MELBOURNE, Aug 20 (Reuters) - Origin Energy ORG.AX , Australia's top gas and power retailer, flagged a 44 percent jump in forecast spending on its flagship gas project and flat earnings from its core business this year, sending its shares tumbling to 7-1/2-year lows on Thursday.
Sydney-based Origin said it would have to spend A$1.8 billion, up from a previous forecast of A$1.25 billion, as its remaining cash contribution for the giant Australia Pacific liquefied natural gas (APLNG) project in Queensland state, which is due to start producing in the December quarter.
The increased spending is due to lower oil prices, a previously flagged delay in first production and new drilling to maximise throughput at the plant, it said.
Investors were worried about the impact on Origin's stretched balance sheet with oil-linked LNG prices expected to remain weak, and because investors had expected some growth in the energy markets business, two analysts said.
"They have a very weak balance sheet," said an analyst with a fund manager which does not own Origin shares due to its high gearing.
He said the extra injection of funding for APLNG would make what are already slim margins even skinnier in a weak oil market, limiting gains to shareholders who have been waiting for the benefits from the A$25 billion APLNG project to kick in.
Origin reported a 4 percent fall in underlying profit to A$682 million ($501 million) for the year to June 2015 on Thursday, and held its final dividend steady at 25 cents a share, meeting a promise to pay out at least 50 cents a year.
The three major credit rating agencies have all downgraded Origin this year, with Moody's the latest following the company's sale of its stake in Contact Energy.
Origin Managing Director Grant King said the company would focus on debt reduction rather than increasing dividends as long as oil prices remained weak and was confident its A$5.8 billion in debt facilities and cash would be ample.
"That will not only fund those commitments but ensure we can endure a prolonged period of low oil prices," he told reporters.
Origin's shares fell as much as 14 percent on Thursday to levels last seen in early 2008. They then traded down 13 percent at A$8.57, which the two analysts said appeared to be an overreaction.
($1 = 1.3604 Australian dollars)