Origin Energy Limited (ASX: ORG) released its quarterly report this morning highlighting Australia Pacific LNG as a strong performer. Here’s what you need to know.
About Origin
Origin Energy is one of Australia’s leading energy retailers, with substantial operations ‘upstream’ (i.e. in electricity generation and storage). Origin also operates a range of renewable energy projects, such as wind farms and solar panel farms. It’s also the leading gas producer in Australia.
The Key Points
- Australia Pacific LNG delivered its highest-ever quarterly revenue, with Origin’s share being $763.9 million
- Electricity sales volumes up 7% on the previous quarter
- Natural gas sales decreased 10% from the previous quarter
Just A Seasonal Glitch?
The higher electricity sales volumes are certainly seasonal and are expected over the summer period. Origin noted that this quarter’s sales were slightly offset by lower Business volumes.
Origin also stated that natural gas sales are seasonal, but the result was also impacted by the ending of short-term wholesale contracts in Queensland.
The Australia Pacific LNG result seems to have less to do with seasonality and more to do with business growth and commodity prices, as highlighted by Origin CEO Frank Calabria.
“Australia Pacific LNG continues to deliver strong earnings with record revenue during the quarter”, he said.
“This result was driven by continued reliable operational performance and higher realised commodity prices.”
Calabria also highlighted the impact of the heatwaves earlier this year on the company’s performance.
“In the Energy Markets business, our power stations performed solidly over the summer and were ready and available during the heatwave conditions which occurred across much of the country in January and again in March”, he said.
“While gas sales to wholesale customers declined in the quarter, we directed additional gas to generation where it helped to meet peak summer demand in the electricity market.”
Are Origin Shares A Buy?
Origin shares have opened slightly lower this morning. I recently wrote an article that explored whether Origin shares could be seriously undervalued – one big investment bank seems to think so.
While the Origin share price has risen slightly since that article, the price target is still much higher. However, I’m sceptical about whether Origin shares can actually reach that price. Origin is a price-taker and relies heavily on resource prices which is something that turns me away from a lot of resources businesses.
Personally, I’d rather invest in one of the companies revealed in the free report below.
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Disclaimer: At the time of writing, Max does not own shares in any of the companies mentioned.
