Surging LNG earnings bolster Origin profits

Origin Energy delivered another strong result from its Queensland LNG business in the September quarter.

Origin Energy's APLNG Condabri Central Gas Processing Facility.

Origin Energy delivered another strong result from its Queensland LNG business in the September quarter, helping mask weakness in its core energy markets unit.

Revenues at its integrated gas unit, which includes the Australia Pacific LNG plant, rose 7 per cent to $688m from the previous quarter, primarily due to a 3 per cent lift in supply and higher oil prices in Australian dollars.

Electricity sales slumped 8 per cent to 8.7TWh from the same period a year ago, with the Sydney-based company citing lower business sales and declines in both consumption and retail customers.

Natural gas within the energy markets business was a mixed picture, falling 7 per cent to 77.1 petajoules from 12 months prior but jumping 18 per cent on the June quarter as its Darling Downs power station resumed operation.

“Australia Pacific LNG continues to perform strongly with production rising during the quarter and high oil prices lifting revenues,” Origin chief executive Frank Calabria said. “Consistent with our 2020 financial year guidance for the energy markets business, electricity sales were lower as a result of expiration of business contracts and in our retail segments, lower customer usage and a decline in customer numbers.”

RBC said Origin had posted a solid start to the current financial year and noted strong LNG pricing of $US9.70 per million BTU compared with its rivals who were facing pressure to lower contract terms when they came up for negotiation, reflecting more tepid market conditions.

“We like the stability of earnings within the APLNG business amid headwinds facing the energy markets business,” RBC analyst Ben Wilson said. “Central to the long-term stability of APLNG earnings is what we deem beneficial contracting terms relative to peers”.

Origin in August delivered a fivefold rise in annual profit as strong earnings from its Queensland LNG business offset a fall in its core energy markets unit.

Bottom line earnings surged to $1.21bn for the 2019 financial year, just short of a $1.259bn consensus forecast, and compared to $280m in the previous year.

The closely watched energy markets unit saw underlying earnings before interest, tax, depreciation and amortisation fall by 5 per cent to $1.574bn, in line with a $1.5bn to $1.6bn previous forecast by the Sydney-based company.

However, Origin warned in August it expected underlying earnings before interest, tax, depreciation and amortisation for energy markets to decline to $1.35bn to $1.45bn in the 2020 financial year.

Origin shares fell 0.76 per cent to $7.86.