‘Extraordinarily challenging quarter’: Origin share price lifts despite $2.2b write down

Worker inspecting oil and gas pipeline.Worker inspecting oil and gas pipeline.

The Origin Energy Ltd (ASX: ORG) share price is in the green today amid the release of the company’s quarterly report.

The energy provider is also in the headlines today amid news its $17 million fine made up the bulk of penalties handed out by the Australian Energy Regulator (AER) in 2021-2022.

After opening 1.5% higher at $5.79, the Origin share price has continued on the up-and-up. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) energy provider’s stock is swapping hands at $5.895. That marks a 3.42% gain.

Origin share price gains on ‘extraordinarily challenging quarter’

  • Australia Pacific LNG (APLNG) revenue increased 6% on that of the March quarter to reach $2.58 billion
  • Domestic gas sales lifted 4% quarter-on-quarter
  • APLNG’s realised oil price excluding hedging came to $117 a barrel last quarter
  • North Asian LNG market prices delivered averaged US$31 per million British thermal units (mmbu)
  • APLNG average realised gas price was $16.43 per gigajoule
  • Energy Markets non-cash impairment of $2.2 billion recognised

The company revealed a $2.2 billion write down for financial year 2022. It was due to a $4.4 billion increase in the value of associated in-the-money Energy Markets derivative assets in financial year 2021.

The value of the business is assessed independently and doesn’t consider hedging benefits.

Origin said the impairment will only impact goodwill, bring no tax impact, and doesn’t reflect the business’ performance of future value.

The company also revealed it received $1.6 billion of cash distributions from APLNG last financial year. It expects its full year revenue to lift 103% on higher commodity prices.

What else happened in the June quarter?

The major news from the company last quarter came when it scrapped financial year 2023 guidance for its Energy Markets business, citing extreme volatility. The Origin share price fell 14% on the back of the announcement.

Origin was also fined after it was found to have breached its hardship policies. Today, the AER revealed it only secured around $35 million of fines in 2021-2022. The ASX 200 energy retailer received the bulk of such penalties with its $17 million fine.

And of course, the company pushed through a dramatic June as the Australian Energy Market Operator (AEMO) switched off the energy spot market in all regions of the National Electricity Market in a bid to avoid blackouts.

The company said the average spot electricity price for the June quarter was $276 per megawatt hour. That was up from $91 per megawatt hour in the March quarter.  

What did management say?

Origin CEO Frank Calabria commented on the results driving the company’s share price today, saying:

In an extraordinarily challenging quarter for the energy industry globally and in Australia, with elevated commodity prices and significant power supply challenges across the NEM, I’m very pleased with how the business has helped meet the energy needs of customers.

Australia Pacific LNG has continued to play an important role in providing secure supply to customers on Australia’s east coast, increasing gas supply to the domestic market by 4% in the June quarter.

What’s next?

Origin hasn’t provided any new earnings guidance today. However, it did note progress on coal contracting to Eraring Power Station for financial year 2023.

The company has now contracted 3 million tonnes of its target of 5 million to 6 million tonnes.

It’s also on track to migrate all electricity and gas customers to the Kraken platform by the end of the year.

Origin share price snapshot

The Origin share price has been outperforming in 2022 so far.

It has gained 9% year to date, leaving it outperforming the ASX 200 by 17%.

It has also lifted 31% over the last 12 months while the index has dumped 6%.

The post ‘Extraordinarily challenging quarter’: Origin share price lifts despite $2.2b write down appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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