Origin share price higher on earnings guidance upgrade

The Origin Energy Ltd (ASX: ORG) share price is on course to end the week on a positive note.

In morning trade, the energy giant’s shares are up 2.5% to $7.51.

Why is the Origin share price pushing higher?

Investors have been bidding the Origin share price higher this morning following the release of a guidance update.

According to the release, for FY 2023, Origin now expects Energy Markets underlying EBITDA to be between $600 million and $730 million. This is up from $500 million to $650 million and excludes the potential impact of the introduction of the legislated coal price cap.

Origin notes that the improvement in Energy Markets earnings has been driven by an expected increase in natural gas and electricity gross profit due to a good operating and trading performance, as well as improved coal delivery under legacy contracts.

It also highlights that no material impact is expected on FY 2023 Energy Markets earnings as a result of the introduction of the $12/GJ cap on uncontracted gas. This is because gas supplies for the year had been almost entirely contracted prior to the cap coming into effect.

In addition, as mentioned above, this guidance excludes the potential impact of any compensation Origin may receive to recover coal costs that exceed the legislated coal price cap of $125/tonne, or further coal supply contracts that may be executed at the capped price.

LNG update

Another positive that could be boosting the Origin share price today is the performance of the LNG trading business. Management notes that it has improved following additional hedging at favourable market prices, resulting in a further $140 million to $180 million of LNG trading EBITDA.

Previously, the company was expecting LNG trading EBITDA for FY 2023 and FY 2024 to be slightly positive. However, it is now expected to be $40 million to $80 million.

Things will be even better in FY 2025, with LNG trading EBITDA now expected to be $450 million to $650 million across FY 2025 and FY 2026. This compares to previous guidance of $350 million to $450 million.

Though, it warns that this outlook remains subject to market prices on unhedged volumes, operational performance, and delivery risk of physical cargoes, and shipping and regasification costs.

Origin is currently a $9.00 per share takeover target for consortium comprising Brookfield Asset Management and MidOcean Energy.

The post Origin share price higher on earnings guidance upgrade appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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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