Origin Energy great coal seam gas bonanza continues to generate good times for shareholders.
The company’s AGM in Sydney yesterday was told that it now expects underlying earnings this financial year to be up to 40% higher than in 2008.
That will be welcome as sharemarkets buckle in the face of recession fears here and overseas.
Mr McCann said "In the first quarter, our Australian businesses have performed in line with our expectations.
"As you may be aware, Contact Energy has had a more challenging start to the year due to unusually dry conditions on the South Island of New Zealand which substantially reduced generation in hydro power stations.
"More significantly, there has been dramatic and unpredictable volatility in oil prices, interest rates and foreign exchange rates between the Australian dollar and the US and NZ dollars.
"Furthermore, the pending completion of the ConocoPhillips transaction which will result in the receipt of US$5 billion and the timing and pricing of the previously advised on-market buyback will all significantly affect the outlook for the full financial year.
"Based on current market conditions for oil prices, exchange rates and interest rates and allowing for a range of outcomes in relation to timing of receipt of the payment from ConocoPhillips and the subsequent on-market buyback,
"Origin expects that underlying profit for the current financial year will be approximately 30 – 40% higher than the prior year," he told the meeting
Origin and ConocoPhillips have formed an $A9.6 billion joint venture to commercialise the energy retailer’s Queensland coal seam gas assets through a liquefied natural gas development.
The energy retailer will receive an initial $US5 billion payment at the completion of the ConocoPhillips transaction.
Origin provides gas and electricity to more than three million homes and businesses across Australia, New Zealand and the Pacific.
Managing director Grant King told the meeting the company was "optimistic" about its future despite the economic outlook being "more challenging than ever".
A number of "interesting acquisition opportunities" may emerge given the current market conditions, he said.
"We believe that the next few years will present more opportunities to grow either by acquisition or development," Mr King told shareholders.
Origin was the focus of a hostile $13.8 billion takeover bid from UK-based BG Group Plc this year, which was targeting the energy retailer in part to secure its vast coal seam gas reserves.
The takeover fell over after Origin formed a joint venture with ConocoPhillips.
Origin shares dropped by more than 30c in early trading yesterday before they recovered to end up 25c at $15.75.
Earlier in his speech, Chairman McCann told the meeting that Origin will have the financial strength to fund a decade of growth and the LNG joint venture will add substantially to the company’s already extensive portfolio of integrated energy developments.
"At a time when most companies face liquidity management challenges, Origin will enter the new year with minimal debt and one of the strongest Balance Sheets in corporate Australia.
"Origin shareholders will also benefit in the shorter term from this transforming joint venture.
"We have continued to increase our dividend payouts, with a final dividend of 13 cents fully franked. This takes total dividends to 25 cents for the year up from 21 cents last year.
"We have announced that we will double this dividend to 50 cents per share by an additional 25 cent dividend, following completion of the transaction with ConocoPhillips.
"Our intention is that dividends will remain at this higher level with a target payout ratio of at least 60% of underlying earnings in the years to follow.
"We have also announced an on-market buy-back of ordinary shares up to the value of $1.275 billion. This is likely to commence in November. We will also consider other capital management initiatives that may include an off-market buy-back of ordinary shares.
"In the coming year, the Board will again be focused on ensuring we deliver growth in shareholder value and earnings from operations. We will be intent on maximising the value from the financial strength in our balance sheet. While the Board will review acquisition opportunities in its core business it will be disciplined in its approach and mindful of the decline in asset values and higher returns expected from acquisitions," he said.
