Australia's Origin Energy profit jumps; raises energy markets forecast

[BENGALURU] Origin Energy, Australia's top power and gas retailer, more than tripled its half-year underlying profit on the back of soaring energy prices and raised its earnings forecast for energy markets, sending its shares up 6 percent.

Origin also sharpened its target for cutting costs at its Australia Pacific liquefied natural gas (APLNG) project, aiming to break even at US$45 a barrel by June, down from a target of US$48.

Analysts and investors applauded the result, which was in line with broker forecasts, as well as the better outlook for energy markets and APLNG, where costs have come down partly due to improved output from its coal seam gas wells.

"We see this as a strong outcome for Origin," Royal Bank of Canada analyst Ben Wilson said in a note.

Origin's shares jumped 6 per cent outpacing a 0.9 per cent rise in the broader market.

Underlying profit after tax for the six months ended Dec 31 rose to A$582 million (S$604.66 million) from A$184 million a year ago, roughly in line with two analysts' estimates around A$593 million, driven largely by strong power and gas prices.

Power and gas prices have soared due to growth in wind and solar power, which need to be backed up by gas-fired generation, which has grown expensive as domestic gas supply has tightneed due to a sharp rise in LNG exports.

As a result, Origin raised its full-year underlying earnings forecast for its energy markets business to between A$1.78 billion and A$1.85 billion from an earlier forecast of A$1.7 billion to A$1.8 billion.

However, like arch rival AGL, Origin's retail business was hit by a sharp rise in customer churn, after government pressure on retailers to drive down household energy costs sparked a price war.

The company lost 47,000 customers in the December half, but has seen a pick-up over the past two months.

Origin said it is on track to cut net debt to less than A$7 billion by June, as targeted, following the recently completed sale of its Lattice Energy business.

Chief executive Frank Calabria said debt reduction along with improving underlying returns would be key measures for reviving the company's dividend.

It suspended dividends in 2016 to focus on cutting debt, which peaked with the construction of APLNG just as oil prices slumped.

"Clearly we're getting closer every six months that we make that progress," he told reporters.

REUTERS