Origin Energy Ltd. will sell A$2.5 billion ($1.8 billion) in shares at a 34 percent discount as part of an effort to improve its balance sheet and maintain its investment-grade rating after a plunge in oil prices.
Origin, preparing to start its A$24.7 billion gas-export project with ConocoPhillips on Australia’s east coast, also plans to sell as much as A$800 million in assets, reduce its dividend and cut spending, the Sydney-based utility said Wednesday. Origin expects the measures to lower net debt to below A$9 billion.
“It’s important to take action to deal with what is the fundamental issue, which is a high level of debt in Origin that’s unsustainable in the current environment,” Managing Director Grant King told analysts on a conference call. “We must reduce debt now.”
The debt-reduction plan comes amid a tumble in commodity prices that has punished producers. Oil’s decline of about 50 percent over the past year is cutting revenue for liquefied natural gas projects whose contracts with Asian buyers are linked to the price of crude. Origin said last month that the price slide may significantly reduce the contribution from its LNG project.
Origin plans to reduce spending by A$1 billion across the financial years ending in June 2016 and June 2017 as part of a A$2.2 billion program to preserve cash, it said.
Assets potentially for sale include its interests in the Cooper and Perth basins of Australia, investments in wind power and infrastructure such as pipelines, Origin said.
The company plans to sell the shares to investors on a 4 for 7 basis at A$4 a piece, a 34 percent discount to its closing price of A$6.10 on Tuesday, the company said. The stock has fallen 59 percent in the past 12 months.
The Australia Pacific LNG project is expected to deliver its first cargo in November, according to the statement. The plant will follow two other export developments on the Queensland coast operated separately by BG Group Plc and Santos Ltd.