Origin Energy has posted a 40% jump in first half sales from its oil and gas business despite a fall in output in the December quarter in the last quarterly report before the sale of its Lattice Energy arm (to Beach Energy).
Sales for the six months to December 2017 surged to $A1.365 billion thanks to the ramp-up of output at the $A25 billion Australia Pacific LNG venture in Queensland plus higher prices for all its oil and gas products.
But December quarter output of 83.5 petajoules was down 5.6 petajoules from the September quarter due to lower demand and maintenance work at its Otway Basin gas field off the Victorian coast.
Production from APLNG was on a par with the September quarter at 63.4 petajoules, with higher LNG production compensating for lower sales of domestic gas.
December quarter revenues were $686 million, up $8 million from the September quarter, despite a slide in LNG prices in the quarter compared to the previous three months to $US7.14 per million British thermal units.
The average gas price also softened, while the average oil price jumped to $A85 a barrel from $A66 in the September quarter.
“Australia Pacific LNG continued to perform well, delivering reliable upstream and downstream production in the December quarter,” Origin chief executive Frank Calabria said in yesterday’s statement.
“This is demonstrated by a total of 35 LNG cargoes loaded and shipped from Curtis Island (at Gladstone).”
The company is still looking at major cost cuts over the next 18 months, aiming to lop about half a billion dollars annually in capital and operational costs, and dropping its operating breakeven price to about $US24 a barrel of oil equivalent (boe), below its current guidance levels of $US30 boe.
That’s why the company revealed the plan cuts of 650 jobs from its business earlier this week.
This reduction has been driven by a reorganisation in Origin, as it moves to a flatter structure, cutting the majority of the roles from its middle management levels.
“The loss of jobs is never a decision taken lightly and we are putting considerable effort into completing this process as quickly as we can so we can provide certainty to our people,” Mr Calabria said yesterday.
“We firmly believe these changes are both necessary and sustainable, in the best interests of Origin and our project partners, and put us in a strong position to achieve our objective of becoming a globally competitive, low-cost gas producer.”
Origin shares were steady on $9.35 at the close on Wednesday.
Origin also announced the completion of the sale of its Lattice Energy oil and gas business to Beach Energy for $1.6 billion.
Origin said it expects to record accounting charges of $220 million to $240 million from the deal, including a $170 million to $180 million impairment to account for Lattice Energy’s earnings from July 1 – the effective date of the sale.
