Slide 1: ASX announcement cover note
For personal use only To Company Announcements Office Facsimile 1300 135 638 Company ASX Limited Date 18 February 2016 From Helen Hardy Pages 60 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: 2016 Half Year Results Announcement
For personal use only 2016 HALF YEAR RESULTS ANNOUNCEMENT Half Year Ended 31 December 2015 Grant King, Managing Director Karen Moses, Executive Director, Finance and Strategy Frank Calabria, CEO Energy Markets David Baldwin, CEO Integrated Gas 18 February 2016
Slide 3: Important Notices
Important Notices For personal use only 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 cert
Slide 4: Outline
Outline For personal use only 1. Performance Highlights Grant King 2. Financial Review Karen Moses 3. Operational Review Energy Markets Frank Calabria Integrated Gas David Baldwin 4. Outlook Grant King 5. Appendix 3
Slide 5: 1. Performance Highlights
For personal use only 1. PERFORMANCE HIGHLIGHTS Grant King, Managing Director 4
Slide 6: Highlights
Highlights For personal use only On track to deliver debt reduction and cash preservation initiatives to further build resilience to prolonged low oil prices $5.5 billion of debt reduction achieved, targeting net debt below $9 billion in FY2017 Reducing operating and capital costs across the b
Slide 7: $5.5 billion debt reduction initiatives, targeting net debt below $9 billion
$5.5 billion debt reduction initiatives, targeting net debt below $9 billion in FY2017 For personal use only Movement in Net Debt - 30 June 2015 to 31 December 2015 14 • Origin implemented a series of 13.3 (3.0) 12 measures that have reduced net debt to $9.3 billion at 31 December 2015 10 0.3 (0.2)
Slide 8: Cash preservation initiatives increase resilience to lower oil prices
Cash preservation initiatives, combined with cash generation from existing businesses, increase resilience to lower oil prices for longer For personal use only Origin’s Brent Oil Price Assumptions (used for planning purposes and impairment considerations) 120 Reduced dividends 100 Capex reductio
Slide 9: Interim dividend of 10 cps determined
Consistent with the announced intention during last year’s Entitlement Offer to reduce the annual dividend to 20 cps on expanded capital base, an unfranked interim dividend of 10 cps has been determined for the first half For personal use only Dividends1 and Payout Ratio 600 100% • Reduction in annu
Slide 10: Reducing cost of functional support as activities diminish
As acquisition and development activities have diminished, the cost of providing functional support to the businesses is being reduced For personal use only Total Monthly Hours Worked1 Origin Personnel 4M 9000 Elevated workforce to deliver APLNG and Monthly Hours Worked (million hours) 3M other grow
Slide 11: Savings from headcount and capex reductions
Savings from headcount and capex reductions will contribute to reduced operating and capital costs in Energy Markets and Integrated Gas For personal use only Capital Expenditure and Cash • Reduction in operational positions will contribute to cost Contributions to APLNG1,2 saving commitments in Ener
Slide 12: Opportunities to reduce APLNG breakeven costs by A$3-5/boe
With APLNG now in production opportunities in the near term are being identified to reduce pre-production estimates of breakeven costs by A$3-5/boe For personal use only Pre-production estimates of breakevens Now that APLNG is in production Cash cost (targeted average steady state A$ A$/boe3 US$/boe
Slide 13: Mortlake Terminal Station sale and $800 million asset sales target
Entered into sale agreement for Mortlake Terminal Station for $110 million, continuing to target sales of at least $800 million For personal use only Infrastructure and wind assets • Agreement to sell Mortlake Terminal Station to AusNet Services for $110 million (announced on 12 February 2016) • Rep
Slide 14: Impairments of geothermal, IT and upstream assets
Decision to exit some activities has resulted in a $222 million impairment of geothermal and IT assets and an additional $22 million in upstream assets, taking recent impairments for upstream assets to $412 million For personal use only Post-tax impairment Impairments ($m) • As flagged at last year’
Slide 15: Stable results driven by Energy Markets
Stable results driven by strong Energy Markets business with fall in oil price having a modest impact on results For personal use only Energy Markets EBIT/Sales Margin 12% 11.2% EBITDA Bridge – Continuing Operations 10% 9.4% 1,000 8% 4 6% 25 (43) 4% 900 71 (25) 2% (38) 846 (30) (3) $ million 0% HY20
Slide 16: APLNG commenced LNG production and shipments
APLNG has commenced LNG production and shipments, with increasing confidence in upstream production and downstream liquefaction capacity For personal use only TJ/d Ramp Up of APLNG Operated 1200 Production 1000 APLNG Upstream complete, Train 1 in production 800 5 cargoes shipped, including 3 to
Slide 17: 2. Financial Review
For personal use only 2. FINANCIAL REVIEW Karen Moses, Executive Director, Finance and Strategy 16
Slide 18: 2016 Half Year Financial Highlights
2016 Half Year Financial Highlights (Unless otherwise stated, information is presented on a continuing operations basis to exclude Contact Energy) For personal use only $ million HY2016 HY2015 Change Statutory (Loss)* - total operations (254) (25) 916% Underlying Profit* - total operations 254 346 (
Slide 19: Underlying EBITDA and EBIT
Underlying EBITDA down $39 million to $807 million Underlying EBIT down $74 million to $443 million For personal use only Underlying EBITDA Underlying EBIT ($ million) HY2016 HY2015 Change HY2016 HY2015 Change Energy Markets 721 621 100 557 470 87 Integrated Gas 137 273 (136) (63) 95 (158) Corporate
Slide 20: Reconciliation of Statutory Loss to Underlying Profit
Reconciliation of Statutory Loss to Underlying Profit ($ million) HY2016 HY2015 Change For personal use only Statutory (Loss) – total operations (254) (25) 916% Items Excluded from Underlying Profit Fair value and foreign exchange movements1 (82) (369) (78%) LNG items pre revenue recognition1 (154)
Slide 21: Cash flow from operating activities down $429 million
Cash flow from operating activities down $429 million to $397 million, reflecting impacts of actions to reduce cost and risks in response to low oil prices For personal use only Bridge of Cash Flow From Operating Activities 900 800 826 (117) 700 (39) (117) 600 $ million (56) 500 (69) (37) 5 400 397
Slide 22: Reduced debt, increased liquidity, improved serviceability
Over the 6 months Origin has reduced debt, increased liquidity and improved serviceability For personal use only Origin Debt & Bank Guarantee Pro-forma Maturity Profile as at 31 December 20151 • $5.5 billion of debt reduction achieved, 6,000 targeting net debt below $9 billion in FY2017 Loans & Bank
Slide 23: 3. Operational Review – Energy Markets
For personal use only 3. OPERATIONAL REVIEW – Energy Markets Frank Calabria, CEO Energy Markets 22
Slide 24: Energy Markets
Energy Markets Underlying EBITDA Cash Flow From Capital Expenditure For personal use only $m $m $m 800 800 Operating Activities 150 694 721 132 117 600 600 Carbon 621 621 116 100 400 400 577 50 200 200 - - - HY2015 HY2016 HY2015 HY2016 HY2015 HY2016 Underlying EBITDA up $100 million or 16% to $721
Slide 25: EBITDA up $100 million to $721 million
EBITDA up $100 million to $721 million Growing margins while reducing costs For personal use only Energy Markets Underlying EBITDA Bridge 800 (9) 25 4 700 721 • Growing Gross Profit from Natural Gas and 80 Electricity (+$71m): 600 621 • Natural Gas Gross Profit up $80m 500 • Electricity Gross Profit
Slide 26: Natural Gas gross profit up $80 million
Increase in Natural Gas Gross Profit of $80 million from growing volumes and margin expansion For personal use only Natural Gas Volume Growth1 Natural Gas Procurement Costs Unit Margin Expansion PJ $/GJ $/GJ 100 LNG 4.4 3.6 Business 84 Retail 3.5 80 4.0 4.1 3.4 4.0 3.2 64 3.6 60 3.2 2.8 40 2.8 2.4 2
Slide 27: Competitive gas position and supply portfolio
Competitive gas position supported by supply duration beyond 2020, transport flexibility and growing customer base For personal use only Energy Markets’ East Coast Gas Portfolio Origin’s Flexible Transport Capacity PJ/a 300 Other Purchases (Price Review) Other Purchases (Oil Linked) Other Purchases
Slide 28: Electricity margins stable
Electricity margins stable (-$9m) Unit margins up $12 million, offset by prior period customer losses For personal use only Electricity Volumes Down1 Electricity Procurement Cost Flat1,2 Unit Margin Expansion $/MWh $/MWh TWh 20 60 40 9.6 9.3 58.5 58.5 50 35.5 36.2 15 30 40 10 30 20 9.6 9.4 20 5 10 1
Slide 29: Energy procurement costs flat in a rising wholesale market
Energy procurement costs flat in a rising wholesale market For personal use only NEM Spot Prices Rise 23% Origin’s Energy Procurement Cost Flat $/MWh Origin Supply HY2016 Market Origin outcome 50 (18.6 TWh) Market Increase Flat Spot (+$9/MWh) (+$0.2/MWh) 40 Wholesale market Increase Flat Contract (+
Slide 30: Flexible fuel and generation portfolios
Flexible fuel and generation portfolios position Origin strongly in changing market For personal use only Origin’s energy portfolio flexibility Long capacity with geographic diversity TWh (FY2015 volumes) Capacity, MW 40 35 30 Business 25 A 20 15 10 Retail B 5 0 Min Production Max Production Sales N
Slide 31: Renewables more attractive as solar and wind costs fall
Renewables more attractive than ever as utility scale solar and wind generation costs fall For personal use only 14TWh of new renewable build required1 LREC price rising and renewables cost falling2 $/MWh TWh 35 140 30 120 Solar PPA 25 100 Wind PPA 20 80 15 60 10 40 5 20 Existing New Build 0 0 FY201
Slide 32: Origin well placed to accelerate a renewable future
Origin is well placed to accelerate a more renewable future For personal use only Origin’s renewable certificate (LREC) position1 Significant renewables opportunity 10 • Origin is actively pursuing a number of utility 9 scale solar and wind opportunities, including 8 via offtake agreements Number of
Slide 33: On track for $100 million cost savings and $50 million capex reduction
On track to deliver $100 million in cost savings and $50 million reduction in capex, embedding a culture of continuous improvement For personal use only Operating Cost Reduction Focus on lifting operational performance Bad & Doubtful Debts (% of billings) $m, cumulative 100 • Credit and collections
Slide 34: Retaining high value customers through cost effective channels
Focused on retaining high value customers through cost effective internal channels. Customer accounts stable. For personal use only Focus on cost effective channels & high value customers Customer accounts stable1 Increasing sales through low Natural Gas and Electricity Customer Active renewal progr
Slide 35: Building customer loyalty and trust
Building customer loyalty and trust For personal use only Customer Experience Digital Customer Experience • Growing customer centric culture Interaction NPS eBilling customer accounts (‘000) • New and differentiated propositions 1,112 12 • Campaign agility 9.7 820 10 • Customer alerts and notificati
Slide 36: Becoming Australia's leading energy solutions provider
Becoming Australia’s leading energy solutions provider For personal use only Solar Energy Services Digital Metering Solar Sales (MW) Cumulative meters (‘000) 10 60 8 50 40 6 30 4 20 2 10 0 0 HY2015 HY2016 HY2015 HY2016 • 42% increase in Solar sales • Launched battery proposition as first retailer to
Slide 37: Energy Markets strategic priorities
Energy Markets strategic priorities to deliver shareholder value For personal use only Build Customer first culture customer Customer experience and service loyalty Differentiated propositions and trust Digital capability Maximise Gas portfolio competitive position value of Competitive c
Slide 38: 3. Operational Review – Integrated Gas
For personal use only 3. OPERATIONAL REVIEW – Integrated Gas David Baldwin, CEO Integrated Gas 37
Slide 39: Integrated Gas
Integrated Gas Underlying EBITDA Cash Flow From Capital Expenditure and Cash $m $m Operating Activities $m Contributions to APLNG For personal use only 300 300 2,500 686 273 254 200 2,000 200 1,412 100 1,500 137 - 1,000 856 100 -102 -100 500 Acquisition APLNG contribution 323 308 Capex - -200 - HY20
Slide 40: EBITDA down $136 million to $137 million
EBITDA down $136 million to $137 million primarily due to a $53 million Vietnam exploration write-off following exit from all international exploration activities1, lower liquids prices and lower production For personal use only Integrated Gas EBITDA Bridge Gas and Liquids Production2 300 3 (1) (30)
Slide 41: Operating cash flow down $356 million to -$102 million
OCF down $356 million to -$102 million primarily due to decrease in underlying EBITDA, and the impacts of actions to reduce cost and risks in response to low oil prices For personal use only Integrated Gas Cash Flow From Operating Activities Bridge (136) Actions to reduce cost 250 • Lower EBITDA (-$
Slide 42: APLNG upstream complete, Train 1 started up
APLNG Upstream is complete and performing at or above expectations. In the Downstream, Train 1 has started up and performing at or above nameplate capacity For personal use only Key Goals and Milestones Plan Actual Progress First Cargo from Train 1 Q2 FY16 Accomplished Q3 Commencement of Sinopec SPA
Slide 43: Remaining cash contribution to APLNG ~$1 billion
Origin’s remaining cash contribution to APLNG from 1 January 2016 is ~$1 billion, consistent with previous guidance1, cost reductions having mitigated upward pressures from lower oil price and train delay For personal use only Cumulative Half Year to (A$m) from FID1 to 31 Dec 2015 31 Dec 2015 Includ
Slide 44: $1 billion cost reduction initiatives in APLNG upstream
$1 billion cost reduction initiatives in APLNG’s Upstream total annual costs have been implemented, with average per well costs of $2.7m in FY2017 For personal use only APLNG Operated Costs per Well 5 Drilling & Completions • Bundled 20+ wellsite services into one (implemented) • Technological impro
Slide 45: Sustain well development lifecycle duration decreasing
Sustain well development lifecycle duration is decreasing from 36 months to 6-9 months, increasing flexibility to tailor future capex spend For personal use only APLNG Gas Production (TJ/d) Nameplate capacity plus 10% • Sustain wells and infrastructure 2 Train Contracted is parceled into discrete “D
Slide 46: APLNG expected to exceed nameplate capacity
APLNG performance is expected to exceed nameplate capacity, creating options to lower the breakeven APLNG Supply and Demand For personal use only TJ/d 2,500 Upstream production is expected to exceed contracted demand: Opportunity to monetise • Well production levels currently being constrained to 2,
Slide 47: APLNG is structurally well positioned
APLNG is structurally well positioned APLNG Is underpinned by: For personal use only Strong reserves1 16,174 PJ Quality assets 3P 2P 1P Leading operators Upstream Operator Downstream Operator Aligned shareholders 37.5% 37.5% 25% Strong offtake contracts with creditworthy customers 1 mtpa 7.6 mtpa co
Slide 48: LNG increasingly important in global energy mix
In the longer-term, LNG is increasingly important in the global energy mix, and Australia is well positioned For personal use only Forecast 2020 Cost of US and East Coast Australian Global gas demand will continue to grow, by ~2% Delivered Asia LNG (US$/mmbtu) over the next decade, with LNG growin
Slide 49: Integrated Gas strategic priorities
Integrated Gas strategic priorities to deliver shareholder value Upstream complete, Train 1 in production and performing at or above nameplate For personal use only Continue Train 2 production in H1 FY2017 execution momentum Complete APLNG project finance tests to release shareholder guarantee
Slide 50: 4. Outlook
For personal use only 4. OUTLOOK Grant King, Managing Director 49
Slide 51: Guidance reaffirmation – Existing Businesses
Guidance reaffirmation – Existing Businesses For personal use only Origin reaffirms guidance provided at the time of last year’s the Entitlement Offer in relation to existing businesses1: • FY2016 Underlying EBITDA (excluding LNG Underlying EBITDA) to be $1.45b to $1.55b • FY2017 Underlying EBITDA (
Slide 52: Guidance update - LNG
Guidance update - LNG For personal use only Guidance in relation to the contribution from LNG to Origin’s Underlying EBITDA and NPAT provided at the time of the Entitlement Offer was: • FY2016 Underlying EBITDA of $110m to $230m and contribution to Underlying NPAT of ($170m) to ($220m) • FY2017 Unde
Slide 53: Origin's priorities in a low oil price environment
In order to drive improved returns for shareholders in a low oil price environment, Origin’s priorities are: For personal use only GROWING CONTRIBUTION FROM ENERGY MARKETS • Continue to build customer loyalty and trust ENERGY • Maximise value of core business MARKETS • Creating new energy solutions
Slide 54: 5. Appendix
53 For personal use only 5. APPENDIX
Slide 55: Important Notices
Important Notices For personal use only 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 2015 (the period) compared with the half year ended 31 December 20
Slide 56: Important Notices (cont)
Important Notices (cont) For personal use only Reserves This Presentation contains disclosure of Origin and APLNG’s reserves and resources as at 30 June 2015. These reserves and resources were announced on 31 July 2015 in Origin’s Annual Reserves Report for the year ended 30 June 2015 (Annual Reserv
Slide 57: Glossary - Statutory Financial Measures
Glossary - Statutory Financial Measures Statutory Financial Measures are measures included in the Financial Statements for the Origin Consolidated Group, which are measured and disclosed in accordance with applicable Australian Accounting Standards. Statutory Financial Measures also include measures
Slide 58: 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 59: Glossary - Non-Financial Terms
Glossary - Non-Financial Terms Term Meaning For personal use only Proved Reserves are those reserves which analysis of geological and engineering data can be estimated with reasonable certainty to be 1P reserves commercially recoverable. There should be at least a 90% probability that the quantities
Slide 60: Thank You
For personal use only THANK YOU For more information Chau Le Group Manager, Investor Relations Email: chau.le@originenergy.com.au Office: +61 2 9375 5816 Mobile: + 61 467 799 642 www.originenergy.com.au 59