Origin Energy Shares Fall on FY21 Results (ASX:ORG)

Origin Energy Ltd [ASX:ORG] shares are down today, following a sharp decline in statutory and underlying profits.

ORG shares are currently trading at $4.21 per share, down 3.5%.

ASX ORG - Origin Share Price Chart

Source: TradingView.com

The energy stock is now down 28% over the last 12 months as the COVID pandemic continues to impact the energy market.

Origin FY21 overview

 Let’s start with some key financials.

ORG reported a FY21 Statutory Net Loss of $2.29 billion from a profit of $83 million in FY20.

This loss was primarily driven by 2.25 billion of non-cash charges, which included impairments and a deferred tax liability.

The underlying profit stood at $318 million, down from $1.02 billion million in FY20.

This drop was mainly due to lower commodity prices in both energy markets and integrated gas divisions.

However, this number was partially offset by lower operating costs in Australia Pacific LNG, retail cost savings, lower interest expense, and oil hedging gains.

The underlying EBITDA came in at $2.05 billion million.

This was a large drop from $3.14 billion in FY20.

Free cash flow did remain robust at $1.14 billion primarily due to high cash conversion in Energy Markets backed by lower working capital requirements.

The strong cash flow helped to reduce debt by $519 million, while allowing for investment in growth and dividends to shareholders.

Speaking of dividends, an unfranked final dividend of 7.5 cents per share was announced, which is a drop from 10 cents per share in FY20.

Origin CEO, Frank Calabria, shared his views on the company’s performance:

Operating conditions were challenging this year due to low prices and the impacts of COVID-19 across our key commodities of electricity, natural gas and oil.

 Energy Markets headwinds are expected to persist into FY2022, though this should be largely offset by the strong performance of our Integrated Gas business.

 Our immediate focus is on capital discipline and cost management to continue to build balance sheet resilience, with a rebound in Energy Markets earnings expected in FY2023 assuming current forward commodity prices continue and flow through to tariffs.

 There were a number of operational highlights across Origin’s two businesses, contributing to stable cash flows.

 Australia Pacific LNG was outstanding, safely curtailing output when the market was subdued, and rapidly ramping up production when demand recovered, matching previous daily production records and shipping a record 130 cargoes for the year.

Have We Hit the Bottom? Financial Expert Warns Not Yet. Learn More.

Energy markets performance

 The Underlying EBITDA stood at $991 million, a drop of $468 million or 32% from the year earlier.

This decline was attributed to the reduction in wholesale prices backed by increased network and metering costs not recovered in regulated tariffs.

Operating cash flow was also down $289 million to $1.02 billion while the cost to serve was down $81 million to $489 million.

Integrated gas performance

 The underlying EBITDA was down $606 million to $1.14 billion while the cash distributions from APLNG stood at $709 million, down $566 million compared to FY20.

The APLNG Production was only down a mere 1% to 37.5% or 263PJ.

The average realised LNG price came in at US$6.2/MMBTU — a metric that was down 32% compared to FY20.

Underlying return on capital employed (ROCE) fell to 4.8%, an 8.2% drop from the year earlier.

ORG ASX outlook

Origin’s guidance for FY22 saw expected underlying EBITDA to be around $1.85–2.15 billion.
This rests on the assumption of a higher Australia Pacific LNG realised oil price of US$68/bbl.

Company Presentation

Source: Company presentation

The year-long selling pressure sustained by Origin may drive some investors to seek opportunities elsewhere.

If you’re interested in dividend-paying stocks that can withstand the global uncertainty, then you may like reading our new 2021 deep value stocks report.

 

Regards,  

Kiryll Prakapenka

 For Rum Rebellion

PS: The Rum Rebellion is a fantastic place to start your investment journey. We talk about the big trends driving the Australian Economy. Learn all about it here.


Lachlann Tierney is a writer for The Rum Rebellion and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. 


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