Australian utility and upstream group Origin Energy sees sliding oil prices affecting its profitability but having minimal impact on its ability to fund its share of the Australia Pacific LNG (APLNG) project.
Costs for the 9mn t/yr APLNG project in Queensland remain exposed to increased costs in non-operated areas but are not expected to be materially different from its budget of A$24.7bn ($20.50bn), Origin said. It has a 37.5pc stake in APLNG, as does ConocoPhillips with Chinese state-controlled oil firm Sinopec owning the remaining 25pc. APLNG aims to ship its first cargo in the second half of 2015.
Origin expects upstream operating expenditure on operated and non-operated coal-bed methane gas fields, pipelines, electricity purchases and royalties of around A$1.2bn/yr on average for the APLNG project. These operating costs reflect the drilling of about 300 operated wells a year at a cost of about A$3mn for each connected well, as well as APLNG's share of about 300 non-operated wells per year. The spending will also be on processing facilities post-LNG production for both operated and non-operated wells, it said.
APLNG will have free cash flow available for distribution to shareholders at oil prices above cash costs at a breakeven price of $40-$45/bl of oil equivalent on average, Origin said.
At current forward oil curve prices, Origin expects its share of distributable cash flow from APLNG to exceed A$900mn/yr on average from the 2016-17 fiscal year ending 30 June.
Guidance for Origin's cash contribution for 2014-15 of around A$3bn provides enough funding without relying on the timing of revenue from gas sales that are not in APLNG's control, it said.
Origin said 8.6mn t/yr of APLNG production are oil-linked prices or about 470PJ/yr (12.55bn m³/yr) of gas. APLNG also has domestic contracts of around 120PJ/yr and sales to the Queensland Curtis LNG operated by UK energy firm BG of about 25PJ/yr.
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