ORIGIN Energy has made the first move in an expected round of consolidation between rival gas projects in Queensland, reaching a sales agreement with its former predator, Britain's BG Group.
As it posted stronger-than-expected profit results yesterday, Origin also sought to play down scepticism over its liquefied natural gas plans by pointing to the deal with BG.
Under the plan, Origin and its partner ConocoPhillips will sell 20 years' worth of gas to BG subsidiary QGC. It comes less than two years after BG's $13.8 billion hostile bid for Origin ended in failure.
The terms of contract were not released, but Origin managing director Grant King said the move showed the company's confidence in the size of its gas reserves, shrugging off market doubts Origin was losing the race to export LNG.
''Hopefully it is evidence that there are opportunities for further co-operation between … some of the projects,'' Mr King said.
Of four competing LNG projects around Gladstone, Origin's is the only one that has not announced a buyer of its gas, and analysts say this is holding back its share price.
Origin also handed down net profit after tax of $371 million yesterday, a result that beat market expectations thanks to a lower tax bill and a fall in interest costs. The profit result represented a 94 per cent fall from $6.6 billion a year ago because of large one-off payments from ConocoPhillips. Removing this one-off impact, underlying profit was 28 per cent higher at $355 million, compared with market estimates of about $300 million.
It confirmed previous guidance of a 15 per cent rise in profits this financial year. It will pay a fully franked interim dividend of 25¢ a share.
Of its divisions, the energy retailing business made the biggest contribution, with earnings before interest, tax and depreciation rising 7 per cent to $320 million.
Income from its power generation business surged from $22 million to $98 million after its capacity more than doubled over the period.
The director of Origin shareholder Private Portfolio Managers, Hugh MacNally, said it was a strong result but the market remained sceptical about a potential glut of LNG projects. ''I don't think that has been resolved in the market's mind.''
Analysts think the next catalyst for Origin growth is securing a buyer for its LNG, but Mr King said the market had swung in favour of buyers since the global financial crisis.
Origin shares fell 1.8 per cent to $16.50.
ORIGIN
Profit $371 million NA
EPS 42.3¢ NA
Sales $4.3 billion +2%
Dividend 25¢steady
