Ann: ORG Half Year Results for the period ended 31 Dec 2019, page-4

Energy Markets Underlying EBITDA was lower than pcp, but in line with previous guidance (even accounting for the impact of AASB16), and full-year FY20 guidance has been re-affirmed. The decline has been driven by the Electricity segment (-23.6% vs pcp in GP terms, mainly because of regulatory changes and of a one-off outage). The Gas segment has been a lot more stable (-3.8% vs pcp); note that Gas now represents 41.1% of total Energy Markets Gross Profit.

On the positive side, the expected FY20 cash distribution from APLNG is now 1,100-1,300m$; this represents an increase vis-a-vis the 943m$ received in FY19, but it is also a guidance upgrade in terms of distribution break-even (29-32US$/boe updated guidance, vis-a-vis 31-34US$/boe previous, reflecting a decline in APLNG's Capex/Opex). In Underlying EBITDA terms, the contribution from APLNG has been stable.

In like-for-like accounting terms (i.e. ignoring the effect from the adoption of AASB16), Origin’s Net Debt has decreased by a further 342m$ since December 2019, and ongoing deleveraging is happening at the APLNG level too.

So, overall, I personally do not see any negative surprise in this set of results. Factoring in the forecast improvement in APLNG Capex/Opex and the decline in Oil/LNG hedging costs, FY20 ORG’s Proportional Free Cash Flow should be broadly in line with FY19 levels, i.e. ~2bn$. Relative to ORG’s current Market Cap of 14.1bn$, that represents a stable FCF yield in excess of 14% pa, which I’ll take any day.

Comfortable Hold for me at these levels.