Origin Energy Limited · ASX:ORG
Origin Energy — FY2018 Earnings Presentation
48 slides from Origin Energy's earnings presentation, Aug 16, 2018
Slide 1: Origin Energy 2018 Full Year Results
Origin Energy 2018 Full Year Results Full year ended 30 June 2018 Frank Calabria, CEO and Lawrie Tremaine, CFO 16 August 2018
Slide 2: Important Notice
Important Notice 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 rel
Slide 3: Outline
Outline 1. Performance Highlights - Frank Calabria 2. Financial Review - Lawrie Tremaine 3. Operational Review - Frank Calabria 4. Outlook - Frank Calabria 3 16 August 2018 2018 Full Year Results Announcement
Slide 4: Performance Highlights
Performance Highlights Frank Calabria, CEO 4 16 August 2018 2018 Full Year Results Announcement
Slide 5: Financial highlights
Financial highlights Statutory Profit Underlying Profit Underlying EBITDA (continuing operations) (continuing operations) $218 million $838 million $2,947 million 12.4 cps 47.7 cps Including H1 FY2018 impairments Up $438 million or 110% on FY2017 Up $774 million or 36% on FY2017 of $533 million afte
Slide 6: Sustainability highlights
Sustainability highlights People Customer ▪ Total Recordable Incident Frequency ▪ Addressing affordability and transparency Rate (TRIFR) down from 3.2 to 2.2 ▪ Improved Net Promoter Scores, #1 Tier 1 ▪ Refreshed purpose and values retailer for Strategic NPS ▪ Employee engagement up 3% ▪ New products
Slide 7: First full year of production at APLNG
First full year of production at APLNG Commodity prices LNG cargoes delivered Sales revenue (APLNG 100%) 80 13 140 6 70 11 120 5 US$/mmbtu 100 60 9 4 US$/bbl 80 A$bn 50 7 3 60 40 5 2 40 30 3 1 20 Oct-16 Apr-17 Oct-17 Apr-18 Jan-17 Jan-18 Jul-16 Jul-17 0 0 JCC (LHS) FY17 FY18 FY17 FY18 APLNG effectiv
Slide 8: APLNG unit cost reductions on-track
APLNG unit cost reductions on-track Key Outcomes Initial Targets Metric FY2018 FY2018 June 2019 Guidance Actual target run rate Cost reduction Well cost1 A$m/well 2.4 1.9 1.2 and productivity improvement Operating cost2 A$/GJ 1.3 1.3 1.0 • Flatter, smaller, asset-led structure built around core proc
Slide 9: Supply response in wholesale markets
Supply response in wholesale markets Electricity Natural Gas Actual Forward price 250 16 14 200 12 150 10 A$/MWh A$/GJ 8 100 6 4 50 2 0 0 Sep-16 Mar-18 Jan-17 Mar-17 May-17 Sep-17 Jul-16 Nov-16 Nov-17 Jan-18 May-18 Jul-17 Jul-18 Jul-20 Nov-16 Mar-17 Jul-17 Mar-18 Mar-19 Mar-20 Nov-19 Nov-20 Nov-17 J
Slide 10: Increased competition in retail markets
Increased competition in retail markets Customer movement Customer activity Market churn (‘000 customers) (‘000 customers) Rolling 12 month average FY18 25% 40 3,000 30 23% 20 2,500 10 21% 2,000 0 19% (10) 1,500 (20) 17% (30) 1,000 (40) 15% 500 (50) 13% (60) 0 NSW VIC QLD SA FY17 FY18 Electricity Ga
Slide 11: Transforming customer experience
Transforming customer experience • Increasing supply – Eraring, Pelican Point and renewables • Flat/falling tariffs in FY2019 – Absorbed 3% electricity price More increase in NSW affordable • No increases for hardship customers since 2016 • Low rate concession products in SA, VIC • Transparency - Sa
Slide 12: Active role in policy development
Active role in policy development • Investment signal in low emissions and reliable generation Support NEG • Support more ambitious targets for the electricity sector over objectives time • We support sensible reform provided no unintended consequences − Conditional discounts to be cost reflective A
Slide 13: Making progress on key commitments
Making progress on key commitments ➢ Balance sheet repair – approaching target capital structure ➢ Disciplined capital management initiatives implemented ➢ Improving returns ➢ Becoming a low cost operator − Step change reduction in costs at APLNG on track − Cost to serve reduction underway in Energy
Slide 14: Positioned for the future
Positioned for the future Today’s portfolio Growth opportunities APLNG strong foundations Integrated Gas • On track to international • Entering stage 2 in the Beetaloo competitiveness − Targeting liquids rich plays • Delivering into strong Asian demand • Entered FEED for Ironbark Stage 1 • Significa
Slide 15: Priorities and opportunities are aligned to our strategy
Priorities and opportunities are aligned to our strategy Connecting customers to the energy and technologies of the future Leading customer • Making energy more affordable, smarter, easier and more experience and sustainable solutions Accelerating towards • Targeting renewables to be >25% of generat
Slide 16: Financial Review
Financial Review Lawrie Tremaine, CFO 16 16 August 2018 2018 Full Year Results Announcement
Slide 17: Strong underlying financial performance
Strong underlying financial performance Statutory Profit/(Loss) 218 Underlying Profit 1,000 (Continuing operations) (200) 838 A$m A$m (1,200) 500 (2,200) 0 FY16 FY17 FY18 FY16 FY17 FY18 Operating Cash Flow Underlying ROCE (Continuing operations) (Continuing operations) 1,600 9% 363 8.4% 1,153 6% A$m
Slide 18: Underlying profit from continuing operations more than doubled to $838 million
Underlying profit from continuing operations more than doubled to $838 million Movements in Underlying Profit $235 million (269) 504 1,022 (116) 184 $ million 838 319 400 1 FY17 - EM EBITDA IG EBITDA Share of Tax/Other FY18 - Discontinued FY18 - Total Continuing APLNG ITDA Continuing Operations oper
Slide 19: Energy Markets Underlying EBITDA increased by 21%
Energy Markets Underlying EBITDA increased by 21% Movements in Energy Markets Underlying EBITDA 60 (35) (48) 61 2 (68) 1,811 478 (131) 1,492 Electricity Gas +$279 million +$121 million FY17 Electricity Volume Competition / Electricity Natural Gas Natural Gas Cost to acquire Cost to maintain Other FY
Slide 20: Integrated Gas Underlying EBITDA increased by 67%
Integrated Gas Underlying EBITDA increased by 67% Movements in Integrated Gas Underlying EBITDA 106 (63) (13) (29) 214 289 Share of APLNG Origin only costs 1,251 +$546 million -$42 million 747 FY17 LNG Volume LNG Price Domestic Revenue APLNG opex/ Commodity Other FY18 other hedging Share of APLNG Or
Slide 21: $2.6 billion free cash flow at APLNG
$2.6 billion free cash flow at APLNG APLNG uses of cash $1.3 billion 6,000 distributable cashflow • Effective oil price of US$56/bbl 5,000 • Project finance debt – Principal repaid $0.9 billion $2.6 4,000 billion free – Interest paid $0.4 billion cashflow • $1.3 billion distributable cash flow after
Slide 22: Cash flow improvement
Cash flow improvement FY2018 FY2017 Change • Working capital increases impacting cash conversion Underlying EBITDA 2,947 2,173 774 – FY2018 driven by coal and Non-cash items (primarily share of APLNG) (1,269) (743) (526) LREC inventory and timing of Change in working capital (245) (178) (67) APLNG c
Slide 23: Delivering on balance sheet commitments
Delivering on balance sheet commitments Adjusted net debt (A$bn) Capital structure 6x 10 8 5x 6 6.5 4x 4 Interim Target (3.0 - 3.5x) 3x 2 Target (2.5 – 3.0x) 0 2x FY16 FY17 FY18 FY16 FY17 1 FY18 Debt/EBITDA • $1.5 billion cash from operating activities and APLNG • $1.5 billion net asset sale proceed
Slide 24: Oil price risk management
Oil price risk management FY2019 oil hedging payoff FY2020 oil hedging payoff 90 90 FY19 effective price FY20 effective price 85 FY19 effective price after hedging 85 FY20 effective price after hedging 80 80 1 1 Effective oil price (US$/bbl)1 Effective oil price (US$/bbl) 75 75 70 70 65 65 60 60 55
Slide 25: Operational Review
Operational Review Frank Calabria, CEO 25 16 August 2018 2018 Full Year Results Announcement
Slide 26: Energy Markets
Energy Markets 26 16 August 2018 2018 Full Year Results Announcement
Slide 27: Improved returns from generation portfolio
Improved returns from generation portfolio Electricity sources and uses 45 40 • Increased generation more than covered retail sales and reduced market price exposure 35 − 14% increase at Eraring to 15.9TWh (NSW) 30 − 1.5TWh new supply from Pelican Point (SA) 25 • Eraring average availability factor
Slide 28: Continuing to grow gas sales volumes
Continuing to grow gas sales volumes Energy Markets Domestic Gas sales (PJ) 300 250 • Secured additional 69 PJ for the east coast domestic markets • Record gas sales volume 200 − Business customer sales up 26.5 PJ − Gas directed to generation up 5.2 PJ 150 • Flexibility to direct competitive gas sup
Slide 29: Competing in market and improving customer experience
Competing in market and improving customer experience Net customer movement Origin Interaction NPS Strategic NPS1 FY17 FY18 40 20 30 21.7 ('000s) - 16.1 (13) (20) (47) (16) (40) FY17 FY18 #1 of Tier 1 retailers (60) H1 FY18 H2 FY18 • Responded to competitive activity and grew • Digitising customer e
Slide 30: Increased activity driving higher retail costs
Increased activity driving higher retail costs Customer activity Electricity and Natural Gas Cost to Serve (‘000 customers) (A$m) 17 11 3,000 42 13 23% increase in 624 customer activity 541 2,500 2,000 15% increase in cost to serve 1,500 1,000 FY17 Competitive Bad debts Digital, Other FY18 activity
Slide 31: Digitising interactions, products and services
Digitising interactions, products and services Increasing digital interactions New products and services Technology pipeline Online sales up 28% MyAccount & Mobile (wins & retains) App unique visits up 54% Visibility and control Reducing energy cost 1,822k 345k Usage Buster Home HQ Savernator 270k 1
Slide 32: Integrated Gas
Integrated Gas 32 16 August 2018 2018 Full Year Results Announcement
Slide 33: Increased production and realised prices
Increased production and realised prices APLNG production APLNG domestic price APLNG LNG price (ORG share) 7.90 6.48 US$/mmbtu A$/GJ PJ 4.50 254 229 3.04 FY17 FY18 FY17 FY18 FY17 FY18 33 16 August 2018 2018 Full Year Results Announcement
Slide 34: FY2018 breakeven improvement
FY2018 breakeven improvement US$45/boe US$39/boe 18 2 18 2 2 27 Operating breakeven 21 down US$6/boe FY18 guidance Operated well cost Non-operated LNG spot & domestic FY18 actual savings Capex revenue/other Operating Breakeven Project Finance • FY2018 breakeven benefited from: − Savings on operated
Slide 35: FY2019 breakeven guidance
FY2019 breakeven guidance 100% APLNG (US$/boe)1 • Continued capex and opex savings offset by additional scope in FY2019 FY2018 Distribution breakeven 39 – Non-operated capex from Continued reduction in well costs (1) FY2018 (US$2/boe) Opex savings and lower purchases (2) – Increased E&A (US$2/boe) –
Slide 36: 2P reserves up 5% before production
2P reserves up 5% before production Revisions/ APLNG 100% Reserves / Resources1 FY2017 Production FY2018 extensions 1P (proven) 7,518 837 (676) 7,679 2P (proven plus probable) 12,545 584 (676) 12,453 3P (proven plus probable plus possible) 13,382 603 (676) 13,310 2C (best estimate contingent resourc
Slide 37: Next phase at Beetaloo
Next phase at Beetaloo • NT moratorium lifted in April 2018 • 70% interest in 18,500km2 permit • Four, stacked, unconventional hydrocarbons plays identified • Booked 6.6 TCF contingent resource (4.6 TCF Origin share) in February 2017 relating to Velkerri B shale dry gas play • Entering Stage 2 appra
Slide 38: Outlook
Outlook Frank Calabria, CEO 38 16 August 2018 2018 Full Year Results Announcement
Slide 39: FY2019 guidance
FY2019 guidance Provided that market conditions and regulatory environment do not materially change Overall, Origin expects Underlying Profit to be higher and further debt reduction in FY2019 Energy Markets APLNG (100%) • Underlying EBITDA of $1,500-1,600 million • Production range of 660-690 PJ − $
Slide 40: Dividend
Dividend • The Board has determined not to pay a dividend in respect of earnings for the second half of FY2018 • Subject to Board approval and no material adverse change in business conditions, our medium term outlook supports recommencement of dividends in FY2019 40 16 August 2018 2018 Full Year Re
Slide 41: Appendix
Appendix 41 16 August 2018 2018 Full Year Results Announcement
Slide 42: FY2019 breakeven guidance
FY2019 breakeven guidance 100% APLNG (A$m) FY2018 FY2019 guidance1 Capital expenditure – Sustain 1,105 1,450 Capital expenditure – E&A 65 200 Operating expenses – pre 1,673 1,5703 capitalisation Less: Spot LNG & domestic revenue (1,345) (1,350) Operating breakeven 1,498 1,870 Operating breakeven (US
Slide 43: Statutory to underlying earnings
Statutory to underlying earnings Reconciliation from statutory to underlying profit $m FY2018 FY2017 Change Statutory Profit / (Loss) 218 (2,226) 2,444 Items Excluded from Underlying (post-tax) - Fair value and FX movements (410) 96 (506) - LNG items pre-revenue recognition - (36) 36 - Disposals, im
Slide 44: Accounting for APLNG
Accounting for APLNG Origin Origin Share of APLNG ($m) Revenue ($m) 14,604 Cost of Sales Revenue 2,073 (11,785) Contribution Operating costs (668) 2,819 Other Income 29 Underlying EBITDA 1,405 Operating costs (1,306) Depreciation and Amortisation (695) Share of APLNG EBITDA Interest on MRCPS (227) 1
Slide 45: 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 controlled entities, for the financial year ended 30 June 2018 (the period) compared with the financial year ended 30 June 2017 (the prior
Slide 46: Important Notices (cont)
Important Notices (cont) Reserves Disclosures of Origin and APLNG’s reserves and resources are as at 30 June 2018. These reserves and resources were announced on the same date as the release of this presentation in Origin’s Annual Reserves Report for the year ended 30 June 2018. Petroleum reserves a
Slide 47: For more information
For more information Peter Rice General Manager, Capital Markets Email: peter.rice@originenergy.com.au Office: +61 2 8345 5308 Mobile: + 61 417 230 306 Liam Barry Senior Manager, Investor Relations Email: liam.barry@originenergy.com.au Office: +61 2 9375 5991 Mobile: + 61 401 710 367 www.originenerg
Slide 48: Thank You
Thank You es ©