Australia’s Origin Energy Flags $417mn Write-down

Leading Australian gas retailer Origin Energy is expecting to register impairment charges of A$533mn ($417mn) post-tax for July-December, the company said February 8.

The write-down, to be included in its half year results scheduled to be released next week, includes an impairment for the Ironbark gas field in Queensland of A$360mn post-tax, after taking into account a downgrade in reserves and a revised development plan, Origin said.

“The reserves revision follows a detailed assessment of the Ironbark gas field applying updated assumptions consistent with the technical review of Australia Pacific LNG’s reserves carried out in June 2017,” it said.

The company has revised down Ironbark’s 2P reserves from 249PJe to 129PJe and 3P reserves from 635PJe to 192PJe.

RBC Capital Markets analyst Ben Wilson described the news as a continuing coalbed methane hangover for Origin.

“As a reminder, Origin purchased Ironbark from Pangaea Resources in 2009 at the height of CBM mania for A$660mn on the premise of 1,150PJ of 3P reserves + 2C of 500PJ,” he said.

The carrying value of the Ironbark gas field development post the impairment is expected to be A$279mn.

The Ironbark development is expected to enter FEED for stage 1 development by June with a revised multi-stage field development plan. First gas is targeted in fiscal 2020-2021 (July-June), Origin said.

“Successful testing of low permeability drilling techniques at Australia Pacific LNG, which could be applied to Ironbark, provides the potential for development of additional resource,” the company added.

Meanwhile, as announced January 31, Origin has completed the A$1,585mn sale of its Lattice Energy business with economic effective date of July 1, last year, and expects to record a non-cash post-tax impairment charge of A$173mn, as a result of recognising Lattice Energy earnings from July 1 to the January 31 completion date.

Origin is due to release its half year results February 15.