TOUGH TIMES: Origin has written down the value of APLNG by more than $1 billion.
TOUGH TIMES: Origin has written down the value of APLNG by more than $1 billion.

Energy company's massive $1b loss after Gladstone investment

A BILLION dollar loss to the value of Australia Pacific LNG has driven a dagger through Origin Energy's half-year financial report, contributing to more than $2 billion in write-downs.

In its first-half financial results for 2017 released today, Origin Energy announced it has more than $2 billion in write-downs of its oil and gas assets.

LNG FUKUROKUJU is purpose built to carry LNG from the APLNG facility at Curtis Island to Kansai Electric facility in Japan.
LNG FUKUROKUJU is purpose built to carry LNG from the APLNG facility at Curtis Island to Kansai Electric facility in Japan. APLNG

The biggest write-down is from its 37.5% stake in APLNG, with a $1.03 billion after-tax hit.

A write-down is a reduction in value of an asset.

Origin blames the higher than expected American exchange rate for the loss on its $25 billion Curtis Island venture.

In the first half-year result under new chief executive Frank Calabria, Origin has announced a Statutory Loss of $1.68 billion, several times more than its first-half 2016 loss of $254 million.

Origin has made it clear APLNG isn't out of the woods just yet, with ongoing concerns around the low oil price.

"Origin's valuation of its investment in APLNG is sensitive to changes in these assumptions which could impact the fingernail statements in the future," a media statement reads.

The write-down to APLNG came as no surprise to some analysts, including Ben Wilson from RBC.

"The impairments are not a surprise, nor do we think Origin should be marked down," RBC analyst Mr Wilson told The Australian.

"Increasing discount rates for the purpose of asset value testing (and perhaps also reserves testing) will be an evolving theme for exploration and production companies."

Asset values drop:

APLNG: 1.03 billion

Browse Basin: 578,000

NewCo Conventional exploration assets: 170,000

Investment in Energia Austral SpA: 114,000

With the Curtis Island project's second production line producing its first cargo of LNG in early October, APLNG has shipped 82 cargoes to date.

The value drop announcement follows concerns on the supply of gas to the east coast gas market because of restrictions on onshore gas exploration.

APLNG, now 100% operational, loaded and shipped 26 cargoes during the quarter, to Sinopec, China, and Kansai, Japan.

It's not the first time a Curtis Island LNG plant has taken a hit to its value, with Santos and BG Group announcing similar losses in the past two years.

In August 2016, Santos advised a $US1.5 billion write-down on the value of its GLNG project, prompted by the low oil price.

Meanwhile, in February 2015, BG Group was hit hard by the oil price drop, announcing a $US4.1 billion write-down on its QCLNG project.



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