Origin Energy Flags Further Impairment Hit -- Update

By Robb M. StewartFeaturesDow Jones Newswires

MELBOURNE, Australia--Origin Energy Ltd. (ORG.AU) said a cut in oil-price assumptions and in the proceeds it anticipates from the planned sale of conventional natural-gas assets will result in an additional writedown of nearly 1.2 billion Australian dollars (US$947 million).

The charge will take impairments for the just-ended year through June to A$3.1 billion, when added to impairment charges already booked against the value of the energy company's stake in a large gas-export venture on Australia's east coast, as well as other assets.

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Origin, which is due to release its annual results on Aug. 16, said the charges are noncash in nature and won't affect cash flows or underlying earnings.

Still, it does raise questions about the price that the company could fetch for the assets it plans to float or sell outright before the end of 2017 as part of its efforts to cut debt.

Origin said it would record an impairment charge of A$815 million against the value of its 37.5% stake in the Australia Pacific LNG project on Curtis Island in Queensland state. The charge stems mainly from a changed view on oil prices, which Origin now bases on US$67 a barrel from 2022.

It said it will also take a A$357 million charge against Lattice Energy, the name given to the assets it plans to sell, after assessing the carrying value against the expected proceeds and estimated cost of disposal.

The sale process is progressing well, Origin added.

Lattice's portfolio includes Origin's stakes in an oil-and-gas venture in the Cooper Basin in South Australia, gas operations in Western Australia, Victoria and New South Wales states and exploration projects in New Zealand. An exit would leave Origin focused on power-generation assets and retail businesses in eastern Australia, as well as its stake in the APLNG project and the coal-seam gas operations that feed it.

Ben Wilson, an analyst at RBC Capital Markets, said he estimates the impairment reduces the book value of Lattice to about A$1.3 billion, which would mark a A$200 million reduction in its valuation if that ends up being the price the business is sold for.

Origin recorded a loss of A$1.7 billion for the first half of the 2017 financial year, driven by a A$1.9 billion impairment against the APLNG project and exploration and other investments. It narrowed its net loss for fiscal 2016 to A$589 million from A$658 million the year before.

APLNG is one of three LNG operations on the coast of Queensland that have positioned Australia to overtake Qatar as the world's biggest exporter of the fuel by as early as 2019. The plant is operated by ConocoPhillips (COP), which also has a 37.5% interest, and includes China Petrochemical Corp. as a partner.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

August 10, 2017 00:00 ET (04:00 GMT)