Oz Origin to Take A$1.16bn-A$1.24bn Hit

Australian gas and power retailer Origin Energy expects to recognise non-cash post-tax charges in the range of A$1.16bn-A$1.24bn for the 12-months to June 30, it said on July 15 in a statement.

It said that the non-cash charges relate to updated year-end valuation estimates primarily driven by revised commodity price assumptions, the associated economic impacts of the Covid-19 pandemic, and the progressive transition to a lower carbon energy supply. In addition, Origin expects to revise its restoration and rehabilitation provisions for generation assets.

The bulk of the charges relate to Origin’s equity stake in Australia Pacific LNG (APLNG). Origin said that it expected to write down the value of its 37.5% stake in APLNG by between A$720-A$770mn, owing to the collapse in global oil and gas prices. APLNG, a joint venture comprising Origin, ConocoPhillips and Sinopec, is Australia’s largest producer of coalbed methane and supplies gas to Queensland’s domestic gas market, while also processing CBM into LNG for exports.

The company also expects to recognise a non-cash charge of A$440-A$460mn post-tax (US$300-US$315mn) relating to an onerous contract provision associated with Cameron LNG. Origin agreed in 2013 to purchase from Cameron LNG 0.25mn metric tons/year of LNG for 20 years with the first cargo delivered in June 2020. Due to the slump in global LNG prices, cargoes from Cameron are now loss-making.

Origin said these estimates are subject to finalisation of its full year audited financial statements, are post-tax and have no impact on cash flow. It expects no change to FY2020 guidance. The company will release its annual results on August 20.

The sharp decline in global oil and gas prices has resulted in asset writedowns and sharp cuts in spending. Earlier this week, another Australian oil and gas company, Woodside, said it will recognise non-cash, post-tax impairment losses of $3.92bn (A$5.6bn) during the six months to June 30.