Origin Energy has suspended dividends after delivering a full year loss of $589 million, as weak oil prices and a heavy debt burden from its Australia Pacific LNG development weighed for a second year in a row.
Australia's largest gas and power retailer had warned in February it would suspend payouts to shareholders if oil prices remained depressed, and on Wednesday came good on that promise. It did not pay any final dividend for 2015/16, leaving the full year payout at 10 cents a share.
"The board has decided that debt reduction will be prioritised," managing director Grant King told reporters.
"It will be a dividend-by-dividend decision. If oil prices improve quickly, it will remain suspended for a short period. Otherwise, we will focus on reducing debt."
Origin expects to reduce its net debt to below $9 billion by the end of 2016/17.
The company's bottom line was hit by an after-tax impairment charge of $515 million, related to the restructuring of its business and a downward revision in its reserves.
Underlying profit for the year to June 30 fell 41 per cent to $354 million, as the continued slump in oil prices crimped margins.
The price slide has hit Origin particularly hard, coming towards the completion of its $26 billion APLNG project in Queensland, which has stretched the company's balance sheet. The project shipped its first cargo in January.
Origin last year raised $2.5 billion through an equity raising, cut about 2,500 jobs, slashed capital expenditure and pledged to sell non-core assets worth $800 million in an effort to shore up its balance sheet. It paid down $4 billion of debt in 2015/16.
Its board was now reviewing all options, including the sale of oil and gas assets not related to its LNG business, Mr King said.
"We have a variety of assets, some of which are not so central to our earnings. We continue to review what decisions we should make to reduce debt," he said.
The company expects to increase underlying earnings by 45 to 60 per cent in 2016/17, to between $2.37 and $2.6 billion, helped by increasing production at APLNG.
The second unit of the nine million tonnes a year plant is set to start production in the December quarter, Origin said.
However, excluding the LNG business, earnings guidance is in the $1.8 billion to $1.95 billion range, slightly lower than the company's estimate in February.
"We anticipate a negative reaction to the guidance downgrade pending further details on the drivers of the downgrade," RBC Capital Markets analyst Ben Wilson said.
Origin Energy shares dropped seven cents, or 1.2 per cent, to $5.77.
WEAK OIL PRICES WEIGH ON ORIGIN ENERGY
* Net loss $589m vs $658m loss year ago
* Revenue down 14pct to $12.17b
* No final dividend, down from 25 cents last year.
