Origin Energy Limited · ASX:ORG
Origin Energy — H1 FY2006 Earnings Presentation
33 slides from Origin Energy's earnings presentation, Feb 20, 2006
Slide 1: Interim Results Announcement Half-year ended 31 December 2005
Interim Results Announcement Half-year ended 31 December 2005 20 February 2006 1
Slide 2: Outline
Outline • Performance Highlights • Financial Review • Operating Review • Outlook - All comparative data are in relation to the prior corresponding period, July – December 2004 and have been restated for A-IFRS, unless otherwise stated - All references to $ are references to Australian dollars unless
Slide 3: Performance Highlights
Performance Highlights 3
Slide 4: Financial Highlights
Financial Highlights • Revenue and other $3,008 million up 31% • EBITDA $589 million up 34% • NPAT $194 million up 14% • Normalised basic EPS 25.5 cps up 11% • Free cash flow (FCF) $301 million up 22% • FCF per share 43.2 cps up 17% • Debt / (debt + equity) 41% down 3%1 • OCAT Ratio2 13.6% target 9.
Slide 5: Operating Highlights
Operating Highlights • Increased capacity of sales gas from Spring Gully to 35 TJ/day • Otway Gas Project on target for commissioning in June 2006 • Commissioning of the Lang Lang gas processing plant commenced in December 2005 • Seismic survey acquired over the Trefoil discovery • Major onshore and
Slide 6: Financial Review
Financial Review 6
Slide 7: Profit & Loss
Profit & Loss Dec 05 Dec 04 % change ($m) ($m) Revenue and other 3,008 2,291 31% EBITDA 589 441 34% EBIT 442 327 35% Net interest expense (87) (60) 46% Tax expense (92) (74) 25% Outside Equity Interests (69) (24) 190% NPAT 194 170 14% Basic earnings per share 25.5¢ 24.6¢ 4% (cents) Free cash flow cp
Slide 8: EBITDA of $589.3 million is 34% higher due to inclusion of Contact
EBITDA of $589.3 million is 34% higher due to the inclusion of Contact for a full six months Divisions Dec 05 Dec 04 % change ($m) ($m) Exploration & Production 98.7 117.7 (16%) Retail 142.2 158.9 (10%) Generation 43.1 29.7 45% Networks 15.8 18.8 (16%) Contact 289.5 115.5 151% Total 589.3 440.6 34%
Slide 9: A-IFRS Impact on EBIT and Profit
A-IFRS Impact on EBIT and Profit Dec 05 Dec 04 Jun 05 NPAT after NPAT after NPAT after EBIT Minorities EBIT Minorities EBIT Minorities $M $M $M $M $M $M Total under A-GAAP 305 152 615 266 Total A-IFRS adjustments 31 24 54 45 (pre-Successful Efforts) Successful Efforts (9) (6) (14) (10) Total A-IFRS
Slide 10: Successful Efforts
Successful Efforts Dec 05 Dec 04 $M $M EBITDA before Successful Efforts 604 455 Increase in Exploration Expense (15) (14) Restated EBITDA 589 441 NPAT after Minorities before Successful Efforts 201 176 Increase in Exploration Expense (15) (14) Decrease in Amortisation Expense 5 5 Decrease in Tax Exp
Slide 11: AASB 139 Financial Instruments
AASB 139 Financial Instruments • Comparatives for December 2004 and June 2005 are not required to be restated under AASB 139 Financial Instruments • Net impact on profit for the December 2005 half year is small due to a number of offsetting impacts • The impact on profit in future periods may be mor
Slide 12: Depreciation & Amortisation
Depreciation & Amortisation Dec 05 ($m) Dec 04 ($m) Property plant & equipment 117.5 81.3 Producing fields 29.3 27.9 Other 0.8 4.4 Total 147.6 113.6 • Increase in PPE depreciation due to full six months contribution of Contact • Goodwill no longer amortised under A-IFRS Page 12 12
Slide 13: Funding & Interest
Funding & Interest Six months ended Dec 05 Jun 05 Dec 04 ($m) ($m) ($m) Net debt ($m) 2,673 2,743 2,742 Total equity ($m) 3,782 3,516 3,389 Net debt to equity (%) 71% 78% 81% Debt to (debt + equity) (%) 41% 44% 45% Net interest expense ($m) 87 135 53 Net interest cover (x EBIT)* 4.5 4.2 5.3 Average
Slide 14: Operating cash flow
Operating cash flow Dec 05 ($m) Dec 04 ($m) EBITDA 589 441 Change in working capital (9) (38) Stay-in-business capex (net*) (134) (55) Other (incl. non-cash items) 19 18 Tax (44) (64) OCAT 421 301 Net interest paid (93) (54) Free cash flow 328 247 • OCAT ratio for calendar 2005 is 13.6% • Increase i
Slide 15: Growth capex for major development projects increased
Growth capex for major development projects increased… Dec 05 ($m) Dec 04 ($m) Stay-in-business 105.5 56.4 Growth Exploration & Production 223.9 142.4 Retail 11.0 11.4 Generation 6.7 3.5 Networks - - Contact 12.0 10.3 Total capital expenditure 359.1 224.0 Acquisitions 66.5 967.5 Capex including acqu
Slide 16: Cash flow returns from business segments
Cash flow returns from business segments are measured at pre-tax and targets of 14.3% over a full year Funds Operating OCFR OCFR Employed Cash flow Dec 05 Dec 04 ($m) ($m) (%) (%) Half year returns* Exploration & 1,357 104.9 7.7% 6.3% Production Retail 1,262 94.2 7.5% 11.1% Generation 323 23.1 7.1%
Slide 17: Interim fully franked dividend of 9 cents per share declared
An interim fully franked dividend of 9 cents per share has been declared (prior period 7 cents fully franked) Dividends - cents per share 18 Franking Payment and DRP 100% 100% 40% 100% 100% 100% 16 • Ex-dividend date 23 February 14 • Date of record 1 March 12 8 • Payable 20 March 10 7 8 • DRP to app
Slide 18: Operating Review
Origin energy Operating Review
Slide 19: Exploration & Production: EBITDA of $98.7m down 16%
Exploration & Production: EBITDA of $98.7m down 16% due to non-recurring items in 2004 … 250 300 • 2004 includes a $9.4m adjustment of Dec-05 Moomba insurance claim under A-IFRS Dec-04 250 and $10.5m benefit from CGP sale 200 • Total production of 39.7PJ down 8% due to shut-in of Jingemia, sale of T
Slide 20: Development of the Otway Gas and BassGas projects progressed
Development of the Otway Gas and BassGas projects progressed during the half… Otway Gas Project (29.75%) BassGas Project (42.5%) • Project 70% complete at 31 • Acquired an additional 5% interest December 2005 • With the Safe Astoria on site, defect • HDD 100% complete and rectification work has reco
Slide 21: Coal Seam Gas developments
Coal Seam Gas developments • Spring Gully production increased to 35 TJ/day • Ongoing investment in the Spring Gully project will increase capacity to 75 TJ/day in the medium term • Acquired 42% interest in the Argyle Coal Seam Gas Project Argyle with net 2P reserves of 117 PJ in February 2006 (adja
Slide 22: Planning and development of the Kupe Gas Project progressed
Planning and development of the Kupe Gas Project has progressed and new exploration permits secured in … Kupe Gas Project (50%) • Two new permits granted adjacent to PEP 38485 • Offshore drilling contract awarded for the development of three wells. Drilling program planned for first half 2007 • Bids
Slide 23: Retail: EBITDA of $142.2 million down 11%
Retail: EBITDA of $142.2 million down 11% due to lower electricity margins and higher customer acquisition costs… 1,800 200 • Segment revenue remained flat due to 1,600 Dec-05 180 the impact of higher LPG and gas Dec-04 revenue offset by lower electricity Total Segment Revenue ($m) 1,400 160 revenue
Slide 24: Gas and LPG volumes slightly higher, electricity volumes down
Gas and LPG volumes slightly higher however electricity volumes down … Product information and % Natural Gas Electricity LPG change from Dec 04 Revenue (A$m) 460 (+1%) 843 (-3%) 277 (+9%) Gross margin (A$m) 85 (+9%) 139 (-9%) 73 (-1%) Sales (PJ) 62 (+1%) - - Sales (TWh) - 7.8 (-5%) - LPG (Ktonnes) -
Slide 25: The contract market has softened short term but strengthened in longer dates
The contract market has softened in the short term but strengthened in longer dates Victorian Spot and Forward Contract Electricity Prices Monthly Average $70 Spot Price $65 Rolling 365 day Average Spot Price $60 Forward curve 2001 Historical $55 June 05 Forward Price (purple) End Jun 04 $50 2002 Hi
Slide 26: Customer numbers increased by 39,000 since December 2004
Customer numbers increased by 39,000 since December 2004… 60% Mass Market Churn: Completed & Pending Customers Natural Electricity (‘000) Gas 55% VI C Elec NSW Elec Vic Gas NSW Gas Dec-04 918 856 50% SA Elec SA Gas Dec-05 904 909 45% Net Change (14) 53 40% % Churn: Monthly data annualised 35% –Conti
Slide 27: Warmer temperatures and continued high LPG prices curtailed contributions
Warmer temperatures and continued high LPG prices has curtailed contributions … Average International Propane Price (CP) 900 Jul-Dec-05 • Cost of LPG (CP) averaged 800 Jul-Dec-04 A$615 A$615/tonne over period A$534 (increase of 15% on prior 700 Jan-Jun-05 A$503 year) and 27% on 3 year 600 average Pr
Slide 28: Generation: EBITDA of $43.1 million up 45%
Generation: EBITDA of $43.1 million up 45% from higher capacity payment and higher plant availability 80 25 • Ladbroke Grove converted to Dec-05 operate on gas supplied from Total Segment Revenue & EBITDA ($m) 70 Dec-04 20 SESA 60 • Higher capacity payment from Mt 50 Capex ($m) 15 Stuart 40 • Sale o
Slide 29: Exceeded all contracted and market targets except Bulwer Island and Ladbroke Grove
Exceeded all contracted and market targets with the exception of Bulwer Island and Ladbroke Grove … Major Origin Origin Capacity Type Operation Availability Contracting Power Int. % MW Party Plants Worsley 50 120 Cogen Base 98% Western Power & Worsley Bulwer Is. 50 32 Cogen Base 91% BP Osborne 50 18
Slide 30: Networks: EBITDA of $15.8 million down 16%
Networks: EBITDA of $15.8 million down 16% due to change in accounting treatment of the Envestra distribution 90 0.6 • Sales revenue in line with prior Dec-05 period Total Segment Revenue & EBITDA ($m) 80 Dec-04 0.5 70 • Distribution from Envestra unchanged however accounting 60 0.4 treatment has ch
Slide 31: Contact: EBITDA of $289.5 million up 151%
Contact: EBITDA of $289.5 million up 151% … 1200 350 • Completed acquisition of 51.4% Dec-05 interest on 1 October 2004. Results Dec-04 300 for Dec-05 includes full six months 1000 compared to three months in Dec-04 Total Segment Revenue ($m) EBITDA & Capex ($m) 250 800 • Sale of Valley Power peaker
Slide 32: Outlook
Origin energy
Slide 33: Outlook
Outlook Profit over the first half was enhanced by a full six months contribution from Contact and an increased contribution from Generation Assuming current market conditions prevail, earnings for the full year are expected to be 10-15% higher than the recurring A-IFRS earnings in the prior period