Origin Energy Limited (ASX: ORG) has been in the news for many a reasons these days. Recently, the group reported about the successful extension of $4.5 billion of bank debt facilities maturing in December 2018 to a new five-year maturity of October 2021. The group could attain this via negotiations through a syndicate of domestic and international banks. Then its Australia Pacific LNG project also gained traction with production of the maiden LNG cargo from the second of the two 4.5 million tonnes per annum production trains. ORG had also confirmed about the discovery of hydrocarbons at Amungee NW-1H, the final well in Stage 1 of the Beetaloo JV. These updates were then followed by the group’s Annual General Meeting (AGM) held on October 19, 2016 in Sydney. Following are the key takeaways of the AGM:
Share prices of Origin were impacted by lower oil prices:The following graph highlights the trends for S&P ASX 100, Brent crude price and the prices of Origin shares in the volatile market scenario witnessed in FY2016. The impact of lower oil prices have had a devastating effect on the market cap of Origin with prices having dropped substantially from their 2015 peaks.
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Share price Scenario (Source: Company Reports)
Commenced oil hedging for FY2018:According to Origin, the company has hedged 15 million barrels of crude oil for the financial year FY2018 with a floor strike of US$45 a barrel, at a total cost of A$35m after tax. The hedge is a combination of puts and collars with the collar hedge comprising 8.5 million barrels capped at an average of US$70 per barrel. The strategy of the company is to protect its ability to repay debt by reducing risks associated with lower oil prices in addition to maintaining substantial advantage in the event of oil prices rebounding.
Robust FY2017 guidance and positive outlook for energy markets: Origin is expecting a 45- 60 percent increase in EBITDA profit for FY2017 (reconfirmation of earlier announcement) and the integrated gas business is said to double the underlying EBITDA to over $1 billion. The guidance has been based on the assumption that the average prices of Brent crude will remain at about US$52.90 and the AUD/USD exchange rate at 0.74. While Origin has not issued its NPAT guidance, the company expects its adjusted net debt to be below $9 billion at the end of FY2017. The company is also open to the idea of splitting its oil and gas production businesses from its generation and retail units. The share price for Origin has moved up 7.4% in the last one month (as at October 24, 2016).
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Outlook for Energy Markets (Source: Company Reports)
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