Origin says it expects to recognise Train 1 revenue from March given its strong performance, which should significantly boost the company’s underlying earnings before tax from $30-80 million to $100-150 million.
Yet despite that the company is still on track to post a loss of between $170-220 million due to the project’s growing pains.
Production from the company’s integrated gas business, which could be demerged over the next year, was 60.9 petajoules, largely thanks to APLNG’s contribution of an extra 9PJe from the earlier quarter, and a boost from the Kupe field in New Zealand increasing production to 1.4PJe.
Since March 2015 APLNG has boosted production by a total of 27.8PJe, and the entire project is running at a gross 119.4PJe.
The Otway Gas Project’s output was 3.1PJe lower for the quarter due to plant availability issues resulting from a planned statutory compliance shutdown.
Revenue for the three months to March 31 was $316.4 million, a 49% increase on the previous quarter and a 45% increase on the previous corresponding period.
“The commencement of LNG exports from Australia Pacific LNG made a strong contribution to Origin’s overall production and sales results during the quarter,” IG CEO David Baldwin said.
“The majority of the 11 cargoes shipped from Australia Pacific LNG’s Curtis Island facility during the quarter were purchased by Sinopec in accordance with the sale and purchase agreement. The project shipped an additional four cargoes during April.
“Pleasingly, daily production rates from Australia Pacific LNG’s first production train have exceeded design nameplate capacity of 4.5 million tonnes per annum.”
First cargo from the project’s second production train is expected during the second half of the year.
The upstream project is now complete with the only activities remaining relating to contract close out, and the downstream project is now 97% complete.
Elsewhere, the installation of the new Halladale and Speculant pipeline from the wellsite to the Otway Gas Plant has commenced, and first gas is also planned for later in 2016.
Last month Origin managing director Grant King confirmed that a demerger or potential mergers were "on the table" as the electricity and gas supplier considers options to help restore shareholder value, with its utility business often being overshadowed by its riskier oil and gas investment.
Some analysts have suggested that a demerger of the energy business from the oil and gas business is a logical next step once APLNG is fully on stream in 2017.
Credit Suisse has even suggested a merger with Santos, however it warned that Origin would need to raise $4 billion in fresh equity because while Origin could carry $4 billion of debt and the electricity business $6 billion, Origin’s debt is $14 billion, and even increased APLNG income won’t make a dent in that.
Origin is, however, putting up its Perth and Cooper basin assets up for sale in the hope of tramping down its debt.
Last month Fitch Ratings reduced Origin’s rating to BBB (Negative), with a warning that the weakness in LNG markets was slowing the pace of improvement in its financials after the start-up of APLNG.
Fitch was also concerned about the slipping of production from train 2 into the second half of the year.
