For the last couple of years Origin Energy has battled to keep ahead in the face of the decline of its coal-fired power station business, with its gas business – especially its APLNG export operation involvement – giving a lot of assistance to its bottom line.
But as shareholders heard at the 2022 AGM yesterday, it is the domestic gas supplies, rather than exported LNG (Liquified Natural Gas), that has of late been delivering higher profits and shareholders could see a benefit next February when the 2022-23 interim results are released.
Origin said it expects earnings from its core energy supply business to jump as much as 78% of up to $650 million this year in a recovery from last year’s slump, boosted by increases in profits from sales of gas, while electricity profits remain “suppressed”.
Further growth in the energy markets business earnings was anticipated in the 2023-24, Origin said in guidance issued before its annual shareholder meeting which included advice on future capital management flagged for February.
Underlying earnings are forecast to jump to $500 million to $650 million in the June, 2023 financial year, up from earlier forecasts of $365 million, Origin said in a market update issued before the AGM.
The gains for the gas producer from high world prices will be offset by higher costs for electricity generation in Australia that will take time to flow through to residential and business customers.
“The improvement in Energy Markets underlying EBITDA (earnings before interest, taxes, depreciation, and amortisation) compared to the prior year is driven by an expected increase in natural gas gross profit,” Origin said the update.
Electricity gross profit is expected to remain suppressed reflecting higher energy costs “only partially priced into regulated tariffs”, the company said.
Origin anticipates further growth in energy earnings in FY2024 as it passes on costs to consumers.
“A higher contribution is expected from the electricity business as higher wholesale electricity prices flow through to customer tariffs,” the company said.
Origin’s gas exploration and production includes assets owned with partners ConocoPhillips and Sinopec in the Surat and Bowen basins in Queensland, where rain is expected to dampen output.
Origin reaffirmed Australia Pacific LNG (APLNG) production guidance but said the continued impact of unseasonal wet weather and a forecast third La Niña was likely to result in production towards the lower end of the range.
Guidance for APLNG’s capital and operating costs was unchanged.
Origin said it will reveal its decision on possible capital management initiatives with its interim results next February.
Origin’s shares eased 1.4% to $5.64.
