Origin Energy analysts unconvinced balance sheet is robust

Origin Energy has failed to convince equity and debt analysts of the robustness of its balance sheet after a surprise $550 million increase in its funding commitment for its large liquefied natural gas project in Queensland.

While chief executive Grant King said on Thursday that Origin didn't require fresh equity to shore up funding for the Australia Pacific LNG project, Macquarie Equities said its "still-stretched" balance sheet needed another $2 billion of debt reduction.

JPMorgan analyst Christopher Laybutt said he - and the rest of the market - had been "caught by surprise" by the extra funding commitment for APLNG, which is partly due to a delay in the start-up of the project and partly because some spending is being brought forward to maximise production once the plant starts exports from Gladstone.

Moody's, which downgraded Origin Energy's credit rating last month to Baa3, said the energy company's "financial metrics have weakened further due to incremental debt incurred to fund its share of APLNG's capital costs."