Origin Energy sales slump as LNG prices plummet

Production is down 5% from this time last year.

Justin Loiseau

Justin Loiseau hails from the great united state of North Carolina, where he started his first business at the ripe age of five: melting crayons into candles. With the infamous Crayola Crash of 1994, Justin moved on to study economics and environmental studies as a Morehead-Cain Scholar at the University of North Carolina. He has worked in a variety of sectors across the globe, from management consulting to the United Nations, and once spent three months examining invasive snails in Vietnam. Justin discovered The Motley Fool in 2012 and it’s been love ever since. Creativity, contrarianism, kerfuffling… what more could one want? When he’s not playing the Fool, you can find Justin at the University of Auckland, where he is pursuing a Masters in Economics as a Rotary Ambassadorial Scholar. Justin finds biogas digesters fascinating and can unicycle a mile in seven minutes.

Published May 1, 2013 9:30 am AEST

Origin Energy (ASX: ORG) released its quarterly production report yesterday, and news is mixed for its E&P business.

For the quarter to 31 March, production increased 2% to 30 petajoules equivalent while sales volumes grew 4% over last quarter. Paul Zealand, CEO of Origin Upstream, noted that the completion of planned maintenance and inspections in the Otway and Kupe basins were the primary push behind the bump in production.

But more production and volume don't always translate to more money. Liquefied natural gas (LNG) prices peaked in December, and their subsequent slump pushed overall sales down 1% to $199 million.

Comparing this most recent quarter to 2012's comparable quarter, the numbers look even worse. A double-whammy dilution of interest and decreased production for Australia Pacific LNG proved a major strain on this quarter's success. Production dropped 5%, sales fell 2%, and sales volumes fell 6% despite higher average gas prices.

Looking beyond lackluster financials, Australia Pacific LNG's upstream and downstream projects are both over a third complete and are on track to meet milestones and start dates. 256 Phase 1 wells and five rigs are pushing upstream output up, while plans for two LNG trains are chugging forward despite stormy setbacks.

So far for fiscal 2013, Origin has contributed $119 million to Australia Pacific LNG, equivalent to 60% of its exploration and production business' quarterly sales.

LNG's future is uncertain, but limited oil supply and growing demand mean oil prices are likely to rise over time. Position yourself to profit from this trend now, with The Motley Fool's brand-new FREE research report, "3 Oil Stocks to Send Your Portfolio Gushing Higher".

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