Origin Energy Ltd (ASX: ORG) reported an outstanding June quarter performance, with the production rising 15% to 42.3 PJe, as compared to the previous quarter, driven by the improved production at APLNG, BassGas, Otwar and Cooper. The APLNG production across operated as well as non-operated areas surged 29% to 218 PJe as compared to the last quarter, driven by the increase in facilities to leverage the rise in demand from LNG trains. BassGas witnessed a 37% quarter over quarter increase to 1.9 PJe, driven by the higher plant availability post a shutdown in the March Quarter. , Cooper Basin production rose 9% as compared to the previous quarter, on the back of production from new wells and improved plant availability. Otwat basis slightly increased by 3% QOQ, driven by increase in customer wins. However, the Perth Basin witnessed a 42% decline impacted by the decrease in customer nominations. As a result of improved overall production, the group’s revenue rose 9% as compared to the previous quarter in spite of falling commodity prices. Meanwhile, the APLNG CSG to LNG project upstream component is 97% finished while 92% of the downstream component is finished.
On the other hand, Origin Energy’s revenues plunged 23%m as compared to the last year’s corresponding quarter, despite rise in production and sales by 21% and 12% respectively. Even the fiscal year 2015 revenues reduced 20% to $900.7 million, as compared to $1,121.8 million in fiscal year 2014, in spite of year on year growing production and sales by 4% and 1% respectively. The falling commodity prices and decreasing third party volumes led to the decline.
Production and Revenue highlights (Source: Company Reports)
Quarterly drilling activity
Source: Data taken from Company Reports and Compiled
Solid Resource Potential
The group’s proved (1P) reserves surged by 544 PJe (post production) to a total of 2,763 PJe, against the earlier reporting period. However, the proved plus probable (2P) reserves reduced by 213 PJe (66 PJe excluding production) to a total of 6,260 PJe, against the ending of the last fiscal year.
Origin Energy’s 2P reserves (Source: Company Reports)
Outlook
Origin Energy’s stock posted 13% decline over the last three months, impacted by the reports of the potential sale of Contact Energy (Wherein Origin has 53% of interest) and falling commodity prices. However, the group has a solid resource potential and recently reported that the firm’s efforts of ramping up its APLNG project is on track. APLNG started loading refrigerants to its Curtis Island LNG facility, progressing well for the first LNG export during the second half of the year. Origin Energy is making efforts to improve its presence in the energy market to leverage the growing oppurtunity in the energy market. We belive that the group will be able to withstand the challennging market conditions, by improving its production and customer nominations.
Based on the foregoing, we reiterate our “BUY” recommendation to Origin at the current levels of $10.13.
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