ORG share price crashed 7% from APLNG performing below expectations

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Origin lowers its APLNG forecasts

1 February 2025

The Australian

Electricity and gas giant Origin Energy has cut its Australia ­Pacific LNG production forecasts for the 2025 financial year by 2-3 per cent to 670-690 petajoules.

The company’s shares sunk 6.7 per cent, or 75c, on the news to $10.45, giving it a market capitalisation of $18bn.

Australia Pacific LNG revenue for the December quarter was 3 per cent higher than the prior quarter, at $2.71bn, driven by higher LNG volumes and ­prices, but offset by lower short-term domestic volumes.

Origin revised its previous guidance of 685-710PJ due to lower than expected benefits from well optimisation activities at Condabri, Talinga and Orana, as well as lower field performance and unplanned maintenance at non-operated assets, it told investors on Friday.

Citi analyst James Byrne said APLNG wells were underperforming because the ramp-up of production after shut-ins was lower than expectations and past performance.

“Origin will learn which wells to preferentially shut in when there is downtime in the processing facilities, but we think it will take some time to optimise the field accordingly,” Mr Byrne said, noting that brokers’ consensus APLNG net present value could be downgraded in the low single digits. “Once the learnings are absorbed, the JV will then need to determine the pathway forward.” Despite lower production, unit capital and operating spending is unchanged at $3.90-$4.30 a gigajoule due to expected cost savings, partially offset by accelerated well optimisation activities in the second half.

Origin LNG trading earnings before interest, taxes, depreciation and amortisation rose 270 per cent to $285m in the first half to be on track for its FY25 guidance of $400m-$450m.

In energy markets, electricity sales volumes were steady compared to the December 2023 quarter, with higher customer numbers and warmer weather offset by lower usage from solar uptake and energy efficiency.

The third stage of the Eraring battery was approved during the quarter, adding 700 megawatt hours to the first stage under construction and increasing its dispatch duration to about four hours. The combined storage of all three stages of the Eraring battery will be 700 megawatts, or 2800MWh.

The production figures follow an official report by the grid operator this week revealing the cost of generating electricity across Australia’s grid over the final three months of 2024 soared more than 80 per cent, as record high demand for electricity amid soaring temperatures coincided with all-time low availability of coal power. Origin Energy’s Eraring coal power station and AGL Energy’s Bayswater experienced prolonged issues, both of which came as the state experienced unseasonably warm weather.

Kraken not covered above, but is still performing as expected and taking market share

With a leading energy software platform that could be worth multiples if it goes public, ORG looks attractive at this price .

[held]

Broker report from ORG

ORG is one I'm really interested in because of their investment in Kraken

And I think other people are interested in also.

Shares have held up pretty strong and Ausbiz thinks ORG is now trading at a premium, attracting only a hold from both analysts last week

Of course Octopus has a few problems which may benefit competitor products like Hansen and Gentrack

But I think Octopus is large enough to get through their problems and hold firm. The acquisition of former customers on Powercloud to Kraken is already one example

Above is the meaty valuation on Kraken of 3.8bn!

14-Feb-2021:  Just to add to @Scherobi's "Top20" straw on ORG, AustralianSuper has been Australia's largest industry super fund for some years, and now claim to be Australia's largest super fund (of any type).  They have an option for their members called "Member Direct" where you can invest up to 80% of your superannuation balance in a range of ASX300 companies and/or in a range of ETFs, which you can choose yourself.  It's basically a SMSF (self-managed super fund) option, without the compliance headaches, because AustralianSuper look after all of the compliance, paperwork, reports, and tax for you.  They charge a little more for that option than they do for their managed options, but they are still very competitive compared to non-industry funds or traditional SMSFs. 

A growing number of AS members use that "Member Direct" option.  I did, when I was an AustralianSuper member.  I managed to grow my account balance at a good clip for a few years, then rolled that entire balance into my second industry super fund, Cbus, after Cbus started to offer a similar service which they call "Cbus Self Managed" - and I now have only one super fund - so no longer use AustralianSuper.

The point however is that the reason for the regular changes in the substantial holdings of companies by large industry funds like AustralianSuper is purely down to the movements within their individual members' "Member Direct" portfolios, so whenever there is a net movement of -1% or +1% across the entire AS membership, AS is required to lodge a notice to notify of the change.  This does not reflect that AustralianSuper themselves are more or less bearish or bullish on the company (in this case, on ORG), just that enough members had either added more ORG or sold down ORG to warrant a change notification.

Outside of that "MemberDirect" option (where members are choosing themselves exactly which companies they want to hold within their own super portfolio), AustralianSuper have around 170 in-house investment professionals working for them, and they also use external well-respected fund managers to manage some of their other investment options, such as their "conservative", "balanced", or "growth" options. 

Sometimes when you view a "Top20" list, it's hard to work out whose money is ultimately being represented by the names you see.  For instance, when you see HSBC or Citicorp popping up across the Top 20, it's not always clear who they are managing that exposure for.  Sometimes it is, sometimes it's not.  It's an interesting thing to monitor, but it's sometimes hard to draw much in the way of useful inferrences from the data.  I tend to focus more on what management and board members hold, and particularly whether they are reducing or increasing their exposure to the company.  With larger companies, those guys won't always make the top 20 list, but all board members have to lodge notifications of their holdings, no matter how small.  Also, watch out for directors or management who are only increasing their exposure via free shares or vested options, rather than buying shares on-market - at market prices.  On-market purchases are the things I look out for the most.

06-Apr-2020:  Operational and Financial Update