No wonder Sinopec wants out of APLNG

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From the SMH blog:

Origin Energy has given itself a bigger cushion on its funding position to bear the impact of the slump in crude oil prices, by increasing a loan facility to $7.4 billion and lengthening out repayment terms.

The company has also sought to reassure the market about the impact of the collapse in crude prices on the economics of its $24.7 billion Australia Pacific LNG project under construction in Queensland, saying it will throw off free cash flow that can then be distributed to shareholders at oil prices down to $US40-$US45 a barrel.

…Origin reiterated it had “no requirement to raise equity”.

Origin said that based on the forward curve for oil prices, its share of distributable cash flow from APLNG is expected to average more than $900 million a year from the 2016-17 financial year. That is down from the estimate of about $US1 billion a year that Origin gave in May this year.

It noted that its returns on the APLNG project are higher than the returns made by the venture itself because Origin benefits from contributions made into the venture by its partners ConocoPhillips and Sinopec.

Holy gas burn, Batman, Sino is not only buying gas it doesn’t need, at prices it doesn’t want to pay, it’s getting reamed by some whacky pre-glut JV contractuals.

I would trust this contract as far I could throw it.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.