Origin board grits teeth to deliver dividend cut

THE Origin Energy board “agonised” over the decision to cut the amount the group pays out to investors, chairman Gordon Cairns says.

And the board is “committed to revisiting” the issue if oil prices bounce back, he says.

Mr Cairns told Origin’s annual meeting yesterday no one was happy with the steep fall in the company’s share price, least of all the board.

“Twelve months ago when we met at the AGM, our share price was $12.561 and the price of oil was around $US85 per barrel,” he said.

“Yesterday, the price of oil was around $US48 per barrel and our share price was $5.36.”

Mr Cairns said the board’s most difficult decision was how much of the dividend should be cut, to preserve cash and help cut debt.

“We agonised over this, as we are sensitive to how important these dividends are to you,” he told shareholders.

“We have tried to be balanced and preserve a level of 20¢ per share on the expanded capital base.

“Should oil prices recover materially in the future, your board is committed to revisiting the level of the dividend.”

At its full-year results in August, Origin announced a final unfranked dividend of 25¢ a share.

But last month, announcing a $2.5 billion share offer to strengthen its position in a tough trading environment, it forecast a dividend of 20¢ a share for the next two years.

The company said at the time it planned to reduce capital expenditure and working capital requirements across this financial year and next by $1 billion and would target up to $800 million of non-core asset sales by June 2017.

Managing director Grant King said production would soon start at the $25 billion Australia Pacific LNG project in Queensland, and it “will make an earnings contribution to our company”.

Shares rallied to close 4.5 per cent higher at $5.60.