Origin Energy Limited · ASX:ORG
Origin Energy — HY2020 Earnings Presentation
54 slides from Origin Energy's earnings presentation, Feb 20, 2020
Slide 1: ASX cover fax: Investor Presentation for Half Year Results
To Company Announcements Office Facsimile 1300 135 638 For personal use only Company ASX Limited Date 20 February 2020 From Helen Hardy Pages 54 Subject Investor Presentation for Half Year Results Please find attached the investor presentation relating to Origin Energy’s Results for the half year en
Slide 2: Origin Energy 2020 Half Year Results
For personal use only Origin Energy 2020 Half Year Results Half year ended 31 December 2019 Frank Calabria, CEO & Lawrie Tremaine, CFO 20 February 2020
Slide 3: Outline
Outline For personal use only 1. Performance Highlights - Frank Calabria 2. Financial Review - Lawrie Tremaine 3. Operational Review - Frank Calabria 4. Outlook - Frank Calabria 2 20 February 2020 2020 Half Year Results Announcement
Slide 4: Performance Highlights
For personal use only Performance Highlights Frank Calabria, CEO 3 20 February 2020 2020 Half Year Results Announcement
Slide 5: HY2020 financial highlights
HY2020 financial highlights For personal use only Statutory Profit Underlying Profit Underlying ROCE 12 month rolling $599 $528 8.3% million million (34.0 cps) (30.0 cps) 25% decrease including lower net gain 11% decrease: introduction of regulated 0.3% decrease on December 2018 on fair value and FX
Slide 6: Strong operational performance in HY2020
Strong operational performance in HY2020 Integrated Gas Energy Markets For personal use only • Record half year production - improved upstream • Unplanned generation outages detracted from an field and facility performance otherwise strong operational performance • ERIC pipeline brought online, impr
Slide 7: We are committed to delivering for our stakeholders
We are committed to delivering for our stakeholders For personal use only Transforming customer Committed to safety and Caring about our impact diversity experience Strategic NPS Regional procurement spend as a TRIFR – rolling 12 months % of total spend 5 4.5 Jun-19 Dec-19 14% 4 3.5 - 15% 12% 3 (2)
Slide 8: We are driven by our Purpose of Getting energy right
We are driven by our Purpose of “Getting energy right” For personal use only … for our Customers … for our Communities … for the Planet • Moving to a simpler, digitised • >$200 million direct and indirect • 1.5⁰C scenario analysis published customer experience regional spend in HY2020 for wholesale
Slide 9: We operate in a rapidly changing energy market
We operate in a rapidly changing energy market For personal use only NEM forward prices declining Renewables impacting intra-day volatility Gas prices declining (NSW $/MWh) (Average NEM demand July- Sep (GWh) (A$/GJ) 30 14 130 120 28 12 110 26 10 100 24 8 90 22 6 80 20 4 70 18 2 60 Opportunity for f
Slide 10: Executing our strategy to deliver value in a changing energy market
Executing our strategy to deliver value in a changing energy market Executing a clear strategy Building a track record Positioned for growth For personal use only Energy Markets • >$100m retail cost out on-track, planning next wave of transformation ✓ Transforming culture • Building a digital IoT ca
Slide 11: Operational performance driving returns for shareholders in FY2020
Operational performance driving returns for shareholders in FY2020 APLNG targeting in FY2020: For personal use only ✓ ‒ Improved production at upper end of 690-710 PJ range ‒ Lower distribution breakeven at US$29-US$321/boe, including ~US$8/boe project finance principal repayment Operational perform
Slide 12: Financial Review
For personal use only Financial Review Lawrie Tremaine, CFO 11 20 February 2020 2020 Half Year Results Announcement
Slide 13: HY2020 financial highlights
HY2020 financial highlights For personal use only Statutory Profit Underlying Profit Underlying EBITDA $796M $592M $1,727M $1,590M $528M 45.3 cps $599M 33.7 cps 34.0 cps 30.0 cps HY19 HY20 HY19 HY20 HY19 HY20 Energy Markets Integrated Gas Corporate Underlying ROCE Free Cash Flow1 Adjusted Net Debt (
Slide 14: Accounting changes adopted from July 2019
Accounting changes adopted from 1 July 2019 For personal use only AASB 16 Leases APLNG dewatering and workover costs: • Adopted from 1 July 2019, prospectively • Change in treatment from 1 July 2019, prospectively • Lease liability and corresponding right-of-use asset • Previously capitalised recogn
Slide 15: Underlying Profit decreased 11%
Underlying Profit decreased 11% For personal use only Movements in Underlying Profit ($m) 15 (14) (129) 52 (47) 7 51 592 528 Primarily Higher Primarily Lower Includes lower production & impact of commodity Mortlake self electricity LNG sales AASB16 Lease hedging costs insurance cost gross profit vol
Slide 16: Energy Markets Underlying EBITDA down 15%
Energy Markets Underlying EBITDA down 15% For personal use only Movements in Underlying EBITDA ($m) Electricity gross profit down $170 million or 24% to $549 million: • Regulation: VDO/DMO price impact (-$55 million) (170) (15) 40 16 • One off unplanned outages: Mortlake and Eraring (-$44 million),
Slide 17: Integrated Gas Underlying EBITDA up 7%, excl. accounting change
Integrated Gas Underlying EBITDA up 7%, excl. accounting change Movements Underlying EBITDA ($m) For personal use only (36) (59) 25 15 (20) 81 Share of APLNG Share of APLNG Integrated Impact of accounting EBITDA growth Gas - Other 900 changes (-$56 million) (+$15 million) 906 (+$47 million) Up $62 m
Slide 18: Free cash flow up 22% on APLNG performance
Free cash flow up 22% on APLNG performance ($m) HY20 HY19 Change • Operating cashflow down 37% to $351 million For personal use only Cash from operating activities 351 553 (202) – Underlying EBITDA (-$137 million) Distributions from APLNG 520 393 127 – Tax payments (-$115 million) Capital expenditur
Slide 19: FY2020 capex driven by generation maintenance and Beetaloo
FY2020 capex driven by generation maintenance and Beetaloo For personal use only Capex ($m) 600 • Majority of FY2020 generation sustain spend occurred in HY2020 (Mortlake repairs, Eraring maintenance, major overhaul at Uranquinty) 500 • Other sustain weighted to H2 FY2020 (LPG capex, ERP system and
Slide 20: APLNG cash flow increasing, oil & LNG hedging/trading costs reducing
APLNG cash flow increasing, oil & LNG hedging/trading costs reducing APLNG estimated distribution and Origin For personal use only oil/LNG hedging and trading (A$m) 981m 1,400 Actual Estimated Range • Estimated FY2020 APLNG cash distribution to Origin of $1.1 - $1.3 billion 1,200 – Assumes performan
Slide 21: Proportionate free cash flow and returns
Proportionate free cash flow and returns For personal use only Proportionate Free Cash Flow and Yield1 Underlying ROCE 2,500 15% 13.6% 12.2% 2,000 10.2% 10% 9.1% 1,500 7.7% 8.4% 8.2% 8.3% 1,000 5% 500 4.1% - 0% FY18 FY19 CY19 FY18 FY19 CY19 Disposals Share of APLNG Origin Energy Markets Integrated G
Slide 22: Continuing to optimise debt book for cost and tenor
Continuing to optimise debt book for cost and tenor For personal use only Debt maturity profile - excluding lease liabilities (A$b) • Adjusted Net Debt / Adjusted Underlying EBITDA 2.7x (2.5x excluding impact of lease accounting change) 2.5 • Active refinancing during HY2020 to lower interest rates
Slide 23: Operational Review
For personal use only Operational Review Frank Calabria, CEO 22 20 February 2020 2020 Half Year Results Announcement
Slide 24: Energy Markets
For personal use only Energy Markets 23 20 February 2020 2020 Half Year Results Announcement
Slide 25: Lower sales volume, stable generation
Lower sales volume, stable generation Electricity sources and uses (TWh) Natural Gas sales (PJ) For personal use only 20 Short Position Generation Losses Generation 15 Swap Contracts Other Business Business - Gas Wholesale Business - 10 Wholesale Owned and contracted Coal (Eraring) generation Busine
Slide 26: Mortlake back in service, peak capacity improvements installed
Mortlake back in service, peak capacity improvements installed Unit outage For personal use only • One of the two units at Mortlake was damaged by an electrical fault on 8 July 2019 and was repaired and returned to service on 24 December 2019 • Improvements made to increase capacity by up to 20 MW p
Slide 27: Strong gas supply position benefiting from lower market prices
Strong gas supply position benefiting from lower market prices Energy Markets East Coast Gas Supply (PJ) For personal use only 300 Short term volumes purchased to match duration of C&I sales Retail 250 contracts customers 200 150 Flexible Business - supply Business - 100 C&I portfolio Wholesale 50 0
Slide 28: Disciplined approach to managing for Customer Lifetime Value
Disciplined approach to managing for Customer Lifetime Value In Situ vs moves churn (Monthly) Wins/Retains (’000s) Customer movement For personal use only 25% Residential (‘000 customers) 1,400 10 HY2020 1,200 20% 5 1,000 15% - 800 10% 600 (5) 400 (10) 5% 200 Origin moves NPS +49 (15) 0% - Sep-18 Se
Slide 29: Cost to serve reducing in line with our >$100 million target
Cost to serve reducing in line with our >$100 million target For personal use only (10) (10) 307 (8) (12) 267 Transformation activities: $28 million benefit • Increasing digitisation • Targeted marketing and optimised channels • Transforming customer journeys • Leaner operational structure • Automat
Slide 30: Focused on customers, cost and growth
Focused on customers, cost and growth For personal use only Grow w revenue Transform customer Target market Growstreams new revenue experience leading cost position streams Digital Interactions/Call volumes Online sales (%) CES Gross Profit ($ million) Six months ended +580% Call volume Digital inte
Slide 31: Medium term drivers in Energy Markets
Medium term drivers in Energy Markets For personal use only Key Drivers Market context Origin context • Relatively fixed cost generation position on 15-20 TWh of supply • Forward electricity and LGC prices trending • Fixed cost PPA position on ~3 million certificates p.a. Wholesale prices down (prio
Slide 32: Integrated Gas
For personal use only Integrated Gas 31 20 February 2020 2020 Half Year Results Announcement
Slide 33: Record APLNG production from improved field & facility performance
Record APLNG production from improved field & facility performance For personal use only APLNG Production 400 (100%) (PJ) • Record production of 358 PJ in HY2020, up 5% from 350 HY2019: 300 – Record operated daily production rate of 1,612 TJ/day achieved on 3 December 2019 250 200 • Higher productio
Slide 34: Record production and lower capex resulted in lower unit costs
Record production and lower capex resulted in lower unit costs For personal use only Capex & Opex excl. purchases 1,600 4.0 • Unit costs reduced to $3.5/GJ, down 13% from HY2019 1,400 • Lower costs due to: 1,200 3.0 – operated cost per well2 down from $1.7 1,000 million to $1.2 million – operated co
Slide 35: APLNG sales mix and realised prices
APLNG sales mix and realised prices Sales Volume (PJ) Average realised gas Price (A$/GJ) For personal use only 400 14 350 12 300 10 250 8 200 6 150 4 100 50 2 - - HY18 HY19 HY20 HY18 HY19 HY20 LNG contract LNG spot Domestic legacy contracts Domestic other contracts LNG Domestic Weighted average • No
Slide 36: Upstream field performance underpins upgraded FY2020 guidance
Upstream field performance underpins upgraded FY2020 guidance FY20 previous FY20 updated For personal use only APLNG (100%) FY18 FY19 guidance guidance Production (PJ) 676 679 690 – 710 690 - 710 Capex + opex, excl. purchases1 (A$bn) 2.6 2.7 2.8 - 3.0 2.5 - 2.7 Unit cost A$/GJ 3.8 4.0 3.9 - 4.3 3.5
Slide 37: APLNG commercial update
APLNG commercial update For personal use only • Long term LNG customers have declared DQT for calendar • Tri-Star proceedings year 2020 – APLNG’s position remains unchanged since 2014 that • Cash flow from calendar year 2019 deferred cargoes reversion has not occurred received in January 2020 – APLN
Slide 38: Reserves base continuing to perform well
Reserves base continuing to perform well For personal use only APLNG reserves position1,2 (PJ) 18,000 • Reserves converging towards 3P since FID 15,000 • Field performing in line with expectations 12,000 • Continue to mature the resource and reserves base via acquisitions (Ironbark), exploration and
Slide 39: Beetaloo – stage appraisal update
Beetaloo – stage 2 appraisal update For personal use only Kyalla shale liquids rich gas play • Vertical section successfully drilled in November 2019 • Operational issues encountered on initial horizontal section • New horizontal section successfully drilled in February 2020, preparations are underw
Slide 40: Outlook
For personal use only Outlook Frank Calabria, CEO 39 20 February 2020 2020 Half Year Results Announcement
Slide 41: FY2020 Guidance update
FY2020 Guidance update Provided on the basis that market conditions do not materially change and the regulatory and political environment do not adversely For personal use only impact on operations • Energy Markets (unchanged), lower than FY2019 FY19 FY20 previous FY20 updated reflecting: guidance g
Slide 42: Questions
For personal use only Questions 41 20 February 2020 2020 Half Year Results Announcement
Slide 43: Appendix
For personal use only Appendix 42 20 February 2020 2020 Half Year Results Announcement
Slide 44: Segment summary
Segment summary For personal use only Energy Markets Integrated Gas Integrated Corporate Total 1,2 1,2 - Share of APLNG Gas - Other ($m) HY20 HY19 HY20 HY19 HY20 HY19 HY20 HY19 HY20 HY19 Underlying EBITDA 723 852 1,033 1,042 (127) (142) (39) (25) 1,590 1,727 Underlying EBIT 484 657 359 307 (139) (15
Slide 45: Underlying ROCE – rolling months
Underlying ROCE – rolling 12 months As at 31 Dec 2019 31 Dec 2018 Change Change For personal use only ($m) ($m) ($m) (%) Capital Employed Net Assets 13,733 12,788 945 7 including: Investment in APLNG 7,323 6,590 733 11 MRCPS issued by APLNG 2,662 3,445 (783) (23) Non-cash fair value uplift (24) (26)
Slide 46: Reconciliation of Adjusted Net Debt
Reconciliation of Adjusted Net Debt For personal use only Issue Issue Hedged Hedged AUD $m AUD $m AUD $m Currency Notional Currency Notional 31-Dec-19 31-Dec-19 31-Dec-19 Interest- Debt and CCIRS Adjusted Net bearing fair value Debt liabilities adjustments AUD debt AUD 803 AUD 803 803 - 803 USD debt
Slide 47: Oil and LNG hedging and trading
Oil and LNG hedging and trading For personal use only FY2020 oil and LNG hedging and trading FY2021 oil hedging • FY2020 estimated underlying oil price of US$68/bbl1 • Oil hedging positions: compared to US$73/bbl in FY2019 ‒ 3.1 mmbbl A$90/bbl fixed price swaps • FY2020 oil and LNG hedging and tradi
Slide 48: Electricity forward price by state (A$/MWh)
For personal use only 47 70 80 150 100 110 130 50 60 90 120 140 70 80 150 110 100 130 50 90 120 60 140 Jul-16 Jul-16 Aug-16 Aug-16 Oct-16 Oct-16 Dec-16 Dec-16 Feb-17 Feb-17 Source: AEMO/Bloomberg Apr-17 Apr-17 20 February 2020 Jun-17 Jun-17 Aug-17 Aug-17 Oct-17 Oct-17 Dec-17 Dec-17 Feb-18 Feb-18 Apr
Slide 49: LREC prices and LREC position
LREC prices and LREC position For personal use only LREC forward prices Origin’s LREC position ($/cert) 80 7 Millions 70 6 60 5 50 4 40 3 30 20 2 10 1 - - Jul-18 Sep-18 Nov-18 Feb-19 Apr-19 Jul-19 Sep-19 Nov-19 Feb-20 CY2020 CY2021 CY2022 CY2023 CY2024 CY19 CY20 CY21 Legacy & Contracts Recent solar
Slide 50: Beetaloo timeline
Beetaloo timeline CY2019 CY2020 CY2021 For personal use only Stage 2 E&A Liquids rich plays KYALLA Results Site & drilling prep Drilling Stimulation & EPT & analysis VELKERRI Site & drilling prep EPT, results Drilling & stimulation & analysis Stage 3 E&A Two horizontal Preparation wells, target depe
Slide 51: Beetaloo – multiple stacked plays increases chance of success
Beetaloo – multiple stacked plays increases chance of success CY20 Velkerri CY20 Kyalla For personal use only liquids-rich Shale Shale Play1 Play1 1) Well locations are illustrative only Stage 2 targeting Kyalla and Velkerri liquids rich gas plays • Kyalla shale liquids rich gas play: • Velkerri sha
Slide 52: Important Notices
Important Notices Forward looking statements For personal use only 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 cert
Slide 53: Important Notices
Important Notices All figures in this presentation relate to businesses of the Origin Energy Group (Origin, or the Company), being Origin Energy Limited and its For personal use only controlled entities, for the reporting period ended 31 December 2019 (the period) compared with the reporting period
Slide 54: For more information
For more information For personal use only Peter Rice General Manager, Capital Markets Email: peter.rice@originenergy.com.au Office: +61 2 8345 5308 Mobile: + 61 417 230 306 Liam Barry Group Manager, Investor Relations Email: liam.barry@originenergy.com.au Office: +61 2 9375 5991 Mobile: + 61 401 71