Origin Energy share price higher on guidance and COVID-19 update

The Origin Energy Ltd (ASX:ORG) share price is pushing higher after updating the market on its expectations for FY 2020 following the COVID-19 outbreak…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Origin Energy Ltd (ASX: ORG) share price is pushing higher on Monday following the release of an update.

At the time of writing the energy retailer's shares are up 2% to $4.86.

What did Origin Energy announce?

This morning Origin Energy provided an update on its operations and financial position in response to the COVID-19 pandemic and a material reduction in oil prices.

According to the release, the company is doing its part during these hard times by supporting those that have been financially affected. It will not disconnect any residential or small business customers in financial stress. This will apply until at least July 31.

There will also be no default listing for any customer who is having trouble paying and all late payment fees have been paused over the same period.

And despite most of its workforce now working from home, to date there has been no material impact on Origin's energy supply operations.

Oil price collapse.

Over the last few weeks the price of oil has collapsed due to a price war between Russia and Saudi Arabia. In light of this material reduction in oil prices, Origin provided an update on its expectations for the full year.

Pleasingly, its Energy Markets FY 2020 underlying EBITDA guidance has been maintained at $1.4 billion to $1.5 billion. This is subject to any material increase in bad and doubtful debt provisioning.

Also unchanged is its expected FY 2020 cash distributions from APLNG. These remain on track to be between $1.1 billion to $1.3 billion.

The company is reducing its capital expenditure. This is likely to be 5% to 10% lower than its guidance for the year. And then in FY 2021 it is aiming to reduce this even further. Management advised that it is targeting a 25% to 30% reduction in capital expenditure in FY 2021 compared to its previous FY 2020 guidance of $530 million to $580 million.

Another positive is that there is significant headroom in Origin's debt covenants at current oil prices for multiple years. It also has more than 24 months of committed and undrawn liquidity.

The company's CEO, Frank Calabria, concluded: "While there is some uncertainty about the extent of the short-term impact on Energy Markets, Origin is in a resilient financial position, with a sound balance sheet and a competitive cost position. We will also continue to play our part, supporting our customers and the broader Australian community through this challenging time. The impacts of COVID-19 are likely to be wide-reaching, and we believe in business getting behind the community and providing whatever support we can."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

A man wearing a red jacket and mountain hiking clothes stands at the top of a mountain peak and looks out over countless mountain ranges.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another disappointing day for ASX investors this Thursday.

Read more »

two men smiling with a laptop in front of them, symbolising a rising share price.
Share Gainers

Why Pinnacle, PWR, Race Oncology, and Vulcan shares are flying today

These shares are having a good session on Thursday. But why?

Read more »

A beautiful woman holds up one finger with one hand and has her hand on her waist with the other as she smiles widely as though she is very pleased about something.
Share Gainers

Why Boss Energy, Emeco, Mineral Resources, and Plenti shares are pushing higher today

These shares are having a good time on hump day. But why?

Read more »

Three small children reach up to hold a toy rocket high above their heads in a green field with a blue sky above them.
Share Gainers

3 ASX 300 shares going gangbusters on Wednesday

Investors are bidding up these three ASX 300 shares today. But why?

Read more »

Man raising both his arms in the air with a piggy bank on his lap, symbolising a record high.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a huge Tuesday for ASX shares, with the index resetting its record high.

Read more »

Woman holding gold bar and cheering.
Gold

Why are ASX gold shares rebounding today?

ASX investors are going for gold today.

Read more »

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

Why Meteoric Resources, Resolute Mining, Sonic Healthcare, and TechnologyOne shares are roaring higher

Let's see why investors are getting excited about these shares on Tuesday.

Read more »

Two kids in superhero capes.
Small Cap Shares

Guess which 2 ASX small-cap shares just rocketed 50%+ on big news!

Investors are sending these two ASX small-cap stocks through the roof on Tuesday.

Read more »