'Misjudged': Volatile gas industry hurts 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 a sign of the volatile LNG market, Origin Energy announced in its half-year financial report a $1.03 billion write-down of its Curtis Island venture.
The APLNG loss was the largest of all write-downs, which totalled about $1.9 billion.
But the announcement came as no surprise to gas and market analysts, who said it was a combination of the high US exchange rate and the low LNG price.
In what was the first half-year result under new chief executive Frank Calabria and new chief financial officer Lawrie Tremaine, Origin Energy announced its statutory loss had blown out to $1.86 billion, several times its 2016 loss of $254 million.
Wood Mackenzie analyst Saul Kavonic says Origin Energy and the other two Curtis Island LNG plants weren't out of the woods just yet.
The gas market analyst expects the challenges for the LNG industry to stick around with low prices forecast throughout the next decade.
"The deliver-ability of CSG wasn't as well as anticipated when the projects were sanctioned ... up to almost half of the yet to be drilled wells could be rendered uneconomic if LNG prices went back to the same depressed levels as last year," Mr Kavonic said.
Australia Pacific LNG was the third and last Gladstone gas project to announce a write-down worth more than a billion dollars.
"The market has been anticipating this ... the challenges have been known and it's an issue which is being felt across all (LNG projects) in Australia," Mr Kavonic said.
"The industry collectively misjudged the difficulties and cost pressures."
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.
"Origin's valuation of its investment in APLNG is sensitive to changes in these assumptions which could impact the fingernail statements in the future," an Origin Energy media statement reads.
Australia Pacific LNG declined to comment on the financial report.