ORIGIN ENERGY LIMITED (ASX: ORG)
Impairment charges to hit 1H18 result: Power and gas player, Origin Energy has advised that it expects to recognise impairment charges of $533 million (post-tax) for the first half of FY2018 in its half year results that are due to be released around 15 February 2018. Particularly, the group expects to recognise an impairment for the Ironbark gas field of $360 million on a post-tax basis in view of the downgrade in Ironbark reserves and a revised development plan. It is noteworthy that first gas from the Ironbark development is expected in FY2021 with FEED entry for stage 1 development in FY2018 based on a revised multi-stage field development plan initially targeting the high permeability sweet spot (Undulla Nose extension) in the North West sector of the tenement.
A post-tax impairment charge of $173 million has also been slated towards recognising Lattice Energy earnings from July 01, 2017 to the January 31, 2018. While the charge in entirety is subject to finalisation of its half year financial statements and is an after-tax, non-cash item with no impact on FY2018 Underlying EBITDA, the update has led the stock slip by 2% on February 08, 2018.
Though December quarter production by the group was 5.6 PJe lower than the previous quarter, Origin’s production for the first half of the 2018 financial year was 172.6 PJe, which is 12% higher than the prior comparable period owing to better production from Australia Pacific LNG with a full six months’ contribution from Train 2; while sales revenue had increased by $391 million to $1,365 million reflecting an improvement of 40%. We have a “Hold” position on the stock at the current price of $8.77
AGL ENERGY LIMITED (ASX: AGL)
Rise in interim dividend: AGL Energy has reported its 1H2018 result entailing statutory profit after tax of $622 million for the six months ended 31 December 2017, reflecting an increase of 91% on the prior corresponding period (pcp). The group’s result finds support from continued underlying earnings growth and a positive movement in the fair value of financial instruments used for hedging activities of $127 million. About 27% growth was noted in underlying profit after tax, which excludes items and movements in the fair value of financial instruments, to $493 million. The result was slightly below market expectations while the sales reported a growth of 7% to $6.45 billion. However, the unfavourable customer mix has impacted the electricity consumer customer sales and there were lower surplus generation volumes sold to pool. Further, group needs to lower down its cost base.
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Net Operating Costs (Source: Company Reports)
Based on the overall result, the group has reconfirmed the full-year guidance for underlying profit after tax of between $940 million and $1.04 billion. The group is set to pay an interim dividend of 54 cents, significantly up by 32% from pcp figure, in March 2018. Despite the decent result, the stock is down 2% on February 08, 2018 and had fallen 12.36% in last three months, but still looks touch “Expensive” at the current price of $22.01
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