Origin Energy Limited · ASX:ORG
Origin Energy — H1 FY2017 Earnings Presentation
47 slides from Origin Energy's earnings presentation, Feb 16, 2017
Slide 1: 2017 Half Year Results
2017 HALF YEAR RESULTS Half year ended 31 December 2016 Frank Calabria CEO, Gary Mallett CFO 16 February 2017 Origin Energy | 2017 Half Year Results Announcement 1
Slide 2: Important Notices
Important Notices Forward looking statements This presentation contains forward looking statements, including statements of current intention, statements of opinion and predictions as to possible future events. Such statements are not statements of fact and there can be no certainty of outcome in re
Slide 3: Outline
Outline Performance Highlights Frank Calabria Financial Review Gary Mallett Operational Review Frank Calabria Outlook Frank Calabria Appendix Origin Energy | 2017 Half Year Results Announcement 3
Slide 4: Performance Highlights
PERFORMANCE HIGHLIGHTS Frank Calabria Origin Energy | 2017 Half Year Results Announcement 4
Slide 5: Origin's key priorities
Origin’s key priorities REDUCING DEBT AND LEADERSHIP IN LEADERSHIP IN IMPROVING RETURNS ENERGY MARKETS INTEGRATED GAS • Maximise earnings and • “Digital first” • Transition from project to operating cash flow • Customer experience, lifetime operations • Limit capital expenditure value and innovative
Slide 6: Delivering on key commitments
Delivering on key commitments H1 FY2017 H2 FY2017 FY2017 Targets Completed APLNG project • Continued growth in • Underlying EBITDA guidance Announced intention to IPO earnings and operating improved to $2.450 - $2.615 conventional upstream assets cash flow billion, subject to market • Lower work
Slide 7: Solid operational performance in Energy Markets and Integrated Gas
Solid operational performance in Energy Markets and Integrated Gas Increasing earnings Completion of development projects and in Energy Markets transition to operations in Integrated Gas $m Energy Markets underlying EBITDA TJ/d Ramp up of APLNG Operated Production 1,400 1,400 1,200 1,200 1,000 1,000
Slide 8: 2017 Half Year Financial Highlights
2017 Half Year Financial Highlights Statutory Loss Underlying EBITDA Underlying Profit $(1.68) billion $1,145 million $184 million (95.6) cps 10.5 cps Up $277 million on H1 FY2016 Down $70 million on H1 FY2016 Down $1.4 billion on H1 FY2016 All segments contributed to Reflects recognition of APLNG I
Slide 9: Non-cash impairment of $1.9 billion (post-tax)
Non-cash impairment of $1.9 billion (post-tax) Post –tax • Origin’s 37.5% share of APLNG’s impairment charge Assets impairment ($m) Assets held by APLNG 1,031 - Assumptions such as oil price, AUD/USD exchange rates, discount rates and costs have impacted the Browse Basin 578 valuation over time. The
Slide 10: Energy Markets EBITDA of $734 million increased by $13 million
Energy Markets EBITDA of $734 million increased by $13 million Movements in Energy Markets Underlying EBITDA LPG and Solar & Cost to serve Energy Services 750 Gas (-$30 million) Electricity (+$22 million) (+$1 million) (+$20 million) 730 7 13 734 8 (7) 710 721 (50) 690 78 670 40 (41) $ million (20)
Slide 11: Integrated Gas EBITDA of $442 million increased by $305 million
Integrated Gas EBITDA of $442 million increased by $305 million Movements in Integrated Gas Underlying EBITDA 500 LNG (+$266 million) E&P (+$39 million) 12 (19) 450 24 (27) (36) 46 400 442 350 305 300 $ million 250 200 150 137 100 50 - HY2016 LNG Contracted LNG Spot Domestic Oil Halladale Exploratio
Slide 12: Origin continues to focus on reducing operating and capital costs
Origin continues to focus on reducing operating and capital costs Movements in operating costs Capital Expenditure and Cash (H1 FY2016 to H1 FY2017) Contributions to APLNG1,2 700 4,000 650 3,000 $ million $ million 600 2,000 End of Worsley JV 550 1,000 500 - H1 Corporate E&P Energy Energy H1 FY2016
Slide 13: Financial Review
FINANCIAL REVIEW Gary Mallett Origin Energy | 2017 Half Year Results Announcement 13
Slide 14: Underlying EBITDA increased by $277 million to $1,145 million
Underlying EBITDA increased by $277 million to $1,145 million Underlying EBIT relatively stable (excluding the impact of Contact) Underlying EBITDA Underlying EBIT ($ million) HY2017 HY2016 Change HY2017 HY2016 Change Energy Markets 734 721 13 576 557 19 Integrated Gas 442 137 305 (100) (63) (37) LN
Slide 15: Underlying profit of $184 million decreased by $70 million
Underlying profit of $184 million decreased by $70 million ($ million) HY2017 HY2016 Change Underlying EBITDA 1,145 868 277 NewCo D&A ceased from 7 December (in line D&A – E&P (133) (136) 3 with accounting standard requirements) D&A – Energy Markets, Corporate, Contact (167) (191) 24 Contact D&A of
Slide 16: Operating cash flow of $495 million increased by $27 million
Operating cash flow of $495 million increased by $27 million Movements in Cash Flow From Operating Activities 800 700 Impact of ongoing cost reduction 277 (275) initiatives and lower risk 600 management costs 500 $ million 55 495 468 30 400 Share of APLNG EBITDA, 30 exploration expense, Oil (186) 53
Slide 17: Adjusted net debt stable at $9.1 billion
Adjusted net debt stable at $9.1 billion Movements in Adjusted Net Debt - 30 June 2016 to 31 December 2016 10 (0.5) 0.2 9 0.3 9.1 9.1 (0.4)1 0.1 8.9 0.3 8 $ billion 7 6 5 30-Jun-16 Cash Flow Asset Capital Cash Interest 31-Dec-16 FX 31-Dec-16 Adjusted Net f rom sales expenditure contributions payment
Slide 18: Origin continues to hold sufficient liquidity
Origin continues to hold sufficient liquidity for all foreseeable funding requirements Origin Debt & Bank Guarantee Pro-forma Maturity Profile as at 31 December 2016 Loans & Bank Guarantees - Undrawn • $5.7 billion1 of undrawn committed bank facilities Loans & Bank Guarantees - Drawn and cash at 31
Slide 19: Operational Review
OPERATIONAL REVIEW Frank Calabria Origin Energy | 2017 Half Year Results Announcement 19
Slide 20: Energy Markets
ENERGY MARKETS Origin Energy | 2017 Half Year Results Announcement 20
Slide 21: Digital first - product and service innovation
ENERGY MARKETS Digital first - product and service innovation, driving customer experience and lifetime value Product innovation Increasing online interaction Online sales increased 21% Predictable Plan 125k 103k Solar as a Service Solar Boost 1H16 1H17 eBilling accounts increased 55% Quick
Slide 22: Customer - Improved experience, competitiveness and margins
ENERGY MARKETS Customer - Improved experience, competitiveness and margins Customer account growth (‘000) 4,000 3,830 3,846 3,000 • Improved customer experience: 2,741 2,740 2,000 Elec - Customer NPS (Interactive) up 4 points Gas to +13 1,000 1,089 1,107 - Ombudsmen complaints down from 3.9 - to 2.6
Slide 23: Natural Gas - Sustainable volume growth, long term competitive cost of supply
ENERGY MARKETS Natural Gas - Sustainable volume growth, long term competitive cost of supply and transportation flexibility PJ Energy Markets’ Sources and Uses of Gas 120 • Increased volumes to LNG customers with oil 100 price linkage • Ramp gas replaced with contracted gas, 80 maintaining a competi
Slide 24: Electricity - flexible fuel and generation portfolio
ENERGY MARKETS Electricity – In a rising wholesale market, a flexible fuel and generation portfolio delivered a competitive cost of energy Calendar 2017 Forward Curve1 120 NSW QLD SA VIC 100 • Rising forward curve continues to be reflected Price - $/MWh 80 in tariffs 60 • Flexible wholesale and gene
Slide 25: Renewables - Growing position supports competitive cost of energy
ENERGY MARKETS Renewables - Growing position supports a competitive cost of energy and adds value to our gas position Bundled PPA Prices1 • Origin’s short generation and REC position provides 160 an opportunity to contract renewable PPAs at attractive prices, enabling Origin to maintain a competitiv
Slide 26: New Energy Solutions - Continues to grow
ENERGY MARKETS New Energy Solutions - Continues to grow Solar Sales Acumen Meters Centralised Energy (MW) (‘000) Services Customers (‘000) 25 100 130 90 125 20 80 120 70 115 15 60 110 50 105 10 40 100 30 95 5 20 90 10 85 0 0 80 1 1 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H16 1H17 1H15 2H15 1H16 2H1
Slide 27: Integrated Gas
INTEGRATED GAS Origin Energy | 2017 Half Year Results Announcement 27
Slide 28: APLNG and Halladale/Speculant were completed during the period
INTEGRATED GAS APLNG and Halladale/Speculant were completed during the period bringing to an end a long period of significant capital expenditure APLNG Train 2 First Cargo, APLNG Project Complete Halladale/Speculant brought online August 2016 Sinopec’s new custom-built LNG tanker CESI Gladstone arri
Slide 29: APLNG production increased by 76%; E&P production up 12%
INTEGRATED GAS APLNG production increased by 76% with the commencement of LNG E&P production increased by 12% driven by Halladale/Speculant PJe APLNG production (ORG share) PJe E&P business production 120 120 100 100 80 80 68 3 60 60 40 40 60 36 42 20 31 20 8 8 - - 1H16 1H17 1H16 1H17 1 Directed to
Slide 30: APLNG Train 1 above nameplate; Train 2 commenced production
INTEGRATED GAS APLNG Train 1 produced above design nameplate capacity through the 120 day production test and Train 2 commenced production in late 2016 APLNG Upstream Supply A$m/ APLNG Sources of Revenue TJ/d 120 day month production test 400 APLNG monthly revenue has increased from ~$40 million in
Slide 31: APLNG break even cost update
INTEGRATED GAS APLNG break even cost update 100% APLNG (A$bn) FY17 Estimate FY18 Estimate • Previous guidance of distribution break even target of Capital expenditure – Sustain 1.4 1.4 US$42/boe was based on an average of FY2017 to FY2023. Going forward, guidance will be provided on a Capital expend
Slide 32: Beetaloo production test and drilling indicate material shale gas resource
INTEGRATED GAS Beetaloo production test and drilling indicate material shale gas resource Best • As announced to the ASX on 15 February 2017, a Measured and Estimated Parameters Units Estimate Discovery Evaluation Report has been submitted to the P50 area (from Contingent Resource area distribution)
Slide 33: Outlook
OUTLOOK Frank Calabria Origin Energy | 2017 Half Year Results Announcement 33
Slide 34: FY2017 Underlying EBITDA range improved to $2,450-2,615 million
Origin’s FY2017 Underlying EBITDA range has improved to $2,450 million - $2,615 million, subject to market conditions • Current earnings guidance is based on2: FY2017 Guidance (A$m) Previous Current - Average FY2017 oil price of US$52.33/bbl3 Energy Markets 1,440-1,540 1,440-1,500 - Average FY2017 A
Slide 35: Guidance commentary
Guidance commentary Energy Markets expectations • Natural Gas gross profit to increase relative to FY2016 and prior guidance due to increased Business sales volumes and margins • Electricity gross profit to increase relative to FY2016 due to margin expansion, however lower than previously guided due
Slide 36: Thank You
THANK YOU For more information Peter Rice Joanna Nelson General Manager, Capital Markets Group Manager, Investor Relations Email: peter.rice@originenergy.com.au Email: joanna.nelson@originenergy.com.au Office: +61 2 8345 5308 Office: +61 2 9375 5708 Mobile: + 61 417 230 306 Mobile: + 61 459 837 251
Slide 37: Appendix
APPENDIX Origin Energy | 2017 Half Year Results Announcement 37
Slide 38: Reconciliation of Statutory Loss to Underlying Profit
Reconciliation of Statutory Loss to Underlying Profit ($ million) HY2017 HY2016 Statutory (Loss) – total operations (1,677) (254) Items Excluded from Underlying Profit Fair value and foreign exchange movements1 37 (82) LNG items pre revenue recognition1 (36) (154) Disposals, dilutions and impairment
Slide 39: Reconciliation of adjusted net debt
Reconciliation of adjusted net debt Issue Issue Hedged Hedged AUD $'m AUD $'m AUD $'m Currency Notional Currency Notional Dec-16 Dec-16 Dec-16 Interest-bearing Fair value adjustments Adjusted net liabilities on FX hedging debt transactions AUD Debt AUD 1,280 AUD 1,280 1,280 0 1,280 USD Debt Left in
Slide 40: Energy Markets sales volumes
Energy Markets sales volumes Natural Gas sales volume (PJ) Electricity sales volume (TWh) Half year ended 31 Change Change Half year ended 31 Change Change 2016 2015 2016 2015 December (PJ) % December (TWh) % Retail Retail NSW 5.1 4.4 0.7 16.6 NSW 4.5 4.5 (0.0) (0.2) Victoria 14.8 15.1 (0.3) (2.1) V
Slide 41: Energy Markets customer accounts
Energy Markets customer accounts Customer Accounts 31 December 2016 30 June 2016 Customer Natural Natural Accounts ('000) Electricity Total Electricity Total Change Gas Gas NSW1 1,233 260 1,493 1,240 252 1,492 1 Victoria 761 165 926 761 160 921 5 Queensland 561 481 1,041 566 478 1,044 (3) South Aust
Slide 42: Energy Markets generation
Energy Markets generation Generation portfolio Nameplate Equivalent Electricity Pool Pool Half year ended 31 Capacity Capacity Type1 Reliability Output Revenue Revenue December Factor (MW) Factor2 (GWh) ($m) ($/MWh) Eraring 2,880 Black Coal 88.7% 46% 5,841 322 55 Darling Downs 644 CCGT 98.5% 52% 1,4
Slide 43: Renewable Power Purchase Agreements
Renewable Power Purchase Agreements Origin’s LRET position1 8 7 6 Number of LRECS (millions) 5 4 3 2 1 - 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 ORG existing PPAs and contracts Use of REC inventory Clare Solar Extension (35MW) Lakeland Solar (10.8MW) Bungala Solar
Slide 44: Important Notices
Important Notices All figures in this report relate to businesses of the Origin Energy Group (Origin, or the Company), being Origin Energy Limited and its controlled entities, for the half year ended 31 December 2016 (the period) compared with the half year ended 31 December 2015 (the prior correspo
Slide 45: Glossary - Statutory Financial Measures
Glossary - Statutory Financial Measures Statutory Financial Measures are measures included in the Interim Financial Statements for the Origin Consolidated Group, which are measured and disclosed in accordance with applicable Australian Accounting Standards. Statutory Financial Measures also include
Slide 46: Glossary - Non-IFRS Financial Measures
Glossary - Non-IFRS Financial Measures Non-IFRS Financial measures are defined as financial measures that are presented other than in accordance with all relevant Accounting Standards. Non-IFRS Financial measures are used internally by management to assess the performance of Origin’s business, and t
Slide 47: Glossary - Non-Financial Terms
Glossary - Non-Financial Terms Term Meaning APLNG Australia Pacific LNG – an incorporated Joint Venture between Origin, ConocoPhillips and Sinopec Bbl Barrel – An international measure of oil production. 1 barrel = 159 litres Boe Barrel of oil equivalent A generation plant’s output over a period com