The Australian gas industry is grappling with a flood of cheap oil on the market and now our ability to fulfil long term contracts has been brought into question. This comes in a week that was dominated by the release of earnings results with Origin Energy back-flipping from an interim profit to a loss. Santos has delivered a full year net loss of almost $1 billion driven by a non-cash tax impairment of $1.5 billion and AGL Energy boosted its first half net profit by 18 per cent to $308 million and affirmed its annual guidance.
Economic News
Debate continued this week about Australia’s ability to fulfil its long term gas supply contracts at a time when falling oil prices are displacing gas and when new drill sites face further community resistance. Credit Suisse’s Mark Samter suggested that many long term contracts would come up short and that major policy shifts would be needed both politically and commercially if crisis is to be avoided.
East Coast gas suppliers have denied there are such shortfalls and argue that production will shift depending on demand. Some of the blame has also been directed at previous governments which failed to make the most of Australia’s gas endowments when oil prices were high.
All about results
Origin Energy Limited
(ASX:ORG) has back-flipped from an interim profit to a loss in the first half of the 2015 financial year. The energy giant booked a net loss of $25 million, sinking from a profit of $322 million the year before. Origin has attributed the net result to non-cash impact of the recent depreciation of the Australian dollar.
Santos Limited
(ASX:STO) has delivered a full year net loss of almost $1 billion driven by a non-cash tax impairment of $1.5 billion. The oil and gas producer says its underlying profit figure was a healthier $533 million. The company reported its highest production in five years with record sales revenue and strong operating cash flows.
Shares in AGL Energy Limited
(ASX:AGL) rose after improving its first half net profit by 18 per cent to $308 million and affirming its annual guidance. The energy giant’s net result was boosted by recent acquisitions and its underlying net profit gained 25 per cent to $302 million.
Gas developments
Oil Search Limited
(ASX:OSH) and ExxonMobil have announced the financial completion of the PNG LNG project which came on-stream mid last year. The energy developer says it will receive more than $US700 million in the project’s first distribution to co-venturers.
Shares in Central Petroleum Limited
(ASX:CTP) spiked more than 30 per cent after providing an update for its Dingo Gas project and announcing early gas sales. The Northern Territory-focused explorer has struck a deal with Power and Water Corp for the early sale of gas under a gas sale and purchase agreement executed in 2012. Under the new arrangement Central will start selling gas from its Palm Valley Gas Field in advance of the commencement of the Dingo Gas Field.
Santos Limited
(ASX:STO) says it will recognise an impairment charge of $1.6 billion in its 2014 full year results on the back of tumbling oil prices. The oil and gas producer says the non-cash accounting adjustment will reflect its long-term price forecast of oil at $US90 barrel and the Aussie dollar at $US0.80. The company notes GLNG will not be effected and is on track for first LNG in the second half of this year.
