What happened to the Origin Energy share price?
At the time of writing, shares of Origin Energy [ASX:ORG] were up by 2.62% to $5.09 on Friday.
Why did Origin Energy shares do this?
Origins’ shares have surged in the 15 days after hitting a low of $3.50 on 15 February. On 1 March, Origin signed a non-binding agreement to supply 500,000 tonnes of LNG per year for a period of five years. No prices were stated. The company announced,
‘Deliveries of LNG under the SPA would be expected to begin in calendar year 2018 or 2019 after completion of ENN’s Zhoushan receiving terminal in Zhejiang province, China.’
The AU$25 billion Australia Pacific LNG (APLNG) facility at Gladstone in Queensland shipped its first LNG cargo in January. The share price rally suggests there are hopes for a turnaround in the months to come.
What now for Origin Ltd?
Origin has an extremely leveraged balance sheet. Shareholders really need to see a turnaround in the crude oil price. If the crude oil price doesn’t turn around, the company could make a new low in the foreseeable future. My analysis — showcased in Tuesday’s Money Morning — shows that the crude oil price may see a short term jump. But that rally is likely to fail. This should put pressure on the Origin share price.
In other market news, the Origin Energy demerger rumours are becoming louder. According to The Sydney Morning Herald, management is seriously considering it.
The AU$25 billion APLNG project has put the balance sheet under serious pressure. Still, AU$1 billion still needs to be spent to complete it. This comes at a time when oil prices are anaemic and Origin still has AU$9.3 billion of debt.
Resources Analyst, Money Morning