Hit by the declining oil price, which continues to squeeze energy companies’ profits, Origin today announced a trading halt and plans to raise $2.5 billion from shareholders, cut opex and sell off more non-core assets, all in an effort to repair the firm’s books and shave billions from its $A13 billion net debt levels.
The announcement comes in the wake of Origin’s sale of NZ power generator Contact Energy earlier this year and on top of a $A2 billion cost cutting regime, which commenced last year.
Origin stocks are trading at $6.10 per share, down 60 per cent in a year.
“We believe this package of initiatives is prudent in light of current market conditions and strikes a reasonable balance in the best interest of all shareholders,” Origin chairman Gordon Cairns said.
The company will launch a 4-for-7 underwritten share offer at $A4 a share, a 34 per cent discount on Tuesday’s closing price.
“In addition to raising $A2.5 billion in capital we plan to reduce the company’s dividend for FY2016 and FY2017, make further reductions in capital expenditure and sell non-core assets to strengthen Origin’s balance sheet.”?
Managing director Grant King rallied the confidence-building message, saying the firm will narrow its focus to its two core Australian businesses – energy markets and integrated gas – while selling off non-core assets in Australia’s Cooper and Perth Basins and infrastructure including gas pipelines.
Mr King told investors that while the Australia Pacific LNG joint-venture has invested in production and pipeline capacity beyond existing sales contracts, Origin will not make further contributions to the project beyond the previously announced $A1.8 billion, which will bring both trains into production next year.