Australian LNG group Origin Energy to cut spending by 40%

By JAMES PATON
Bloomberg

OriginEnergy, the Australian company building a A$24.7 billion ($19 billion) natural gas-export project with ConocoPhillips, will cut spending by about 40% after the downturn in oil prices.

Spending on growth projects will drop to about A$900 million in the 12 months through June 2016, from an estimated A$1.5 billion this year, the Sydney-based company said today as it posted a 9% decline in underlying first-half profit.

The company plans to conserve cash and accelerate cost cuts, and said a sustained oil slump would lead to lower growth in cash flow and earnings than previously expected.

Origin is preparing to start its liquefied natural gas (LNG) project in Queensland as tumbling oil prices threaten to eat into revenue. The project is one of three gas export plants going ahead on Australia’s east coast, putting the nation on course to become the world’s largest LNG supplier.

The cost of the plant isn’t expected to be “materially different,” Origin said. It’s on track to start “sustained LNG production” from the first unit in the first quarter of the fiscal year starting in July 2016 and the second unit should start in the middle of that year, Origin said.

Santos’s Gladstone LNG project is scheduled to begin later this year, while BG Group is operator of an LNG development that started late last year.

Origin, Australia’s largest electricity and gas retailer, had an underlying profit of A$346 million, compared with A$381 million a year earlier. That compared with an estimate of A$393 million from Citigroup.

Origin had a net loss of A$25 million, compared with a profit of A$322 million a year earlier.

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