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1 To Company Announcements Office Facsimile Company ASX Limited Date 15 February 2018 From Helen Hardy Pages 81 Subject ORG Half Year Results for the period ended 31 December 2017 We attach the following documents relating to Origin Energy s Results for the half year ended 31 December 2017: 1. ASX Appendix 4D & Interim Financial Statements 2. Directors Report including the Operating Financial Review Regards Helen Hardy Company Secretary Origin Energy Limited ACN Level 45 Australia Square, George Street, Sydney NSW 2000 GPO Box 5376, Sydney NSW 2001 Telephone (02) Facsimile (02)

2 Origin Energy Limited and Controlled Entities Appendix 4D Results for announcement to the market 31 December December 31 December Total Group Revenue ($million) up 19% to 7,491 6,321 Revenue ($million) - continuing operations up 19% to 7,262 6,085 Revenue ($million) - discontinued operations down 3% to Net loss for the period attributable to members of the parent entity ($million) down 87% to (207) (1,559) From continuing operations ($million) down 90% to (136) (1,378) From discontinued operations ($million) down 61% to (71) (181) 31 December 30 June Net tangible asset backing per ordinary security down 6% to $3.26 $3.46 Dividends Interim dividend determined subsequent to 31 December 2017 Previous corresponding period (31 December 2016) Record date for determining entitlements to the dividend Dividend payment date Amount per security nil nil N/A N/A Franked amount per security at 30 per cent tax nil nil Brief explanation of any of the figures reported above or other item(s) of importance not previously released to the market. Refer to the attached Directors' Report and Operating and Financial Review for explanations. Discussion and Analysis of the results for the year ended 31 December Refer to the attached Directors' Report and Operating and Financial Review for commentary.

3 Origin Energy Limited and its Controlled Entities Interim Financial Statements 31 December 2017 Origin Energy Limited ABN

4 Origin Energy Limited and its Controlled Entities Interim Financial Statements Contents Primary statements Interim income statement Interim statement of comprehensive income Interim statement of financial position Interim statement of changes in equity Interim statement of cash flows Overview A Results for the half year ended 31 December 2017 A1 Segments A2 Income A3 Expenses A4 Income tax expense A5 Earnings per share A6 Dividends B Financial instruments and share capital B1 Other financial assets and liabilities B2 Fair value of financial assets and liabilities B3 Share capital C Group structure C1 Joint arrangements C2 Changes in controlled entities C3 Discontinued operations, assets held for sale and disposals D Other information D1 Contingent liabilities D2 Commitments D3 Notes to the interim statement of cash flows D4 Power Purchase Arrangements adjustment D5 Subsequent events Directors' declaration Independent auditor's report

5 Origin Energy Limited and its Controlled Entities Interim income statement for the half year ended 31 December Note $million $million (1) Continuing operations Revenue A2 7,262 6,085 Other income A Expenses A3 (7,442) (6,350) Results of equity accounted investees C1 88 (1,104) Interest income A Interest expense A3 (255) (287) Loss before income tax (223) (1,435) Income tax benefit Loss for the period from continuing operations (135) (1,377) Discontinued operations Loss from discontinued operations C3 (71) (181) Loss for the period (206) (1,558) Profit/(loss) for the period attributable to: Members of the parent entity (207) (1,559) Non-controlling interests 1 1 Loss for the period (206) (1,558) Earnings per share Basic earnings per share A5 (11.8) cents (88.9) cents Diluted earnings per share A5 (11.8) cents (88.9) cents Profit/(loss) for the period from continuing operations attributable to: Members of the parent entity (136) (1,378) Non-controlling interests 1 1 Loss for the period (135) (1,377) Earnings per share from continuing operations Basic earnings per share A5 (7.8) cents (78.6) cents Diluted earnings per share A5 (7.8) cents (78.6) cents (1) Certain amounts have been re-presented to separately show those operations classified as discontinued operations and also to reflect adjustments relating to note D4. The interim income statement should be read in conjunction with the accompanying notes to the interim financial statements. 3

6 Origin Energy Limited and its Controlled Entities Interim statement of comprehensive income for the half year ended 31 December $million $million (1) Loss for the period (206) (1,558) Other comprehensive income Items that may be reclassified to the income statement Foreign currency translation differences for foreign operations (50) 212 Available for sale financial assets Valuation gain taken to equity 1 7 Cash flow hedges Changes fair value of cashflow hedges (93) (105) Total other comprehensive income for the period, net of tax (142) 114 Total comprehensive income for the period (348) (1,444) Total comprehensive income attributable to: Items that may be reclassified to the income statement Members of the parent entity (349) (1,445) Non-controlling interests 1 1 (348) (1,444) Total comprehensive income for the period (348) (1,444) Total comprehensive income for the period attributable to members of the parent entity arising from: Continuing operations (261) (1,128) Discontinued operations (88) (317) (1) Certain amounts have been re-presented to separately show those operations classified as discontinued operations and also to reflect adjustments relating to note D4. The interim statement of comprehensive income should be read in conjunction with the accompanying notes to the interim financial statements. 4

7 Origin Energy Limited and its Controlled Entities Interim statement of financial position 31 December 30 June as at Note $million $million Current assets Cash and cash equivalents Trade and other receivables 2,214 2,278 Inventories Derivatives Other financial assets B Assets classified as held for sale C3 1,906 2,050 Other assets Total current assets 5,514 5,011 Non-current assets Trade and other receivables 7 4 Derivatives 1,046 1,055 Other financial assets B1 3,660 3,700 Investments accounted for using the equity method C1 5,546 5,463 Property, plant and equipment (PPE) 3,651 3,714 Exploration and evaluation assets Intangible assets 5,319 5,325 Deferred tax assets Other assets Total non-current assets 19,888 20,188 Total assets 25,402 25,199 Current liabilities Trade and other payables 1,898 1,892 Payables to joint ventures Interest-bearing liabilities 1, Derivatives Other financial liabilities B Provision for income tax Employee benefits Provisions Liabilities classified as held for sale C Total current liabilities 5,257 3,854 Non-current liabilities Trade and other payables 6 10 Interest-bearing liabilities 7,406 8,382 Derivatives 1,393 1,309 Employee benefits Provisions Total non-current liabilities 9,064 9,927 Total liabilities 14,321 13,781 Net assets 11,081 11,418 Equity Share capital B3 7,150 7,150 Reserves Retained earnings 3,600 3,807 Total parent entity interest 11,059 11,396 Non-controlling interests Total equity 11,081 11,418 The interim statement of financial position should be read in conjunction with the accompanying notes to the interim financial statements. 5

8 Origin Energy Limited and its Controlled Entities Interim statement of changes in equity for the half year ended 31 December $million Share capital Sharebased payments reserve Foreign currency translation reserve Hedging reserve Availablefor-sale reserve Retained earnings Noncontrolling interests Total equity Balance as at 1 July 2017 Other comprehensive income (Loss)/Profit Total comprehensive income for the period Dividends paid Share-based payments Total transactions with owners recorded directly in equity 7, (16) 3, , (50) (93) (142) (207) 1 (206) - - (50) (93) 1 (207) 1 (348) (1) (1) (1) 11 Balance as at 31 December , (15) 3, ,081 Balance as at 1 July , , ,530 Power Purchase Arrangements adjustment, net of tax (refer to note D4) (470) (470) Balance as at 1 July 2016 restated (1) 7, , ,060 (Loss)/profit as reported in 2016 financial statements Power Purchase Arrangements adjustment, net of tax (refer to note D4) (1) (1,677) 1 (1,676) Restated (loss)/profit for the period (1,559) 1 (1,558) Other comprehensive income Total comprehensive income for the period Share-based payments Total transactions with owners recorded directly in equity Balance as at 31 December 2016 restated (1) (105) (105) 7 (1,559) 1 (1,444) , , ,630 (1) Certain amounts have been restated to reflect adjustments relating to note D4. At 1 July 2016, opening retained earnings have been adjusted by $470 million. In the 6 month period to 31 December 2016, the profit for the period has been adjusted by $118 million. The interim statement of changes in equity should be read in conjunction with the accompanying notes to the interim financial statements. 6

9 Origin Energy Limited and its Controlled Entities Interim statement of cash flows for the half year ended 31 December $million $million Cash flows from operating activities Cash receipts from customers 8,323 7,077 Cash paid to suppliers (7,620) (6,633) Cash generated from operations Income taxes paid, net of refunds received (34) 51 Net cash from operating activities Cash flows from investing activities Acquisition of PPE (138) (236) Acquisition of exploration and development assets (27) (22) Acquisition of other assets (50) (23) Acquisition of other investments (8) - Investment in equity accounted investees (74) (228) Interest received from equity accounted investees Investment in equity accounted investees (funding of APLNG debt service reserve account) - (127) Net proceeds from sale of non-current assets Net cash used in investing activities (183) (169) Cash flows from financing activities Proceeds from borrowings 3,045 2,664 Repayment of borrowings (3,250) (2,826) Interest paid (248) (281) Dividends paid to non-controlling interests (1) - Loan from equity accounted investees (1) Net cash used in financing activities (378) (316) Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effect of exchange rate changes on cash (1) 2 Cash and cash equivalents at the end of the period (2) (1) (2) $76 million represents cash generated by Australia Pacific LNG as part of its normal business operations deposited to a project finance debt service reserve account. Upon issuance of a bank guarantee to Australia Pacific LNG by Origin the cash was distributed to Origin by way of a loan. Cash and cash equivalents at the end of the period includes $60 million (2016: $38 million) of cash and cash equivalents which are classified as held for sale. The interim statement of cash flows should be read in conjunction with the accompanying notes to the interim financial statements. 7

10 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements Overview Origin Energy Limited (the Company) is a company domiciled in Australia. The interim financial statements of the Company for the half year ended 31 December 2017, comprise the Company and its controlled entities (together referred to as 'the Group'). The interim financial statements were approved by the Board of Directors on 15 February The interim financial statements do not include all of the information required for a full annual financial report, and should be read in conjunction with the financial statements of the Group for the full year ended 30 June 2017, which are available upon request from the Company's registered office at Level 45, Australia Square, George Street, Sydney NSW 2000 or at The interim financial statements are general purpose financial statements which have been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001 (Cth). The interim financial statements are presented in Australian dollars. The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191 dated 24 March 2016 and in accordance with that Instrument, amounts in the interim financial statements have been rounded off to the nearest million dollars, unless otherwise stated. Certain comparative amounts have been reclassified for consistency with the current period's presentation. The accounting policies and judgements/estimates applied by the Group in these interim financial statements are the same as those applied in its financial statements for the full year ended 30 June 2017 except for new standards, amendments to standards and interpretations effective from 1 January The following standard, applicable from 1 January 2017, has been adopted by the Group. AASB Amendments to Australian Accounting Standards Amendments to AASB 107 The amendment requires disclosure of changes arising from cash flows such as drawdowns and repayments of borrowings; and non-cash changes such as acquisitions, disposals and unrealised exchange differences. This amendment has no impact on the accounting policies, financial position or performance of the Group. Other standards amendments were applicable for the first time in 2017, but were not relevant to the Group and do not impact the half year financial report. Estimates of recoverable amounts are based on an asset s value in use or fair value less costs of disposal, using a discounted cash flow method. This requires estimates and assumptions to be made about highly uncertain external factors such as future commodity prices, foreign exchange rates, discount rates, the effects of inflation, climate change policies, supply-and-demand conditions, reserves, future operating profiles and production costs. The recoverable amounts of non-current assets have been assessed at 31 December 2017 based on the types of judgements and estimates described above. Where required, any impairment has been recognised in the interim income statement. 8

11 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements A Results for the half year This section highlights the performance of the Group for the half year, including results by operating segment, income and expenses, earnings per share and dividends. A1 Segments The Group's Managing Director monitors the operating results of the business using operating segments which are organised according to the nature and/or geography of the activities undertaken. This section includes the results by operating segment (A1.1) and segment assets and liabilities (A1.2). A1.1 Segment results for the half year ended 31 December Total continuing Energy Markets (1) Integrated Gas (2) Corporate (3) operations Discontinued operations (4) Consolidated $million Ref (5) (5) (5) Revenue Segment revenue 7,130 6, ,262 6, ,666 6,480 Eliminations (a) (175) (159) (175) (159) External revenue 7,130 6, ,262 6, ,491 6,321 EBITDA 769 1,051 (6) (2,025) (78) (157) 685 (1,131) (18) (87) 667 (1,218) Depreciation and amortisation (171) (158) (10) (9) - - (181) (167) (4) (133) (185) (300) Share of ITDA of equity accounted investees - - (587) (587) (587) 42 EBIT (603) (1,992) (78) (157) (83) (1,256) (22) (220) (105) (1,476) Interest income (6) Interest expense (6) (255) (287) (255) (287) (6) (6) (261) (293) Income tax expense (7) (43) Non-controlling interests (NCI) (1) (1) (1) (1) - - (1) (1) Statutory profit/(loss) attributable to members of the parent entity (488) (1,884) (246) (387) (136) (1,378) (71) (181) (207) (1,559) Reconciliation of statutory profit/(loss) to segment result and underlying profit Fair value and foreign exchange movements (c) (123) 221 (121) (6) (3) 12 (247) 227 (30) (4) (277) 223 LNG related items pre revenue recognition (d) (68) - (52) (52) Disposals, impairments and business restructuring (8) (e) - 95 (514) (1,856) (44) (137) (558) (1,898) (218) (239) (776) (2,137) Tax and NCI on items excluded from underlying profit Total significant items (123) 316 (635) (1,846) 194 (21) (564) (1,551) (225) (192) (789) (1,743) Segment result and underlying profit/(loss) (38) (440) (366) Underlying EBITDA (b) (29) (32) 1, ,722 1,145 (1) Energy retailing, power generation and LPG operations predominantly in Australia. (2) Unconventional Gas business including the Group's investment in Australia Pacific LNG, the results of the Group's activities as Australia Pacific LNG upstream operator and management of the Group s exposure to LNG pricing risk. The results of the Group s Upstream conventional business which are part of the proposed divestment have been classified as discontinued operations. (3) Various business development and support activities that are not allocated to operating segments. (4) Further details of discontinued operations are included in note C3. (5) Certain amounts have been restated to reflect adjustments relating to note D4. (6) Interest income earned on MRCPS has been allocated to the Integrated Gas segment relating to the LNG business. Interest expense has been allocated to both the Corporate and the discontinued operations segments. (7) Income tax expense for entities in the Origin tax consolidated group is allocated to the Corporate segment with the exception of amounts related to discontinued operations. (8) Included in the Integrated Gas segment in the prior period is Origin's share of APLNG's impairment of $1,031 million, which is stated net of tax. 9

12 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements A1 Segments (continued) Explanatory notes to segment results for the half year ended 31 December (a) Segment revenue eliminations Sales between segments occur on an arm's length basis. The Upstream conventional business (of which assets relating to the proposed divestment have been classified as discontinued operations) sells gas and LPG to the Energy Markets segment. (b) Underlying EBITDA Represents underlying earnings before interest, tax, depreciation and amortisation (EBITDA). (c) Fair value and foreign exchange movements $million Gross NCI Gross NCI (Decrease)/increase in fair value of financial instruments (1) (198) (35) LNG foreign currency (loss)/gain (79) (32) Tax benefit on translation of foreign denominated long term tax balances (1) (277) (68) (d) LNG related items pre revenue recognition Net financing costs incurred in funding the Australia Pacific LNG project - - (45) 14 LNG pre-production costs not able to be capitalised - - (7) (52) 16 (e) Disposals, impairments and business restructuring Lattice Energy related recycling of foreign currency translation reserve to income statement (2) (27) Gain on sale of Jingemia (2) 7 (2) - - Gain on sale of Rimu, Kauri and Manutahi (RKM) Gain on sale of Mortlake Pipeline (26) Gain on sale of Surat Basin (1) Gain on sale of Cullerin Range Wind Farm (4) Loss on sale of OTP Geothermal Pte Ltd - - (1) - Disposals (20) (2) 102 (31) Integrated Gas impairments Ironbark (514) Share of Australia Pacific LNG impairment of non-current assets - - (1,031) - Browse Basin - - (825) 247 Lattice Energy (2) (198) 25 (243) 73 Corporate Investment in Energia Austral SpA - - (114) - Impairments (712) 179 (2,213) 320 Transaction costs in respect of the Lattice Energy divestment (44) Restructure costs - - (16) 4 Corporate transaction costs - - (10) 3 De-recognition of tax assets relating to divestment of Lattice Energy (2) - (9) - (21) Business restructuring (44) 4 (26) (14) Tax and Tax and Total disposals, impairments and business restructuring (776) 181 (2,137) 275 (1) $30 million (pre-tax) (2016: $4 million (pre-tax)) relates to discontinued operations. (2) Amounts relating to discontinued operations. 10

13 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements A1 Segments (continued) A1.2 Segment Assets and Liabilities $million 31 Dec 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec 30 June 31 Dec 30 June as at Assets Segment assets Investments accounted for using the equity method (refer to note C1) Cash, funding related derivatives and tax assets Total assets Total assets and Energy Markets Integrated Gas Corporate Total continuing operations liabilities held for sale (2) Consolidated 12,509 12, ,220 13,287 1,591 1,696 14,811 14, ,546 5, ,546 5, ,546 5,463 3,558 3,609 1, ,730 4, ,045 4,753 12,509 12,188 9,685 10,045 1, ,496 23,149 1,906 2,050 25,402 25,199 Liabilities Segment liabilities Financial liabilities, interest-bearing liabilities, funding related derivatives and tax liabilities (3,113) (2,852) (836) (565) (493) (467) (4,442) (3,884) (666) (720) (5,108) (4,604) (9,213) (9,177) (9,213) (9,177) - - (9,213) (9,177) Total liabilities (3,113) (2,852) (836) (565) (9,706) (9,644) (13,655) (13,061) (666) (720) (14,321) (13,781) Acquisitions of non-current assets (includes capital expenditure) (1) (1) The Integrated Gas segment includes $74 million of equity contr butions to Australia Pacific LNG at December At December 2016 cash contributions of $226 million to Australia Pacific LNG are not treated as acquisitions as they were in the form of loans rather than an increase in the Group's equity investment. (2) Further details of held for sale amounts are included in note C3. 11

14 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements A2 Income for the half year ended 31 December $million (1) $million (1) Income from continuing operations Revenue (2) 7,262 6,085 Gain on sale of assets Other 9 11 Other income Interest earned on Australia Pacific LNG MRCPS (refer to note B1) Interest income (3) (1) Excludes amounts classified as discontinued operations. Refer to note C3. (2) Revenue from the sale of oil and gas by the Integrated Gas segment is recognised when title to the commodity passes to the customer. Revenue from the sale of electricity and gas by the Energy Markets segment is recognised on delivery of the product. Amount excludes revenue from discontinued operations of $229 million (2016: $236 million restated). Note A1 provides segment revenue. (3) Interest income is recognised as it accrues. A3 Expenses for the half year ended 31 December $million (1) $million (1) Expenses from continuing operations Raw materials and consumables used 5,781 4,804 Labour Depreciation and amortisation Impairment of assets (2) Decrease/(increase) in fair value of financial instruments (3) 168 (121) Net foreign exchange loss/(gain) 79 (107) Other Expenses 7,442 6,350 Interest on interest-bearing liabilities Impact of discounting on long term provisions 1 1 Interest expense Financing costs capitalised 1 1 (1) Excludes amounts classified as discontinued operations. Refer to note C3. (2) Reflects impairments of $514 million (tax benefit $154 million) relating to Ironbark. The Ironbark valuation is determined based on an assessment of fair value less costs of disposal (level 3 fair value hierarchy). Key assumptions in Ironbark's valuation are reserves, future production profiles, commodity prices, operating costs and any future development costs necessary to produce the reserves. The pre-tax discount rate, determined as weighted average cost of capital, that has been applied in determining the recoverable amount of $279 million is 12.7%. The impairment charges resulted primarily from a reduction in the reported reserves. (3) Certain amounts have been restated to reflect adjustments relating to note D4. 12

15 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements A4 Income tax expense for the half year ended 31 December per cent per cent Effective statutory tax rate for continuing operations 39 4 The 31 December 2017 effective statutory tax rate for continuing operations of 39% varies from the restated comparative period (4%) primarily due to the non-deductible impairment expenses for both international investments and the investment in Australia Pacific LNG in the prior year with no similar transactions occurring in the current year. The variation from the corporate rate of 30% is primarily due to the nondeductibility of Origin's share of profit after tax of Australia Pacific LNG. A5 Earnings per share for the half year ended 31 December (2) Earnings per share based on statutory consolidated loss Basic earnings per share (11.8) cents (88.9) cents Diluted earnings per share (11.8) cents (88.9) cents Basic earnings per share from continuing operations (7.8) cents (78.6) cents Diluted earnings per share from continuing operations (7.8) cents (78.6) cents Basic earnings per share from discontinued operations (4.0) cents (10.3) cents Diluted earnings per share from discontinued operations (4.0) cents (10.3) cents Earnings per share based on underlying consolidated profit (1) Underlying basic earnings per share 33.1 cents 10.5 cents Underlying diluted earnings per share 33.0 cents 10.5 cents Underlying basic earnings per share from continuing operations 24.3 cents 9.9 cents Underlying basic earnings per share from discontinued operations 8.8 cents 0.6 cents (1) Refer to note A1 for a reconciliation of statutory loss to underlying consolidated profit. (2) Certain amounts have been re-presented to separately show those operations classified as discontinued operations and also to reflect adjustments relating to note D4. Calculation of earnings per share Basic earnings per share Basic earnings per share is calculated as loss for the period attributable to the parent entity (2017: $207 million loss; 2016: $1,559 million loss) divided by the average weighted number of shares on issue during the period. Basic earnings per share from continuing operations Basic earnings per share from continuing operations is calculated as loss for the period from continuing operations attributable to the parent (2017: $136 million loss; 2016: $1,378 million loss) divided by the average weighted number of shares on issue during the period. Diluted underlying earnings per share Diluted underlying earnings per share represents profit/(loss) for the period attributable to the parent divided by an average weighted number of shares (2017: 1,762,445,953; 2016: 1,757,916,870) which has been adjusted to reflect the number of shares which would be issued if outstanding options, performance share rights and deferred shares rights were to be exercised (2017: 6,093,137; 2016: 3,975,222). Due to the statutory loss attributable to the parent for the half years ended 31 December 2017 and 2016, the effect of these instruments has been excluded from the 31 December 2017 and 2016 calculation of diluted earnings per share and diluted earnings per share from continuing operations, as their inclusion would have the effect of reducing the loss per share. 13

16 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements A6 Dividends Nil final dividend (2016: Nil final dividend) $million $million - - B Financial instruments and share capital B1 Other financial assets and liabilities 31 Dec 30 June as at $million $million Other financial assets Current Environmental scheme certificates Available-for-sale financial assets Other financial assets Non-current Available-for-sale financial assets Mandatorily Redeemable Cumulative Preference Shares issued by Australia Pacific LNG (1) 3,558 3,609 3,660 3,700 Other financial liabilities Current Environmental scheme surrender obligations Other financial liabilities (1) The Group has invested in Mandatorily Redeemable Cumulative Preference Shares (MRCPS) issued by Australia Pacific LNG (APLNG) in the amount of US$2.8 billion (converted from USD to AUD using an end of period exchange rate of ). The MRCPS are the mechanism by which the funding for the CSG to LNG Project has been provided by the shareholders of APLNG in proportion to their ordinary equity interests. The MRCPS have a fixed rate dividend obligation based on the relevant observable market interest rates and estimated credit margin at the date of issue. The dividend is paid twice per annum. The mandatory redemption date for the MRCPS is 30 June Dividends received are recognised as interest. Refer to note A2. The effective interest rate at 31 December 2017 was 6.37% (30 June 2017: 6.37%). 14

17 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements B2 Fair value of financial assets and liabilities The following table summarises the methods that are used to estimate the fair value of the Group's financial instruments. Instrument Financial instruments traded in active markets Forward foreign exchange contracts Commodity option contracts which are regularly traded Long-term debt and other financial assets Commodity swaps and nonexchange traded futures Interest rate swaps and cross currency interest rate swaps Structured electricity derivatives which are not regularly traded and with no observable market price Power purchase arrangement electricity derivatives Oil forward structured derivative instrument Commodity option contracts which are not regularly traded Fair Value Methodology Quoted market prices at reporting date. Present value of expected future cash flows using quoted forward exchange rates. Most recent available transaction prices for same or similar instruments. Quoted market prices, dealer quotes for similar instruments, or present value of estimated future cash flows. Present value of expected future cash flows using market forward prices. Present value of expected future cash flows of these instruments. Key variables include market pricing data, discount rates and credit risk of the Group or counterparty where relevant. Variables reflect those which would be used by market participants to execute and value the instruments. The valuation models for long-term electricity derivatives reflect the fair value of the avoided costs of construction of the physical assets which would be required to achieve an equivalent risk management outcome for the Group. The methodology takes into account all relevant variables including forward commodity prices, physical generation plant variables, the risk-free discount rate and related credit adjustments, and asset lives. The valuation models for shortterm electricity derivatives include premiums for lack of volume in the market relative to the size of the instruments being valued. The discounted cash flow methodology reflects the difference in the contract price and long term forecast electricity pool prices which are not observable in the market. The valuation also requires estimation of forecast electricity volumes, the risk-free discount rate and related credit adjustments. Valued with reference to the observable market oil forward prices, foreign exchange rates and discount rates. As a result of the structured nature of the instrument, certain risk premium and credit variables utilised in the valuation model are unobservable. Valued using an established pricing model (such as Monte Carlo or Black-Scholes) to generate potential future cash flow outcomes over the period covered by the option contract. Variables reflect those which would be used by market participants to value the option including commodity price and foreign exchange data, the risk-free discount rate and related credit adjustments. Valuation methodologies are determined based on the nature of the underlying instrument. To the maximum extent possible, valuations are based on assumptions which are supported by independent and observable market data. Where valuation models are used, instruments are discounted at the market interest rate applicable to the instrument. 15

18 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements B2 Fair value of financial assets and liabilities (continued) The following table provides information about the reliability of the inputs used in determining the fair value of financial assets and liabilities carried at fair value. The three levels in the hierarchy reflect the level of independent observable market data used in determining the fair values and are defined as follows: Level 1: quoted prices (unadjusted) in active markets for identical instruments. Level 2: other valuation methods for which all inputs that have a significant impact on fair value are observable, either directly (as prices) or indirectly (derived from prices). Level 3: one or more key inputs for the instrument are not based on observable market data (unobservable inputs). as at 31 December 2017 Level 1 Level 2 Level 3 Total $million $million $million $million Derivative financial assets 39 1, ,455 Environmental scheme certificates Available-for-sale financial assets Total financial assets carried at fair value 571 1, ,987 Derivative financial liabilities (18) (940) (921) (1,879) Environmental scheme surrender obligations (553) - - (553) Total financial liabilities carried at fair value (571) (940) (921) (2,432) as at 30 June 2017 Level 1 Level 2 Level 3 Total $million $million $million $million Derivative financial assets ,296 Environmental scheme certificates Available-for-sale financial assets Total financial assets carried at fair value ,473 Derivative financial liabilities (16) (842) (751) (1,609) Environmental scheme surrender obligations (276) - - (276) Total financial liabilities carried at fair value (292) (842) (751) (1,885) The following table shows a reconciliation of movements in the value of instruments included in Level 3 of the fair value hierarchy: $million Balance as at 1 July 2017 (453) Net gain realised in revenue line 8 Net loss realised in cost of sales (28) Net loss from financial instruments at fair value (251) Cash settlements on existing instruments 135 Balance as at 31 December 2017 (589) 16

19 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements B2 Fair value of financial assets and liabilities (continued) The following is a summary of the main inputs and assumptions used by the Group in measuring the fair value of Level 3 financial instruments. Discount rates: Based on observable market rates for risk-free instruments of the appropriate term. Credit adjustments: Applied to the discount rate depending on the asset/liability position of a financial instrument to reflect the risk of default by either the Group or a specific counterparty. Where a counterparty specific credit curve is not observable, an estimated curve is applied which takes into consideration the credit rating of the counterparty and its industry. Forward commodity prices: Including both observable external market data and internally derived forecast data. For oil derivatives, internally derived data principally relates to the forward price path for Japanese Customs-cleared Crude (JCC) which is not readily observable in the market. The forward curve for JCC is inferred from the observable Brent oil forward curve. For certain long term electricity derivatives, internally derived forecast spot pool prices and renewable energy certificate prices are applied as market prices are not readily observable for the corresponding term. Physical generation plant variables: Variables which would be used in the valuation of physical generation assets with equivalent risk management outcomes including new build capital costs, operating costs and plant efficiency factors. For derivatives related to renewable generation, further assumptions are applied to forecast generation volumes over the life of the instrument. Liquidity premiums: Applied to allow for the lack of volume in the market relative to the size of the instruments being valued. Strike premiums: Applied to allow for instances where instruments have different strike prices to those associated with instruments which have observable market prices. The use of different methodologies or assumptions could lead to different measurements of fair value. For fair value measurements in Level 3, a 10 per cent increase or decrease in the unobservable assumptions would have the following effects: (1) for the half year ended 31 December Impact on post-tax profit Impact on post-tax profit Increase Decrease Increase Decrease $million $million Electricity derivative assets 150 (150) 69 (69) Electricity derivative liabilities 109 (109) 118 (118) Oil derivative assets (2) (1) Certain amounts have been restated to reflect adjustments relating to note D4. 17

20 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements B2 Fair value of financial assets and liabilities (continued) Gains/(losses) on initial recognition of financial instruments Any differences between the fair value at initial recognition (transaction price) and the amount that would be determined at that date using the relevant valuation technique are deferred in the statement of financial position and recognised in the income statement over the life of the instrument. The following has been recognised in the interim income statement during the half year: 31 December as at 2017 $million Derivative assets Opening balance - gain 533 Transfers to liabilities (142) Recognised in the interim income statement (10) Closing balance - gain 381 Derivative liabilities Opening balance - gain 374 Transfers to assets 142 Recognised in the interim income statement (36) Closing balance - gain 480 Except as noted below the carrying amounts of financial assets and liabilities are reasonable approximations of their fair values. The Group has the following non-current financial instruments which are not measured at fair value in the interim statement of financial position: Carrying value Fair value Fair value 31 Dec 30 Jun 31 Dec 30 Jun hierarchy as at 31 December level $million $million $million $million Assets Other financial assets 2 3,558 3,609 2,979 3,115 Liabilities Bank loans - unsecured Capital markets borrowings - unsecured 2 6,698 7,588 7,076 7,959 7,399 8,375 7,739 8,703 The fair value of these financial instruments reflect the present value of estimated future cash flows of the instrument. Key variables used to determine the present value include: market pricing data (for the relevant underlying interest rates, foreign exchange rates or commodity prices); discount rates; and credit risk of the Group or counterparty where appropriate. Each of these variables is taken from observed market pricing data at the valuation date and would be those used by market participants to execute and value the instruments. 18

21 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements B3 Share capital 6 months to 12 months to 31 December 30 June $million $million Issued and paid-up capital 1,758,036,396 (June 2017: 1,755,333,517) ordinary shares, fully paid 7,150 7,150 Ordinary share capital at the beginning of the period 7,150 7,150 Shares issued: 2,702,879 (June 2017: 1,997,753) shares in accordance with the Long Term Incentive Plans (1) - - Total movements in ordinary share capital - - Ordinary share capital at the end of the period 7,150 7,150 (1) Relates to shares that have not yet vested, issued for nil consideration. Terms and conditions Holders of ordinary shares are entitled to receive dividends as determined from time to time and are entitled to one vote per share at shareholders' meetings. In the event of the winding up of the Group, ordinary shareholders rank after creditors, and are fully entitled to any proceeds of liquidation. The Group does not have authorised capital or par value in respect of its issued shares. 19

22 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements C Group structure The following section provides information on the Group's structure and how this impacts the results of the Group as a whole, including details of joint arrangements and changes made to the Group structure during the half year. C1 Joint arrangements Joint arrangements are those entities over whose activities the Group has joint control, established by contractual agreement and require consent of two or more parties for strategic, financial and operating decisions. The Group classifies its interests in joint arrangements as either joint operations or joint ventures depending on its rights to the assets and obligations for the liabilities of the arrangements. C1.1 Interests in joint ventures Interests in joint ventures are initially recognised at cost and are subsequently adjusted for changes in the Group's share of the joint venture's net assets. Country of Ownership interest (%) Joint venture entity Reporting date incorporation Australia Pacific LNG Pty Ltd (1) 30 June Australia Energia Andina Geothermal SpA (2) 31 December Chile Energia Austral SpA (3) 31 December Chile KUBU Energy Resources (Pty) Limited 30 June Botswana PNG Energy Developments Limited 31 December PNG Venn Energy Trading Pte Limited 31 March Singapore (1) Australia Pacific LNG is a separate legal entity. Operating, management and funding decisions require the unanimous support of the Foundation Shareholders, which includes the Group and ConocoPhillips. Accordingly, joint control exists and the Group has classified the investment in Australia Pacific LNG as a joint venture. (2) Energia Andina Geothermal SpA (previously named Energia Andina S.A) is a separate legal entity. Key decisions require super majority (four directors) approval, with the Group entitled to appoint two of the five directors. As a consequence joint control exists and the Group has classified the investment as a joint venture. Prior to being renamed, Energia Andina S.A was split into two entities and one of those, Andina Solar - Javiera was sold in the prior period. (3) Energia Austral SpA is a separate legal entity. Key decisions require super majority (four directors) approval, with the Group entitled to appoint two of the five directors. As a consequence joint control exists and the Group has classified the investment as a joint venture. The Group's ownership interest can change between reporting periods when equity contributions are made to the joint venture. Of the above joint arrangements, only Australia Pacific LNG has a material impact to the Group. 20

23 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements C1 Joint arrangements (continued) C1.2 Investment in Australia Pacific LNG Pty Ltd A summary of Australia Pacific LNG's financial performance for the periods ended 31 December 2017 and 31 December 2016, and its financial position as at 31 December 2017 and 30 June 2017 follows: $million for the half year ended 31 December Total APLNG Origin interest Total APLNG Origin interest Operating revenue 2,659 1,475 Operating expenses (858) (603) Underlying EBITDA 1, Depreciation and amortisation expense (912) (770) Interest income 6 2 Interest expense on MRCPS (305) (316) Other interest expense (260) (242) Capitalised interest Income tax (expense)/benefit (100) 90 Underlying result for the period (199) (75) Elimination of MRCPS depreciation (1) Total underlying result for the period (199) (73) Items excluded from segment result: Impairment of non-current assets - - (2,749) (1,031) Total items excluded from segment result - - (2,749) (1,031) Net profit/(loss) for the period (2,948) (1,104) Other comprehensive income Total comprehensive income (2,948) (1,104) (1) During project construction, interest paid by Australia Pacific LNG (APLNG) to the Group on Mandatorily Redeemable Cumulative Preference Shares (MRCPS) was capitalised by APLNG. These capitalised interest amounts in APLNG now form part of the cost of APLNG's assets and these assets have been depreciated since commencement of operations. During the project construction period, when the Group received interest on the MRCPS from APLNG, it recorded the interest as income after eliminating a proportion of this interest which related to its ownership interest in APLNG. When the Group now takes up its share of APLNG's net profit after tax (NPAT) the result contains an element of depreciation relating to this capitalised interest. As these amounts were previously eliminated by the Group against its investment at the time the interest was received, an adjustment is made to reverse the impact of this depreciation on APLNG NPAT. Impairment of investment $million for the half year ended 31 December Share of Australia Pacific LNG impairment of non-current assets ,031 21

24 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements C1 Joint arrangements (continued) C1.2 Investment in Australia Pacific LNG Pty Ltd (continued) Impairment of investment (continued) The carrying amount of the Group's equity accounted investment in Australia Pacific LNG (APLNG) is reviewed at each reporting date to determine whether there is any indication of impairment. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made. APLNG has performed its own impairment assessment and determined that no impairment is required. The Group s own assessment of the carrying value identified no additional impairment. The recoverable amount of the investment is sensitive to changes in key assumptions. A change in assumption could result in further impairment losses or the reversal of previous impairment losses. Given that there is a low level of headroom compared to carrying value, the assumptions and the sensitivity of the investment to assumption changes are described below. The APLNG valuation is determined based on an assessment of fair value less costs of disposal (based on level 3 fair value hierarchy). Key assumptions in APLNG's valuation are reserves, future production profiles, foreign exchange, commodity prices, operating costs and any future development costs necessary to produce the reserves. Estimated unconventional reserve quantities in APLNG are based upon interpretations of geological and geophysical models and assessment of the technical feasibility and commercial viability of producing the reserves. Reserve estimates are prepared which conform to guidelines prepared by the Society of Petroleum Engineers. These assessments require assumptions to be made regarding future development and production cost, commodity prices, exchange rates and fiscal regimes. The estimates of reserves may change from period to period as the economic assumptions used to estimate the reserves can change from period to period, and as additional geological data is generated during the course of operations. Estimated reserve quantities include a Probabilistic Resource Assessment approach. Estimates of future commodity prices are based on APLNG's best estimate of future market prices with reference to external industry and market analysts forecasts, current spot prices and forward curves. Future commodity prices for impairment testing are reviewed on a six monthly basis. Where volumes are contracted, future prices are based on the contracted price. Oil prices (Brent oil Nominal, US$/bbl) used by APLNG in its impairment assessment are set out below (1) 31 December (1) Escalated at 2.1% from Forecasts of the exchange rate for foreign currencies, where relevant, are estimated with reference to observable external market data and forward values, including analysis of broker and consensus estimates. The future estimated AUD/USD rates applied by APLNG are represented below December The pre-tax discount rate, determined as APLNG's weighted average cost of capital, adjusted for risks where appropriate, that has been applied is 10.3% (30 June 2017: 10.1%). 22

25 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements C1 Joint arrangements (continued) C1.2 Investment in Australia Pacific LNG Pty Ltd (continued) Valuation sensitivity The calculation of fair value less costs of disposal for APLNG is most sensitive to changes in oil price, discount rates and the AUD/USD foreign exchange rate. Key accounting judgements and estimates used in forming the valuation are disclosed in the previous impairment of investment section. Reasonably possible changes in assumptions can significantly impact the estimated fair value of Origin s investment in APLNG. As the recoverable amount of APLNG equals its carrying value, any adverse movements in key assumptions, in isolation, will lead to further impairment. These reasonably possible changes include: A decrease in oil prices of USD$1/bbl, which in isolation would lead to a decrease of US$375 million in the valuation; and An increase in the discount rate of 0.27% in isolation or an increase in the AUD/USD FX rate of 2.4 cents in isolation from the rates assumed in the valuation would lead to a similar decrease as noted for oil above. Changes in any of the aforementioned assumptions may be accompanied by changes in other assumptions which may have an offsetting impact. 23

26 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements C1 Joint arrangements (continued) C1.2 Investment in Australia Pacific LNG Pty Ltd (continued) $million 31 December 30 June as at Summary statement of financial position of Australia Pacific LNG (100 per cent share) Cash and cash equivalents Other current assets Current assets Receivables from shareholders Property, plant and equipment Exploration, evaluation and development assets Other non-current assets Non-current assets Total assets Bank loans - secured Other current liabilities Current liabilities Bank loans - secured Payable to shareholders Other non-current liabilities Non-current liabilities Total liabilities Net assets Group's interest of 37.5 per cent of APLNG net assets Group's own costs Mandatorily Redeemable Cumulative Preference Shares elimination (1) Investment in Australia Pacific LNG Pty Ltd 1, ,685 1, ,540 33, ,291 2,425 36,560 36,962 38,245 38, ,739 1,842 8,983 9,532 9,488 9,624 2,848 2,413 21,319 21,569 23,058 23,411 15,187 14,975 5,696 5, (175) (177) 5,546 5,463 (1) The Mandatorily Redeemable Cumulative Preference Shares (MRCPS) are recognised as a financial asset by the Group and the MRCPS dividend is recognised as interest revenue in the Group s interim income statement. The proportion attributable to the Group s own interest (37.5 per cent) is eliminated through the equity accounted investment balance as Australia Pacific LNG has capitalised a portion of interest expense associated with the MRCPS. Balance sheet amounts are converted from USD to AUD using an end of period exchange rate of (30 June 2017: ). 24

27 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements C2 Changes in controlled entities 2017 There were no significant business combinations during the period. Changes in controlled entities Lattice Energy Limited transferred its shares in Origin Energy Browse Pty Ltd and Origin Energy Petroleum Pty Ltd to Origin Energy Upstream Holdings Pty Ltd on 31 August Origin Energy Power Limited transferred its shares in Darling Downs Solar Farm Operating Holding Pty Ltd to Origin Energy Holdings Pty Limited on 27 July Darling Downs Solar Farm Operating Holding Pty Ltd changed its name to Origin Future Energy Pty Limited on 7 August Origin Future Energy Pty Ltd transferred its shares in Darling Downs Solar Farm Operating Pty Ltd to Origin Energy Holdings Pty Ltd on 24 August Darling Downs Solar Farm Operating Pty Ltd changed its name to Origin Energy Metering Coordinator Pty Ltd on 24 August Lattice Energy Resources NZ (Holdings) Limited transferred its shares in Origin Energy Resources NZ (Rimu) Limited to Origin Energy Holdings Pty Ltd on 25 September Lattice Energy Limited transferred its shares in Origin Energy CSG 2 Pty Ltd and Origin Energy ATP 788P Pty Ltd to Origin Energy Upstream Holdings Pty Ltd on 26 September There were no significant business combinations during the period. Changes in controlled entities Sagasco South East Inc was deregistered on 10 October Cullerin Range Wind Farm Pty Ltd was sold during the half year ended 31 December Darling Downs Solar Farm Operating Holding Pty Ltd, Darling Downs Solar Farm Asset Holding Pty Ltd, Darling Downs Solar Farm Asset Pty Ltd and Darling Downs Solar Farm Operating Pty Ltd were incorporated during the half year ended 31 December

28 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements C3 Discontinued operations, assets held for sale and disposals C3.1 Discontinued operations On 6 December 2016 the Group announced its intention to divest the Lattice Energy assets. The associated earnings, along with those from the Darling Downs Pipeline and the Jingemia asset in Western Australia, have been classified as discontinued operations in the interim income statement and all related note disclosures for the current and comparative period. for the half year ended 31 December Results of discontinued operations $million $million Revenue Net gain on sale of assets 7 - Expenses (60) (213) Impairment (198) (243) Net financing expense (6) (6) Loss before income tax Income tax (expense)/benefit Loss after tax from discontinued operations (28) (226) (43) 45 (71) (181) Attributable to: Members of the parent entity (71) (181) Non-controlling interest - - (71) (181) Financing costs capitalised 1 6 Cash flows of discontinued operations Cash flows from operating activities Cash flows used in investing activities (85) (97) Net increase in cash and cash equivalents

29 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements C3 Discontinued operations, assets held for sale and disposals (continued) C3.2 Assets held for sale The assets and liabilities relating to the divestment of the Lattice Energy business and the Acumen metering business have been classified as held for sale at 31 December 2017 (December 2016: The assets and liabilities relating to the divestment of the conventional upstream business, Stockyard Hill Wind Farm, Darling Downs Pipeline and Javiera solar project). Impairment losses of $198 million (2016: $243 million) for write-downs of the disposal group to the lower of its carrying amount and its fair value less costs to sell have been included in results of discontinued operations. The impairment losses have been applied to reduce the carrying amount of property, plant and equipment and exploration assets within the disposal group. The impairment is primarily as a result of recognising Lattice Energy earnings from 1 July 2017 up to the date of completion. 31 December 30 June Assets and liabilities classified as held for sale $million $million Cash and cash equivalents Trade and other receivables Inventories Other assets 12 8 Property, plant and equipment 1,378 1,479 Exploration and evaluation assets 6 - Intangible assets 2 3 Tax assets Other assets Assets classified as held for sale 1,906 2,050 Trade and other payables Employee benefits Provisions Liabilities classified as held for sale C3.3 Disposals On 26 April 2016 Origin entered into a Sale Agreement with Cyclone Energy Pty Ltd for the sale of the Jingemia asset in Western Australia. Completion of the transaction occurred on 14 July 2017 for cash proceeds of $1. The assets and liabilities disposed primarily comprised a restoration provision of $7 million, resulting in a pre-tax gain on sale of $7 million, net of transaction costs. 27

30 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements D Other information This section includes other information to assist in understanding the financial performance and position of the Group, or items required to be disclosed to comply with accounting standards and other pronouncements. D1 Contingent liabilities Discussed below are items where either it is not probable that the Group will have to make future payments or the amount of the future payments are not able to be measured reliably. Guarantees Bank guarantees and letters of credit have been provided mainly to Australian Energy Market Operator Limited to support the Group's obligations to purchase electricity from the National Electricity Market. 31 December 30 June as at $million (1) $million (1) Bank guarantees - unsecured Letters of credit - unsecured 2 2 (1) Includes unsecured bank guarantees of $13 million related to discontinued operations. The Group's share of guarantees for certain contractual commitments of its joint ventures is shown at note D2. The Group has also given letters of comfort to its bankers in respect of financial arrangements provided by the banks to certain partly-owned controlled entities. 28

31 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements D1 Contingent liabilities (continued) Joint arrangements As a participant in certain joint arrangements, the Group is liable for its share of liabilities incurred by these arrangements. In some circumstances the Group may incur more than its proportionate share of such liabilities, but will have the right to recover the excess liability from the other joint arrangement participants. During the period, Australia Pacific LNG (APLNG) made principal repayments of US$332 million and interest payments on the project finance facility of US$164 million. At 31 December 2017, the total outstanding balance of the project finance facility was US$7.9 billion. In August 2017, the Train 2 Project Finance lenders' tests were completed which reduced the guarantees provided by the Company s shareholders at their proportionate share for amounts drawn down under the facility from 40% to nil. In September 2016, APLNG made a loan to the Group of US$96 million and receipt of this US$96 million from APLNG is shown as a current payable to joint ventures in the Statement of Financial Position. A futher US$60 million was loaned by APLNG to Origin in September 2017, bringing the total loan amount to US$156 million. These loans were made by APLNG to the Group in accordance with the terms of the APLNG project financing facility, which allows APLNG to make a loan to a shareholder if the shareholder provides the project financiers with a letter of credit for the amount of the loan. The Group continues to provide parent company guarantees in excess of its 37.5 per cent shareholding in Australia Pacific LNG in respect of certain historical domestic contracts. Legal and regulatory Certain entities within the Group (and joint venture entities, such as Australia Pacific LNG) are subject to various lawsuits and claims as well as audits and reviews by government or regulatory bodies. In most instances it is not possible to reasonably predict the outcome of these matters or their impact on the Group. Where outcomes can be reasonably predicted, provisions are recorded. A number of sites owned/operated (or previously owned/operated) by the Group have been identified as contaminated. These properties are subject to ongoing environmental management programs. For sites where the requirements can be assessed and remediation costs can be estimated, such costs have been expensed or provided for. Warranties and indemnities have also been given and/or received by entities in the Group in relation to environmental liabilities for certain properties divested and/or acquired. Capital expenditure As part of the acquisition of Browse Basin exploration permits, the Group agreed to pay cash consideration of US$75 million contingent upon a project Final Investment Decision (FID) and US$75 million contingent upon first production. The Group will pay further contingent consideration of up to US$50 million upon first production if 2P reserves, at the time of FID, reach certain thresholds. These obligations have not been provided for at the reporting date as they are dependent upon uncertain future events not wholly within the Group s control. 29

32 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements D2 Commitments Detailed below are the Group's contractual commitments which are not recognised as liabilities as the relevant assets have not yet been received. 31 December 30 June as at $million (1) $million (1) Capital expenditure commitments Joint venture commitments (2) (1) (2) Includes $10 million (June 2017: $9 million) of capital expenditure commitments and $105 million (June 2017: $104 million) of joint venture commitments relating to discontinued operations. Includes $586 million (June 2017: $623 million) in relation to the Group's share of Australia Pacific LNG s capital, joint venture and operating lease commitments. D3 Notes to the interim statement of cash flows Cash includes cash on hand, at bank and short-term deposits, net of outstanding bank overdrafts for the half year ended 31 December $million $million The following non-cash financing and investing activities have not been included in the statement of cash flows: Investment in equity accounted investees - (1,116) Reduction in loan to equity accounted investees - 1, Reconciliation of movements of liabilities to cash flows arising from financing activities $million Liabilities from financing activities Current borrowings Non-current borrowings Other financial (assets)/ liabilities Total Balance as at 1 July , ,626 Proceeds from borrowings - 3,045-3,045 Repayment of borrowings/other liabilities - (3,115) (135) (3,250) Foreign exchange adjustments (22) Other non-cash movements 1,040 (1,047) - (7) Balance as at 31 December ,151 7,406 (24) 8,533 30

33 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements D4 Power Purchase Arrangements adjustment Power Purchase Arrangements (PPAs) are entered into with third parties (power generator entities) by the Group in order to ensure it can continue to purchase electricity at predetermined prices and to meet its commitments under the Renewable Energy Target Scheme. The Group has historically concluded that all PPAs were supply contracts for the delivery of electricity and Renewable Energy Certificates (RECs) as the contracts required physical delivery of the products and the view that the Australian Electricity Market Operator (AEMO) was a market clearing house that is used to settle such arrangements. As the Group has a short generation position (i.e. it needs to purchase energy from the market to meet electricity demand of its customers) the accounting outcome reflected the economic rationale for entering into the arrangements. Whilst the accounting standards that outline the measurement and presentation requirements to be applied to PPAs have not changed, there has been a review of the accounting treatment for these contracts since the half year ended 31 December As a number of the PPAs require net settlement due to the structure of the electricity market, it has been concluded that the net payment made to or received from the third party should be accounted for as a derivative financial instrument. As a result, the Group has determined the fair value of these arrangements and recognised a derivative asset or liability at each reporting date. This change in accounting treatment has been reflected in both the current and comparative periods. The Group has restated each of the affected financial statement line items for the prior year, as detailed below. Impact on equity (increase/ (decrease)) Previously reported Adjustment Restated 1 July 2016 $million $million $million Derivative assets - current 253 (16) 237 Derivative assets - non-current 1,134 (69) 1,065 Deferred tax assets Total assets 28, ,905 Derivative liabilities - non-current 1, ,637 Deferred tax liabilities 110 (110) - Total liabilities 14, ,845 Retained earnings 6,502 (470) 6,032 Net impact on equity 14,530 (470) 14,060 Impact on income statement (increase/(decrease)) 31 December 2016 $million $million $million (1) Expenses (6,513) 169 (6,344) Net impact on profit for the year (1,676) 118 (1,558) (1) Excludes impact of discontinued operations re-presentation Impact on basic and diluted earnings per share (EPS) (increase/(decrease) in EPS) Earnings per share Basic earnings per share 6.7 Diluted earnings per share 6.7 The change did not have an impact on other comprehensive income for the period or the Group's operating, investing and financing cash flows. 31

34 Origin Energy Limited and its Controlled Entities Notes to the interim financial statements D5 Subsequent events Other than the matters described below, no item, transaction or event of a material nature has arisen since 31 December 2017 that would significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial periods. On 31 January 2018, Origin completed the sale of Lattice Energy Limited (Lattice Energy) to Beach Energy Limited for $1,585 million. After adjusting for settlement of the acquisition by Lattice Energy of Benaris interests in the Otway basin, transaction costs, adjustments and taxes, the balance of the sale proceeds will be used to close out of oil forward sale agreements (see below) and pay down debt of approximately $1 billion. Origin s investment in Lattice Energy is recorded at its recoverable amount at 31 December 2017 and therefore there is not expected to be any significant profit or loss realised on divestment in the year ending 30 June In the 2013 financial year, Origin entered into agreements to sell approximately 60 per cent of its future oil and condensate over a 72 month period commencing on 1 July 2015, for which Origin received $482 million in upfront proceeds. Following the divestment of Lattice Energy, the oil forward sale agreement has been settled for $265 million. On 30 January 2018, a new organisational structure for the Integrated Gas business was announced internally. It is expected that the current Integrated Gas workforce will reduce by approximately 650 people as a result of this restructuring, with the related costs to be incurred in the 2018 calendar year. These restructuring changes, combined with a re-alignment of the business to be asset focused, lower well development costs and simplification of work processes, are expected to deliver significant cost savings in the future, and form part of a previously disclosed breakeven cost improvement initiative. On 15 February 2018, Origin announced its intention to redeem the 500 million Capital Securities due in 2071 (2071 Capital Securities) issued by Origin Energy Finance Limited and listed on the London Stock Exchange at their first call date (16 June 2018). 32

35 Directors' Declaration In the opinion of the directors of Origin Energy Limited (the Company): (a) the interim financial statements and notes are in accordance with the Corporations Act 2001 (Cth), including: (i) (ii) giving a true and fair view of the financial position of the Group as at 31 December 2017 and of its performance, for the half year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and other applicable accounting standards and the Corporations Regulations 2001 (Cth); and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of the directors: Gordon M Cairns, Chairman Director Sydney, 15 February

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38 Directors Report for the six months ended 31 December 2017 In accordance with the Corporations Act 2001, the Directors of Origin Energy Limited (Company) report on the Company and the consolidated entity Origin Energy Group (Origin), being the Company and its controlled entities, for the half year ended 31 December 2017 ( the period ). The Operating and Financial Review forms part of this Directors Report. Directors The names of the Directors of the Company holding office during the half year ended 31 December 2017 and up until the date of this Report are as follows: Gordon Cairns (Chairman) Frank Calabria (Managing Director & Chief Executive Officer) John Akehurst Maxine Brenner Teresa Engelhard Bruce Morgan Scott Perkins Steven Sargent Review of Operations A review of the operations and results of operations of Origin during the period is set out in the Operating and Financial Review, which is attached to and forms part of this Directors report. Lead Auditor s Independence Declaration The lead auditor s independence declaration made under Section 307C of the Corporations Act 2001 is attached to and forms part of the Directors Report for the half year ended 31 December Rounding The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors Reports) Instrument 2016/191 dated 24 March 2016 and in accordance with that class order, amounts in the financial report and Directors Report have been rounded off to the nearest million dollars unless otherwise stated. Signed in accordance with a resolution of the Directors: Mr Gordon Cairns Chairman Sydney, 15 February 2018

39 Lead Auditor s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Origin Energy Limited I declare that, to the best of my knowledge and belief, in relation to the review of Origin Energy Limited for the interim period ended 31 December 2017 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and ii. no contraventions of any applicable code of professional conduct in relation to the review. KPMG Duncan McLennan Partner Sydney 15 February 2018 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG International ), a Swiss entity. Liability limited by a scheme approved under Professional Standards Legislation.

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41 IMPORTANT INFORMATION IMPORTANT INFORMATION This Operating and Financial Review (OFR) contains forward looking statements, including statements of current intention, statements of opinion and predictions as to possible future events and future financial prospects. Such statements are not statements of fact and there can be no certainty of outcome in relation to the matters to which the statements relate. Forward looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause the actual outcomes to be materially different from the events or results expressed or implied by such statements, and the outcomes are not all within the control of Origin. Statements about past performance are not necessarily indicative of future performance. Neither the Company nor any of its subsidiaries, affiliates and associated companies (or any of their respective officers, employees or agents) (the Relevant Persons ) makes any representation, assurance or guarantee as to the accuracy or likelihood of fulfilment of any forward looking statement or any outcomes expressed or implied in any forward looking statement. The forward looking statements in this OFR reflect views held only at the date of this report and except as required by applicable law or the ASX Listing Rules, the Relevant Persons disclaim any obligation or undertaking to publicly update any forward looking statements, or discussion of future financial prospects, whether as a result of new information or future events. This OFR and Directors Report refer to Origin s financial results, including Origin s Statutory Profit and Underlying Profit. Origin s Statutory Profit contains a number of items that when excluded provide a different perspective on the financial and operational performance of the business. Income Statement amounts, presented on an underlying basis such as Underlying Profit, are non-ifrs financial measures, and exclude the impact of these items consistent with the manner in which senior management reviews the financial and operating performance of the business. Each underlying measure disclosed has been adjusted to remove the impact of these items on a consistent basis. A reconciliation and description of the items that contribute to the difference between Statutory Profit and Underlying Profit is provided in Section 2.3 of this OFR. Certain other non-ifrs financial measures are also included in this OFR. These non-ifrs financial measures are used internally by management to assess the performance of Origin s business and make decisions on allocation of resources. Further information regarding the non-ifrs financial measures is included in the Glossary in Appendix 5 of this OFR. Non- IFRS measures have not been subject to audit or review. Certain comparative amounts from the prior corresponding period have been re-presented to conform to the current period s presentation. OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

42 TABLE OF CONTENTS TABLE OF CONTENTS 1. OVERVIEW FINANCIAL UPDATE Financial Summary Sale of Lattice Energy Reconciliation from statutory to underlying profit Underlying Profit from continuing operations up 147% Operating cash flow from continuing operations up 43% Capital management REVIEW OF SEGMENT OPERATIONS Energy Markets Integrated Gas APPENDIX 1 CONSOLIDATED FINANCIAL SUPPLEMENTARY DATA APPENDIX 2 ENERGY MARKETS SUPPLEMENTARY DATA APPENDIX 3 INTEGRATED GAS SUPPLEMENTARY DATA APPENDIX 4 APLNG REVERSION APPENDIX 5 GLOSSARY AND INTERPRETATION OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

43 TABLE OF CONTENTS OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

44 OVERVIEW 1. OVERVIEW PERFORMANCE HIGHLIGHTS STATUTORY LOSS UNDERLYING PROFIT CONTINUING OPERATIONS UNDERLYING EBITDA CONTINUING OPERATIONS $(207)M $428M $1,492M Includes the impact of impairments of $533 million after tax $255 million on HY2017 $502 million on HY2017 OPERATING CASH FLOW CONTINUING OPERATIONS ADJUSTED NET DEBT UNDERLYING ROCE $552M $7.9B 9.9% $166 million on HY2017 $0.2 billion from June 2017 (excludes completion of the sale of Lattice Energy) up from 4.5% in HY2017 DELIVERING ON PRIORITIES Improved earnings in electricity and natural gas o Energy Markets EBITDA up 21% on HY2017 o 33% increase in owned and contracted electricity generation output on HY2017 o 20% increase in gas sales volume on HY2017 Increasing production and revenue at APLNG o Integrated Gas EBITDA up 120% (ex Lattice Energy) on HY2017 o APLNG production and commodity revenue increased by 15% and 64% respectively on HY2017 o $116 million net APLNG cash flow to Origin Deleveraging on track o 43% increase in operating cashflow from continuing operations o Lattice sale completed on 31 January 2018 (~$1bn reduction in debt) Record safety performance (TRIFR reduced to 1.9 from 3.2 in FY2017) OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

45 OVERVIEW FY2018 GUIDANCE Provided that market conditions and regulatory environment do not materially change ENERGY MARKETS INTEGRATED GAS ADJUSTED NET DEBT & CAPEX $ B PJ BELOW $7B Increase from prior guidance of $ B FY18 production from APLNG (Origin share) By 30 June 2018 (unchanged) TWH US$45/BOE $ M Output from Eraring Power Station in FY18 (FY17: 13.9TWh) NEAR TERM FOCUS FY18 cash flow breakeven (assuming AUD:USD rate of 0.78) Down from US$48/boe, benefiting from higher spot LNG and domestic revenue and deferral of activity Capital expenditure excluding Lattice Energy (unchanged) Rebuilding the right to grow o Continued balance sheet repair o Disciplined capital management o Reducing organisational complexity and cost Addressing energy security and prices o Taking action on affordability o Making energy simple and transparent o Increasing supply of gas and electricity to help put downward pressure on energy prices Transforming customer experience o Defending market share and managing for value o Digital-first approach to customer interactions and new products and services o Trialling future energy solutions Step change reduction in upstream costs at APLNG o Smaller, simpler operating model o Streamlined processes o Reducing costs and improving productivity OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

46 OVERVIEW OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

47 FINANCIAL UPDATE 2. FINANCIAL UPDATE 2.1 Financial Summary Half year ended 31 December Change ($m) ($m) ($m) Statutory Loss (207) (1,559) 1,352 Underlying earnings (Continuing operations): Energy Markets Integrated Gas Corporate (29) (32) 3 Underlying EBITDA 1, Underlying Profit Underlying EPS Other (Total operations): Underlying profit Net cash flow from operating and investing activities (NCOIA) Adjusted Net Debt 7,887 8,111 1 (224) Underlying ROCE 2 9.9% 4.5% Debt/EBITDA 3 3.9x 5.9x For the half year ended 31 December 2017 there was positive momentum in the operating performance of both our Energy Markets and Integrated Gas businesses. Notwithstanding a statutory loss of $207 million which reflects post-tax impairment charges of $533 million, the Underlying profit more than doubled compared to HY2017. We are continuing to make progress on our key priorities of reducing debt and improving returns. Energy Markets underlying EBITDA increased by 21% on HY2017 underpinned by a 33% increase in generation output and a 20% increase in natural gas sales volumes. We are responding to heightened concerns about energy prices and security. During the period, we launched new low-priced products for concession customers and we made sure customers in financial hardship were not impacted by price rises. We are competing actively for customers and making it easier for them to get a better deal. By clearly stating the dollar value on our offers, and through tools including our online price comparator tool, we are helping customer save on their energy costs. To enhance energy security and help put downward pressure on wholesale prices, we are increasing supply of gas and electricity. We recognise there is more to do to address energy security and high prices and this will remain a focus going forward. Integrated Gas underlying EBITDA increased by 120% (excluding Lattice Energy) on HY2017 driven by a 15% increase in production (with a full 6 months contribution from LNG Train 2) and a 64% increase in revenue. Origin received net cash flow from APLNG of $116 million compared to a net cash contribution by Origin to APLNG of $124 million in HY2017. APLNG continues to be a part of the LNG industry s ongoing commitment to address concerns for gas supply, signing an agreement during the period for 41 PJ to Origin for the domestic market. Net cash from operating and investing activities increased by 49% to $486 million and assisted in debt reduction of $224 million. The successful completion of the Lattice Energy sale on 31 January 2018 contributed a further reduction in Adjusted Net Debt of approximately $1 billion. 1 Adjusted Net Debt as at 30 June Adjusted EBIT / Average Capital employed (annualised). See Glossary for details 3 Adjusted net debt / (Origin EBITDA Share of APLNG EBITDA + net cash flow from APLNG) over the last 12 months OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

48 FINANCIAL UPDATE 2.2 Sale of Lattice Energy On 31 January, Origin announced the completion of the $1,585 million sale of Lattice Energy to Beach Energy with an effective date of 1 July After adjusting for the settlement of the acquisition by Lattice Energy of Benaris interests in the Otway basin ($190 million), transaction costs, adjustments and taxes, the balance of the sale proceeds were used to close out oil forward sale agreements ($265 million) and pay down debt (approximately $1 billion). As a result of this transaction a non-cash impairment charge of $198 million ($173 million post-tax) has been recognised reflecting the recognition of Lattice Energy earnings from 1 July 2017 up to the 31 January 2018 completion date. Lattice Energy is classified as a discontinued operation in the income statement. See Appendix 1 for details. Half year ended 31 December Underlying earnings (Discontinued operations) 4 : Change ($m) ($m) ($m) Underlying EBITDA Underlying Profit Reconciliation from statutory to underlying profit Half year ended 31 December 2017 ($m) 2016 ($m) Movement ($m) Statutory Loss (207) (1,559) 1,352 Items Excluded from Underlying Profit (post-tax) Fair value and foreign exchange movements (194) 155 (349) LNG items pre-revenue recognition - (36) 36 Disposals, impairments and business restructuring (595) (1,862) 1,267 Total Items Excluded from Underlying Profit (post-tax) (789) (1,743) 954 Underlying Profit (Total operations) Fair value and foreign exchange movements reflect fair value losses associated with oil hedging, interest rate swaps and other financial instruments. See Appendix 1 for further information on the nature of these financial instruments. Disposals, impairments and business restructuring for the period of $595 million includes impairment charges of $533 million (post-tax), transaction costs associated with the disposal of Lattice Energy of $31 million (post-tax) and Lattice Energy related Foreign Currency Translation Reserve release of $27 million. Origin recognised a non-cash impairment for Ironbark of $360 million (post-tax) primarily reflecting reserves revision applying assumptions consistent with the APLNG technical methodology as well as a revised development plan. The carrying value of the Ironbark gas field development post the impairment is $279 million. See the announcement made to the ASX on 8 February for further details. As discussed in section 2.2 above, a non-cash post tax impairment charge of $173 million has been recognised reflecting the recognition of Lattice Energy earnings from 1 July 2017 up to the 31 January 2018 completion date. 4 Underlying earnings from discontinued operations includes Lattice Energy, Darling Downs Pipeline and Jingemia. OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

49 FINANCIAL UPDATE 2.4 Underlying Profit from continuing operations up 147% MOVEMENTS IN UNDERLYING PROFIT ($m) 343 (187) (57) UNDERLYING PROFIT HY17 - CONT. OPERATIONS EM EBITDA IG EBITDA SHARE OF APLNG ITDA TAX/OTHER UNDERLYING PROFIT HY18 - CONT. OPERATIONS DISCONT. OPS UNDERLYING PROFIT HY18 - TOTAL OPERATIONS Underlying profit from continuing operations increased $255 million driven by: Higher Energy Markets EBITDA ($156 million) due to improved electricity wholesale margins, and increases in natural gas sales volumes and margins, partly offset by increased operating costs reflecting increased competitive activity; and Higher revenue and LNG production ($156 million) reflecting: o o higher domestic gas and LNG prices and a full six months contribution from APLNG Train 2 in HY2018 compared with two months in HY2017, when the facility was ramping up production, partly offset by a higher share of APLNG ITDA due to recognition of Train 2 costs for a full six-month period. The discontinued Lattice Energy contributed $154 million to Underlying Profit from total operations, including the impact of ceasing to recognise depreciation and amortisation from 7 December See Appendix 1 for detailed breakdown. 2.5 Operating cash flow from continuing operations up 43% Operating cash flow from continuing operations increased by $166 million (or 43%) to $552 million, primarily reflecting a $141 million increase in Underlying EBITDA (after adjusting for non-cash items). See a cash flow in Appendix 1 for a detailed breakdown. OPERATING CASH FLOW ($m) HY2017 HY2018 DISCONTINUED OPERATIONS CONTINUING OPERATIONS OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

50 FINANCIAL UPDATE 2.6 Capital management Adjusted net debt down $224 million MOVEMENTS IN ADJUSTMENT NET DEBT ($m) 8,111 (552) (116) CONTINUING OPERATIONS ($282 MILLION) (32) 90 7, JUN 17 ADJUSTED NET DEBT CASH FLOW OPERATIONS NET CASH FROM APLNG CAPITAL EXPENDITURE/ DISPOSALS INTEREST PAYMENTS NET CASH FLOW FROM DISCONTINUED OPERATIONS OTHER 31 DEC 17 ADJUSTED NET DEBT Adjusted net debt decreased by $224 million to $7,887 million. Cash from APLNG included a net cash receipt of $116 million comprising $40 million classified as an investing cash flow and $76 million classified as financing cash flow. Refer to Appendix 1 for additional detail. Net cash flow from continuing operations included capital expenditure and investments of $138 million comprising: Mandatory spend ($30 million), primarily expenditure related to the implementation of Power of Choice electricity market reforms Sustaining spend ($72 million), including $39 million related to maintenance of Darling Downs, Eraring and Shoalhaven power stations Productivity / growth ($37 million), Energy Markets investment across digital and Future Energy Net cash flow from discontinued operations ($32 million) includes the previously announced $60 million transaction with Benaris related to the Otway Basin Joint Venture, in preparation for the sale of Lattice Energy. Other cash flows primarily related to higher collateral (classified as a financing cash flow) requirements associated with electricity futures positions. OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

51 FINANCIAL UPDATE Debt portfolio and management DEBT MATURITY PROFILE ($m) DEBT COMPOSITION (AS AT 31 DEC 17) ($b) 7,000 6,000 5, Average interest rate 0.81% 4, % 3, , , % - FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25+ - Dec % HYBRIDS CAPITAL MARKETS DEBT LOANS - DRAWN LOANS - UNDRAWN UNDRAWN CAPITAL MARKETS FACILITIES HYBRIDS BANK LOANS For the six-month period Origin s average interest rate was 6.3% and at 31 December Origin s committed and undrawn debt facilities and cash totalled $4.7 billion. Following the completion of the APLNG lenders test and release of project finance shareholder guarantees, $2 billion of surplus undrawn facilities were cancelled in September 2017 and a further $900 million was cancelled in February 2018 delivering cumulative savings in financing costs of approximately $20 million per annum. Origin s debt portfolio includes two Euro hybrid securities totalling A$2.3 billion at 31 December 2017 incurring interest approximately 4% above bank debt. We intend to redeem the 500 million 2071 hybrid security on its first call date (16 June 2018). The repayment of debt with proceeds from the sale of Lattice Energy together with the redemption of the 500 million hybrid is expected to result in further interest savings of approximately $70 million per annum from June There is a continued focus on reducing the cost of funding through other debt restructure initiatives. APLNG funding During the construction phase of APLNG, the shareholders, including Origin, contributed capital into APLNG via ordinary equity and the investment in preference shares (termed MRCPS) issued by APLNG. APLNG will make distributions to shareholders first via dividends on the MRCPS and second either via redemption of MRCPS or dividends on ordinary equity. Origin has invested US$2.8 billion in MRCPS which pay fixed dividends of 6.37% per annum and which is recognised as interest income in Origin s financial statements. APLNG also signed a US$8.5 billion project finance facility in 2012 to fund the construction of the LNG project and the facility was fully drawn in During the period APLNG made principal repayments of US$332 million (A$422 million) on this facility. The balance as at 31 December 2017 was US$7,901 million (A$10,131 million, APLNG 100%). Interim Dividend Due to the ongoing prioritisation of debt reduction, the Board has determined not to pay a dividend in respect of earnings for the first half of Reinstatement of the dividend will be considered each six months by the Board. OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

52 FINANCIAL UPDATE OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

53 REVIEW OF SEGMENT OPERATIONS 3. REVIEW OF SEGMENT OPERATIONS 3.1 Energy Markets EBITDA UP 21% on HY2017 to $891 million Energy Markets Operations ELECTRICITY GENERATION UP 33% on HY2017 to 12.6 TWh (owned and contracted) GAS SALES UP 20% on HY2017 to 146 PJ (internal and external sales) GENERATION Power station (gas fired) Power station (coal fired) Contracted wind generation Pumped hydro generation Contracted solar generation + Development proposal Under construction LPG seaboard terminal Office Electricity Customer Accounts Natural Gas Customer Accounts In addition, Origin has LPG operations in New Zealand and across the Asia Pacific that are not shown in the above map. The Australian energy sector has been characterised by heightened concerns about energy prices and security. The closure of Hazelwood power station led to surging wholesale electricity prices which flowed through to high power bills for households and a tight supply-demand balance in the east coast gas market created price pressures for large gas users. We took action to deliver price relief to customers and make energy simpler, including: launching new low rate products for concession customers (Origin Value, SA Concession) no price rises for hardship customers in the period providing financial support and flexible plans to help customers manage their energy bills launching an online comparator tool an easy way to find the best deal advocating for a standardised industry comparator rate providing dollar values in energy offers; and leveraging data analytics to drive customer value. OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

54 REVIEW OF SEGMENT OPERATIONS Increased competition in the retail market driven by price rises and new entrants contributed to a 47,000 decrease in electricity and natural gas customer accounts during the period. MARKET CHURN 21.3% We competed actively for customers through various sales channels, improving service, introducing new products and campaigns, which contributed to customer gains during December and January. Origin s Interaction Net Promoter Score increased by two-points to 18. Origin s digital-first approach is driving more and more customer interactions through online channels, resulting in: 20.9% 20.6% Dec16 Jun17 Dec-17 MONTHLY NET CUSTOMER MOVEMENT ('000s) a 19% increase in ebilling accounts to 2.1 million a 41% increase in online sales to 175,000 a 12% increase in direct debit accounts to 1 million; and a 14% increase in MyAccount registrations to 1.2 million. Longer term, we are investing in and trialling future energy solutions to give customers greater visibility and control over their energy usage and costs. Origin has responded to concerns about energy security by increasing supply of electricity and gas which will also help put downward pressure on prices: increasing generation output at Eraring by 37% during the period. Eraring s average availability factor in CY2017 was 87% (well above the NEM average) supplying gas to bring 240 MW of gas-fired peaking generation back on line in South Australia from 1 July 2017 contracting to bring more than 1.1 GW of renewable supply online by 2020 increasing the flexibility at Quarantine Power Station in South Australia securing an additional 69 PJ of gas for the domestic market which will continue to support sales to both external customers and to Origin s generation fleet in (10) (20) ONLINE SALES (WINS & RETAINS) (000s) 124 HY HY2018 INTERACTION NPS (POINTS) 18.0 Jun17 Dec17 OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

55 REVIEW OF SEGMENT OPERATIONS Financial Summary MOVEMENTS IN ENERGY MARKETS UNDERLYING EBITDA ($m) (16) (19) 1 (23) 158 GAS +$55 MILLION COST TO SERVE-$35 MILLION ELECTRICITY +$135 MILLION HY2017 ELECTRICITY VOLUMES WHOLESALE MARGIN GAS VOLUMES GAS MARGIN COST TO ACQUIRE COST TO MAINTAIN OTHER HY2018 Energy Markets EBITDA increased $156 million to $891 million. Electricity gross profit increased $135 million reflecting improved returns from our generation portfolio ($158 million) partly offset by lower retail sales volumes ($23 million) reflecting a combination of customer losses ($16 million), cooler spring weather and continued increases in energy efficiency and solar PV penetration. See Appendix 2 for detailed breakdown of Energy Markets financial performance. Unit margin increased to $43.9/MWh from $35.80/MWh reflecting: wholesale electricity price increases in excess of increases in our fuel supply costs, and increased coal and gas fired generation volumes allowing for a reduction in contracted and spot electricity purchases. The increase in Energy Markets generation volumes reflected the 1 in 20 year outage at Eraring in HY2017 and increased generation during HY2018 with access to additional coal and gas fuel supply. Increased gas fired generation included contracting 240 MW of capacity at Pelican Point from 1 July 2017 utilising Origin s gas supply portfolio ENERGY MARKETS' SOURCES OF ELECTRICITY (TWh) 1H17 RENEWABLES GAS SPOT Sources 1H18 COAL (ERARING) CONTRACTS OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

56 REVIEW OF SEGMENT OPERATIONS Natural gas gross profit increased $55 million reflecting improved business sales volumes ($30 million) and margins ($25 million). A strong and flexible supply portfolio facilitated additional sales to external business customers (15.1 PJ) and to our own electricity generation portfolio (9.5 PJ). Unit margin increased across business and retail customer segments as a result of a competitive gas portfolio and rising market price environment. Average margin increased to $2.80/GJ from $2.70/GJ notwithstanding higher gas procurement costs and the impact of a higher proportion of business customer volumes at lower unit margin ENERGY MARKETS' SOURCES AND USES OF GAS (PJ) 1H17 1H18 1H17 1H18 Sources Uses GENERATION OIL LINKED BUSINESS APLNG OIL-LINKED FIXED PRICE OTHER APLNG - FIXED PRICE LNG GENERATION RETAIL OTHER LNG FIXED PRICE BUSINESS RETAIL Electricity and natural gas cost to serve increased by $35 million to $307 million as a result of increased levels of customer activity reflecting higher energy prices and a spotlight on affordability COST TO SERVE ($m) 307 increased cost to acquire and retain ($16 million) reflecting: 272 o increased call centre staff to handle a 10% increase in call volumes and 24% increase in win/retain activity; and o increased spend on marketing and brand increased cost to maintain ($19 million) as a result of: HY2017 HY2018 o increased bad and doubtful debts expense ($14 million) reflecting impact of increases in energy prices and more customers on hardship and payment plans; WINS/RETAINS ('000s) o o ongoing spend on data analytics (previously capitalised) to support customer strategy and increased digital interactions and operational efficiencies ($8 million), and costs associated with hardship programs and an increase in regulatory/government activity ($4 million), o partly offset by lower back office costs as a result of digital-first operational efficiencies ($7 million) HY 2017 HY 2018 WINS RETAINS OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

57 REVIEW OF SEGMENT OPERATIONS Future Energy During the period, we progressed a series of initiatives which are aimed at connecting customers to the energy and technologies of the future, including in the areas of: Collaborative energy programs: We are a co-founder of Free Electrons, a US-based clean energy accelerator program that selects start-ups each year to undergo rigorous assessments, culminating in market trials with large utilities such as Origin. We are also the principal sponsor of Energy Lab based at the University of Technology, Sydney, a home for clean energy innovation and Australian energy technology start-ups. Energy management trials: Appliance cost breakdown to better inform customers about their home energy usage and demand-side management aimed at shifting commercial and industrial customers load to test potential electricity cost savings Integrated renewable energy: Trial of a peer to peer energy trading solution Connected home: Trial of technology to allow customers to monitor and control aspects of their home Energy Markets Outlook In H2 FY2018, we expect to continue to optimise our existing portfolio in response to high wholesale prices. In Electricity, we are on track to increase Eraring output to TWh, despite a planned 10 week outage at one unit in Q4 FY MW of contracted renewables is also scheduled to come online in H2 FY2018, reducing the green energy supply costs within Origin s overall electricity portfolio. In Natural Gas, we expect to continue to benefit from the higher volumes and margin secured in the first half. Operating costs to serve our customers are expected to continue to be impacted by increased levels of customer activity in a highly competitive market. We will continue to defend market share, manage for value and focus on transforming the customer experience through digital, innovative products and future energy solutions. Energy Markets FY2018 EBITDA is expected to be in the range of $ $1.85 billion (increased from previous guidance of $1.7 - $1.8 billion) provided that market conditions and the regulatory environment do not materially change. The increase is primarily driven by increased generation at Eraring and growth in natural gas sales volumes and margin, partially offset by cost pressure from increased customer activity and competition. OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

58 REVIEW OF SEGMENT OPERATIONS 3.2 Integrated Gas EBITDA UP 120% APLNG PRODUCTION UP 15% on HY2017 to $630 million Integrated Gas operations on HY2017 to 127 PJ (Origin share) APLNG COMMODITY REVENUE UP 64% on HY2017 to $984 million (Origin share) APLNG operations APLNG is delivering increased production and revenue with over 200 LNG cargoes loaded and shipped to date and 67 cargoes in the last six months. APLNG has a proven ability to produce at > 10% above the downstream plant s 9 Mtpa nameplate capacity. During HY2018 APLNG successfully completed the project finance lenders tests releasing Origin s shareholder guarantees. Planned maintenance was successfully completed during the half year on both LNG trains. During this time, excess gas volumes were directed to the domestic market. Production from operated fields averaged 1,390 TJ/d over the half year compared to 1,156 TJ/d for the same period last year. APLNG announced a new agreement to supply an additional 41 PJ of gas to Origin for the domestic market over 14 months commencing November 2017 and continues to be part of the LNG industry s ongoing commitment to address the AEMO forecast gas shortfall. See Appendix 4 for disclosure relating to the Tri-Star litigation. OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

59 REVIEW OF SEGMENT OPERATIONS Other operations Beetaloo (Northern Territory) Origin has a 70% interest in the 6.6TCF Beetaloo resource (Northern Territory). The Scientific Inquiry into Hydraulic Fracturing in the Northern Territory released their delayed Draft Final Report in mid-december. The Panel stated that provided that the recommendations made in this Report are adopted and implemented, not only should the risk of any harm be minimised to an acceptable level, in some instances, it can be avoided altogether. The final report is due to be published in March Origin continues to engage with stakeholder groups across the Northern Territory, including those directly connected to the project area. Ironbark (Surat Basin, Queensland) The Ironbark development is expected to enter FEED for Stage 1 development in FY2018 with a revised multistage field development plan, initially targeting the high permeability sweet spot (Undulla Nose extension) in the North West sector of the tenement. First gas is targeted in FY2021. Successful testing of low permeability drilling techniques at Australia Pacific LNG, which could be applied to Ironbark, provides the potential for development of additional resource. Origin is considering various options to bring the Ironbark gas to market and the FEED process is expected to inform an optimum path for development of the resource in the future. Financial Summary MOVEMENTS IN INTEGRATED GAS UNDERLYING EBITDA EXCLUDING LATTICE ($m) (5) HY2017 LNG VOLUME LNG PRICE DOMESTIC REVENUE OTHER HY2018 Integrated Gas EBITDA increased by $343 million to $630 million primarily reflecting increased production and higher commodity prices. OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

60 REVIEW OF SEGMENT OPERATIONS APLNG PRODUCTION (ORG SHARE) (PJe) APLNG DOMESTIC PRICE (A$/GJ) APLNG LNG PRICE (US$/MMBTU) HY2017 HY2018 HY2017 HY2018 HY2017 HY2018 DOMESTIC DIRECTED TO LNG Origin s share of APLNG production increased by 17 PJe or 15% to 127 PJe reflecting a full six month contribution from APLNG s second LNG Train. Domestic volumes decreased reflecting a reduction in sales to QGC, with volumes directed to LNG feed gas following the commissioning of Train 2. The average realised domestic gas price increased 62% to $4.13/GJ reflecting a reduction in sales of low priced gas to QGC and higher prices received for short term gas as a result of rising wholesale prices. The average realised LNG price increased 21% to US$7.23/mmbtu reflecting higher oil and spot LNG prices. APLNG generated free cash flow of $429 million (excluding movements in project finance reserve accounts) after funding all cash operating costs, capital expenditure, working capital / other, project finance interest and project finance principal repayment. Refer to Appendix 3 for additional detail. 3,000 2,500 2,000 APLNG CASH FLOW (100%) (A$M) $0.4 BILLION FREE CASH FLOW GENERATED The increase in commodity prices and production, combined with a reduction in capital expenditure resulted in net cash from APLNG to Origin of $116 million ($40 million classified as investing cash flow and $76 million classified as financing cash flow), compared to a $124 million contribution from Origin to APLNG in HY2017. Refer to Appendix 1 for additional detail. 1,500 1, H18 Sources 1H18 Uses DOMESTIC GAS/SPOT LNG REVENUE FREE CASH FLOW GENERATED LNG CONTRACT REVENUE LNG CONTRACT REVENUE DOMESTIC GAS/SPOT WORKING LNG REVENUE CAPITAL AND OTHER OPERATING COSTS CAPITAL EXPENDITURE PROJECT FINANCE PRINCIPAL PROJECT FINANCE PROJECT INTEREST FINANCE INTEREST PROJECT FINANCE PRINCIPAL WORKING CAPITAL CAPITAL AND OTHER EXPENDITURE FREE CASH FLOW OPERATING GENERATEDCOSTS OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

61 REVIEW OF SEGMENT OPERATIONS APLNG Outlook FY2018 distribution breakeven is expected to benefit from higher spot LNG and domestic revenue as well as deferral of activity. The operating cost unit rate of $1.33/GJ (upstream operated) and standard vertical unfracked well cost of $2.5 million per well achieved in HY2018 are in line with expectations and on track to deliver FY2018 guidance of $1.30/GJ and $2.4 million per well respectively. FY2018 distribution breakeven guidance has decreased from US$48/boe to US$45/boe as a result of the re-phasing of some activity into FY2019 o o revised non-operated sustain capex scope and deferral of operated activity changes to the timing of planned exploration and appraisal activity the impact of higher domestic gas and spot LNG prices partly offset by lower volumes due to downstream maintenance shutdowns higher operating expenses due to one- off redundancy costs from the organisational re-structure, and revised FX assumption to 0.78 from 0.75 AUD/USD APLNG expects to complete two downstream maintenance shutdowns, one in Q3 FY2018 and one in Q4 FY2018 each involving one train shutdown for approximately sixteen days. 100% APLNG (A$bn) Prior FY AUD/USD Current FY AUD/USD Capital expenditure Sustain Capital expenditure E&A Operating expenses pre capitalisation Less: Spot LNG & domestic revenue (1.1) (1.2) Operating breakeven Operating breakeven (US$/boe) Project finance interest Project finance principal Distribution breakeven Distribution breakeven (US$/boe) Sales Volumes, 100% APLNG (100%) Prior FY18 guidance FY2018 Guidance Domestic & Spot LNG (PJ) Contract LNG volumes (PJ) Contract LNG volumes (mmboe) OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

62 REVIEW OF SEGMENT OPERATIONS Looking forward, Origin, as upstream operator is focused on building a low cost operating model targeting an operating breakeven run rate of < US$24/boe and distribution breakeven run rate of <US$40/boe 5 from June 2019 by: moving to a simplified and lean organisation streamlining processes optimising production The distribution breakeven includes target savings from project finance. As part of the operating and capital expenditure reductions a material reduction in unit rates is being targeted from June 2019: unit operating cost reduction from A$1.30/GJ (upstream operated) to $1.00/GJ unit well cost reduction from A$2.4 million/well to $1.2 million/well operating cost and capital expenditure (including exploration and appraisal expenditure) of <$2.8billion The June 2019 target run rate includes more than $500m reduction in sustain capital and operating expenditure from the $3.3 billion capital and operating expenditure baseline provided at the November 2017 investor day. We are implementing a simplified organisation reflecting an asset-led structure that is smaller, flatter and simpler and is built around a small number of core processes. An experienced leadership team has been appointed. The operating model change will result in a reduction of 650 roles, primarily in capital cities with a strong regional presence maintained. 5 AUD=0.75 USD OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

63 REVIEW OF SEGMENT OPERATIONS OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

64 REVIEW OF SEGMENT OPERATIONS APPENDIX 1 CONSOLIDATED FINANCIAL SUPPLEMENTARY DATA Underlying Profit Half year ended 31 December 2017 ($m) 2016 ($m) Change ($m) Change (%) Continuing operations: Energy Markets underlying EBITDA Integrated Gas underlying EBITDA Corporate underlying EBITDA (29) (32) 3 (9) Underlying EBITDA 1, Underlying depreciation and amortisation (181) (167) (14) 8 Underlying share of ITDA (587) (400) (187) 47 Underlying EBIT Underlying interest income Underlying interest expense (255) (218) (37) 17 Underlying profit before income tax and non-controlling interests Underlying income tax expense (154) (115) (39) 34 Non-controlling interests share of underlying profit (1) (1) - - Underlying profit Discontinued operations: Underlying profit ,300 Total operations: Underlying profit Underlying earnings per share Discontinued Operations Half year ended 31 December Change ($m) ($m) ($m) Underlying EBITDA Underlying depreciation and amortisation (4) (133) 129 Underlying EBIT Underlying financing costs (6) (6) - Underlying income tax expense (66) (5) (61) Underlying profit Items excluded from underlying profit (225) (192) (33) OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

65 REVIEW OF SEGMENT OPERATIONS Cash flow Half year ended 31 December Movements (continuing operations) 2017 ($m) 2016 ($m) Change ($m) Change (%) Underlying EBITDA 1, Non-cash items in Underlying EBITDA 6 (636) (275) (361) 131 Change in working capital (increase) (194) (239) 45 (19) Oil Puts premium paid (7) (64) 57 (89) Other (69) (77) 8 (10) Tax paid / refund received (34) 51 (85) (167) Cash flow from operating activities (continuing operations) Discontinued operations cash flow from operating activities Total cash flow from operating activities Capital expenditure (138) (185) 47 (25) Net cash from/(to) APLNG 7 40 (124) 164 N/A APLNG reserve accounts - (127) 127 (100) Net disposals/(acquisitions) (365) (100) Cash flow from investing activities (continuing operations) (98) (72) (26) 36 Discontinued operations cash flow from investing activities (85) (97) 12 (12) Total cash flow from investing activities (183) (169) (14) 8 Net cash flow from operating and investing activities (NCOIA) Net proceeds/(repayment) of debt (205) (162) (43) 27 APLNG loan proceeds (51) (40) Interest paid (248) (281) 33 (12) Dividends paid (1) - (1) N/A Total cash flow from financing activities (378) (316) (62) 20 6 Non-cash items in EBITDA include the contribution from equity accounted Australia Pacific LNG operations ($675 million: HY2017 $327 million) less amortisation of oil hedge premiums ($38 million: HY2017 $50 million). 7 APLNG net cash flow includes the receipt of $114 million interest on MRCPS less a $74 million contribution to APLNG 8 APLNG loan proceeds ($76 million) represents cash generated by Australia Pacific LNG as part of its normal business operations deposited to a project finance debt service reserve account. Upon issuance of a bank guarantee to Australia Pacific LNG by Origin the cash was distributed to Origin by way of a loan. OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

66 REVIEW OF SEGMENT OPERATIONS Capital position As at 31-Dec Dec-16 ($m) ($m) Net Assets - continuing operations 10,156 11,304 including: Investment in APLNG 5,546 6,494 MRCPS 9 issued by APLNG 3,558 3,837 Non-cash fair value uplift (29) (860) Adjusted net assets continuing operations 10,126 10,444 Origin Adjusted Net Debt 7,887 9,143 Net derivative liabilities 853 (82) Origin's share of APLNG net debt (project finance less cash) 3,329 4,285 Capital employed - discontinued operations 925 1,678 Capital employed 23,120 25,468 Origin's underlying EBIT - continuing operations Origin's equity share of APLNG interest and tax Dilution depreciation adjustment 1 32 Adjusted EBIT - continuing operations Adjusted EBIT - discontinued operations Adjusted EBIT 1, Average capital employed 24,294 26,027 Underlying ROCE % 4.5% 9 Mandatory Redeemable Preference Shares (MRCPS). 10 Adjusted EBIT / Average Capital employed (annualised) OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

67 REVIEW OF SEGMENT OPERATIONS Reconciliation of Adjusted Net Debt Between 2011 and 2015, Origin raised foreign currency denominated debt in the US and Euro markets. This foreign currency debt was hedged into either AUD or USD using cross currency interest rate swap (CCIRS) derivatives. Accounting standards require the foreign currency debt and the linked CCIRS derivatives to be disclosed in different lines on the Statement of Financial Position (Balance Sheet). Foreign currency debt is translated at the current market spot rate and classified as interest-bearing liabilities, whilst the associated CCIRS derivatives are measured at current market rates (fair value) and are classified as either derivative assets or derivative liabilities on the Statement of Financial Position. It is the combination of the interest-bearing liabilities and the derivative assets or derivative liabilities that reflect the Company s adjusted net debt position or the quantum of funds the Company is required to repay upon maturity of the debt. As at 31 December 2017, Origin s interest bearing liabilities on the Statement of Financial Position were $8,557 million. The associated CCIRS was a net derivative asset of $412 million on the Statement of Financial Position. Adjusted Net Debt of $7,887 million decreased $224 million compared to the prior period. Issue Currency Issue Notional Hedged Currency Hedged Notional AUD $m Dec-17 Interestbearing liabilities AUD $m Dec-17 Fair value adjustments on FX hedging transactions AUD $m Dec-17 Adjusted net debt AUD debt AUD 517 AUD USD Debt left in USD USD 790 USD 790 1, ,013 USD debt swapped to AUD USD 895 AUD 1,004 1,145 (141) 1,004 EUR debt swapped to AUD EUR 2,700 AUD 3,727 4,222 (495) 3,727 EUR debt swapped to USD EUR 1,000 USD 1,372 1, ,759 NZD debt swapped to AUD NZD 141 AUD (4) 125 Total 8,557 (412) 8,145 Cash and cash equivalents (258) Adjusted net debt (7,887) OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER

68 REVIEW OF SEGMENT OPERATIONS Financial instruments and fair value adjustments Oil and gas derivatives Origin is exposed to fluctuations in the oil price through its gas portfolio, as well as indirectly through its investment in APLNG, and utilises a variety of oil derivatives to manage this price risk. Origin's gas hedging consists primarily of swaps that fix the price to be paid under oil-linked gas purchase contracts. The value of these derivatives increases when market oil prices exceed the agreed swap price. Much of the APLNG related oil hedging is carried out through put options undertaken by Origin that establish a minimum oil price Origin will receive on oil-linked LNG sales. The value of these options declines in periods of rising oil prices as payouts are less likely to be received. Electricity derivatives Origin generates approximately half of the total electricity volume it sells. As such it is exposed to fluctuations in wholesale electricity prices in respect of the electricity that must be purchased to meet retail and business customer demand. To manage this risk Origin utilises a variety of derivatives including swaps, options, power purchase arrangements and forward purchase contracts. The value of these derivatives declines in periods of decreasing electricity prices as the electricity purchase costs to be paid by Origin exceed current market prices. Currency and interest rate derivatives Origin utilises a variety of funding derivatives to manage the exposure to foreign exchange and interest rate risk on its debt portfolio. A significant portion of the debt portfolio is Euro denominated and cross currency interest rate swap derivatives have been used to hedge that debt to AUD or USD. Although Origin has an Australian functional currency, a portion of the foreign debt is swapped to USD as a natural offset to the investment in APLNG which is USD functional and will deliver USD distributions. The value of these currency derivatives increases in periods where the Euro strengthens against the Australian dollar. OPERATING AND FINANCIAL REVIEW FOR THE HALF YEAR ENDED 31 DECEMBER