What a week it has been for investors in the oil and gas sector with all the majors taking a hammering.
At the close of Friday's trading session, for the week shareholders in Origin Energy Ltd (ASX: ORG), Woodside Petroleum Limited (ASX: WPL), Santos Ltd (ASX: STO), Oil Search Limited (ASX: OSH) and Beach Energy Ltd (ASX: BPT) are nursing losses of 12.6%, 3.8%, 6.7%, 8.2% and 11.5%.
In comparison, the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has finished the five trading days down around 2.7%.
The falls are significant. Depending on your long-term view of both the outlook for the oil price and the outlook for each company specifically, this sell-off could represent a buying opportunity.
This week, investors have had the opportunity to review the results of Woodside, Santos and Origin.
Here's a run-down on Origin's full year profit result:
- Underlying earnings before interest and tax declined 5% to $1.28 billion
- Underlying profit slipped 4% to $682 million
- Underlying earnings per share slipped 5% to 61.7 cents per share (cps)
- The full year unfranked dividend was held steady at 50 cps; a 25 cps final dividend was declared and is payable on September 28
In an attempt to put investors' concerns at ease, Managing Director Grant King noted that: "We have improved returns in Energy Markets, Australia Pacific LNG remains on track, our capabilities in renewables continue to grow with important progress made in solar, and liquidity is sufficient to meet our remaining contributions to Australia Pacific LNG and other business initiatives."
With the huge APLNG project nearing completion – upstream build is 97% complete and downstream build is 92% complete – Origin should shortly begin to recuperate some of its significant cash outlay.
Cash flows from APLNG coupled with plans to significantly reduce costs across Origin's asset base (these plans include initiatives to reduce annual upstream APLNG costs by $650 million per annum and a company-wide project to deliver cost savings of $200 million from the 2017 financial year) may provide enough confidence for investors to look past the current difficult operating environment.
