Origin's Q4 Report Reflects Major Transformation in Upstream Business
Origin has released its Quarterly Production Report to the Australian Securities Exchange for the Quarter ending December 31, 2008 which covers its activities in the areas of gas and oil exploration and production (the E&P business).
Commenting on results for the December Quarter, Origin’s Managing Director Grant King said, "This is the first quarter that incorporates the effect of the transaction with ConocoPhillips to establish APLNG. Notwithstanding this transaction, the E&P business for the half year to 31 December 2008 has achieved record levels of production, sales and revenues -- each 23% higher than the half year to December 31, 2007."
The completion of the transaction with ConocoPhillips to establish a 50:50 incorporated joint venture -- Australia Pacific LNG (APLNG) -- Australia's largest proposed CSG to LNG project resulted in the Origin Group receiving an upfront payment of A$6.9 billion. In addition to this initial payment COP will carry Origin's share of expenditure for a further A$1.15 billion. APLNG is targeting a final investment decision in the LNG project by late 2010.
Mr King said, "The APLNG transaction has seen Origin reduce its interest in its CSG assets by 50%. As a consequence of its reduced interest, Origin has recorded a lower share of production from CSG over the last two months of the December Quarter. This, combined with the lower seasonal gas production usually seen when moving from the September (winter) Quarter to the December (spring/early summer) Quarter and a constraint on production from the BassGas project, has seen December Quarter production approximately 30% lower than the September Quarter."
Origin anticipates that the successful remediation in late December of the BassGas production constraint, the anticipated seasonal increase in gas demand in the March quarter and continued growth of underlying domestic production from the CSG assets will see production levels increase in the March Quarter.
In respect of the December Quarter, a decrease in the international price of oil, condensate and LPG has significantly impacted revenue, with a 41% overall reduction in revenues recorded between the September and December Quarters.
In conclusion Mr King said, "The December quarter was a period of major transformation for the company's upstream business and for Origin. The company has no net interest bearing debt, a significant cash balance and significant undrawn bank facilities. The strong financial position of the company at a time of global economic uncertainty provides many opportunities for Origin, including the
continued development of our E&P business."
- Origin achieved record Production, Sales Volumes and Revenues for the first half of the financial year reflecting strong aggregate growth in Origin's upstream assets.
- In addition the Origin Group received A$6.9 billion on completion of the transaction with ConocoPhillips (COP) to establish a 50:50 incorporated joint venture -- Australia Pacific LNG (APLNG) -- Australia's largest proposed CSG to LNG project. For the 50% interest in APLNG, and in addition to its upfront investment, COP will carry Origin's share of project expenditure for a further A$1.15 billion leading up to a final investment decision in the LNG development, expected in late 2010. COP will invest up to another US$2 billion in further payments of US$500 million on approval of each LNG train, for up to 4 trains, to partly carry Origin's share of development expenditure.
- Following completion of the transaction with COP, Origin now has no net interest bearing debt, a significant cash balance and significant undrawn bank facilities.
Record first half Production, Sales and Revenues, each up 23%
- Contributions from the new Otway Gas Project and Taranaki assets.
- Higher contribution from CSG assets, despite the 50% reduction in Origin's interest following the completion of the APLNG transaction in late October, as production capacity continues to grow.
- These factors more than offset lower production from BassGas and Perth Basin gas due to well constraints and the ongoing natural decline in Perth Basin oil production.
Quarterly Production 3% higher than corresponding Quarter last year
- Quarterly production was higher than the corresponding period last year despite the 50% reduction in Origin's interest in CSG assets following completion of the APLNG transaction in late October and production constraints at BassGas and the Perth Basin. Revenue was lower due to falling liquids prices.
Quarterly Production 30% lower than September Quarter
- Quarterly production was lower than the September Quarter due to the 50% reduction in Origin's interest in CSG assets following completion of the APLNG transaction in late October, lower seasonal gas demand as expected during the period and production constraints at BassGas and the Perth Basin. Revenue was significantly lower due to the significant reduction in the international price for oil, condensate and LPG.
Significant events and influences during the Quarter included:
- Otway Gas Project: The project continued to operate reliably during the Quarter with lower volumes reflecting low seasonal gas demand in southern Australia.
- BassGas Project: A constraint that restricted production from the Yolla 4 well for most of the December Quarter was successfully resolved at the end of the Quarter and production has returned to normal operating levels.
- Kupe Gas Project: Construction of the onshore Production Station is 70% complete. The project remains on track for first commercial gas sales to commence in the September Quarter 2009.
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