By David Winning


SYDNEY--Origin Energy Ltd. said buoyant prices of liquefied natural gas had helped it to return to a half-year profit as it continues to engage a consortium that wants to acquire the business.

Origin reported a net profit of 399 million Australian dollars (US$276.5 million) for the six months through December, recovering from a loss of A$131 million a year ago. Revenue rose by 35% to A$8.76 billion.

Directors of the company declared an interim dividend of 16.5 Australian cents a share, up from 12.5 cents a year earlier.

Russia's war with Ukraine has stoked demand for liquefied natural gas around the world, including from the Australia Pacific LNG project that Origin owns with ConocoPhillips and China Petrochemical Corp. In the first six months of the fiscal year, APLNG's revenue was 51% higher than a year earlier, mainly reflecting higher realized oil prices.

Still, APLNG's ability to capture this tailwind from strong LNG markets has been hampered by wet weather. The facility's production fell by 5% in the half-year period, although Origin said recently that a plan is in place to recover lost production in the second half of its fiscal year.

Origin's Energy Markets business has also fared better than many investors were expecting as recently as the start of January. The division's underlying earnings before interest, tax, depreciation and amortization in the six months through December declined to A$148 million, from A$268 million a year ago.

On Jan. 27, Origin upgraded its underlying Ebitda guidance for the Energy Markets business to A$600 million-A$730 million, from a prior range of A$500 million-A$650 million, citing a good operating and trading performance as well as improved coal delivery under legacy contracts.

On Thursday, Origin said it now expects Energy Markets underlying Ebit to be toward the higher end of the A$600 million-A$730 million range.

Origin became a takeover target in November when a consortium comprising Brookfield Asset Management Inc. and the LNG arm of private-equity firm EIG Global Energy Partners proposed a takeover worth A$9.00 a share in cash. When disclosing the approach, Origin said it intended to recommend that shareholders vote in favor of a deal, if the consortium makes a formal bid.

On Thursday, Origin said the consortium has substantially completed due diligence "and active engagement continues on a non-exclusive basis in relation to the submission of a binding proposal."

Takeover talks are taking place against a backdrop of energy policy shifts. The Australian government has put forward new policies aimed at containing increases in energy prices at a time when households are feeling broader cost-of-living pressures, including through higher interest rates. Among the government's interventions is a 1-year price cap on natural gas supply along Australia's east coast.

In a research note this month, Morgan Stanley analysts said it didn't view the policy changes as a material incremental headwind for valuing Origin and rival AGL Energy Ltd., noting they would help to shore up fuel supplies for the companies as well.

If successful, the bid consortium plans to break Origin up. Brookfield would acquire Origin's Energy Markets business, which generates electricity for sale to customers along with some gas supply. MidOcean Energy, the EIG unit, would own Origin's Integrated Gas business, which includes its 27.5% interest in the Australia Pacific LNG project.

Last year, Origin agreed to sell a 10% stake in the Australia Pacific LNG project to EIG for 2.12 billion Australian dollars, but the deal didn't proceed because ConocoPhillips exercised its pre-emption rights to acquire the interest instead.


Write to David Winning at david.winning@wsj.com


(END) Dow Jones Newswires

02-15-23 1657ET