(Adds details on capex, Origin considers pipeline sale)
MELBOURNE/PERTH, Feb 19 (Reuters) - Origin Energy Ltd , Australia’s biggest gas and power retailer, reported a 9 percent drop in first-half underlying profit on Thursday, hurt by lower oil output, and said it would focus on cutting costs amid the oil price slump.
Origin is in transition as it prepares to start exporting liquefied natural gas (LNG) from its A$24.7 billion Australia Pacific LNG project in Queensland state, due to start producing mid-year, but is under pressure from the steep fall in oil prices.
The company said it will look for ways to defer some capital spending, and would also consider the sale of the APLNG pipeline that runs from its gasfields to the LNG plant.
“We’re just reluctant to commit capex in some areas until it’s clearer as to what future prices are going to be and future cash flows are going to be,” Managing Director Grant King told reporters on a conference call Thursday.
Underlying profit fell to A$346 million for the six months to December, below below two analysts’ forecasts around A$369 million. But the company held its dividend at 25 cents, as expected, and its shares were steady in afternoon trade.
King said efforts to conserve cash flow and any cutback on capital expenditure meant the APLNG project was less likely to generate surplus gas.
Before oil prices plunged 50 percent, Origin Energy and rival Santos Ltd, which are both building LNG plants in Queensland, were looking forward to sharp growth in earnings.
LNG prices are tied to oil prices, while exports of LNG would sap gas from Australia’s eastern markets, driving up local gas prices.
Both companies have had to temper their outlooks, although Origin said at current market forecasts for oil prices to improve to $85 a barrel in real terms from 2018, the economics of its APLNG investment “remain robust” but diminished.
The first full-year contribution from APLNG is expected in the year to June 2017.
Origin’s rival BG Group sold its pipeline in late 2014 for $5 billion. (Reporting by Sonali Paul in Melbourne and Rebekah Kebede in Perth; Editing by Richard Pullin)