A big payoff for LNG player Origin Energy from 2021’s gas price surge thanks to shortages in Europe, China, Japan and South Korea, aided by cold winter weather in those regions.
Origin, which is also one of Australia’s biggest power suppliers and retailers revealed a huge increase in sales revenue for liquefied natural gas (LNG) for the three months to the end of September.
But the news from its other big business – the Australian domestic energy market wasn’t so upbeat and the company looks like taking a bit of a beating so far as revenues and earnings are concerned for the six months to December because of weak demand and low prices.
Origin said in its December quarterly report that revenue from its jointly owned Australia Pacific LNG venture in Queensland (which uses coal seam gas) rose 33% from the prior quarter and was 91% above the level in the December, 2020 quarter.
Tight global supplies of LNG and the rise in spot demand from Europe and Asia for winter heating supplies sent prices for one-off shipments on the spot market soaring to all-time highs above $US60 a million BTUs (British Thermal Units, a measure of the heating capacity of gas).
LNG prices are remaining high this month thanks to fears over a possible Russian invasion of Ukraine disrupting European gas supplies from Russia.
Origin said it had delivered three LNG cargoes on the spot market in the December quarter, when North Asian LNG benchmark prices were averaging $US28 per million British thermal units, up from just $US2 during the depths of the COVID-19 crisis in 2020.
Another five spot cargoes were scheduled for delivery in the March quarter, the company said.
“Australia Pacific LNG has continued its strong performance and was able to benefit from the substantial increase in oil and spot LNG prices and favourable currency movements, helping to drive a large increase in revenue compared to the prior year,” Origin CEO Frank Calabria said in the report.
“Early completion of planned maintenance boosted production and sales in the December quarter, and also allowed Australia Pacific LNG to capitalise on a buoyant spot LNG market, selling three JKM-linked (a pricing system based on Japanese prices) spot cargoes with a further five sold for delivery in the coming months.”
Origin said it received $555 million in cash distributions from APLNG for the 6 months to December 2021.
That will help offset what looks like to have been a very weak six months in the domestic energy (especially gas) sector.
“In Energy Markets, a cooler start to summer and reduced economic activity owing to continued lockdowns in the two most populous states meant the December quarter was subdued, Origin said in Monday’s report.
“Prices across the NEM were lower in this period, as a consequence of fewer unplanned baseload outages and increased renewable generation.
“Origin won new business customers in electricity which drove increased volumes in this segment, however natural gas business volumes declined as contracts expired and the impact of COVID was felt across the economy. Gas to generation was also lower as a result of reduced daytime pool prices,” the company said.
Investors ignored the gloomy news and focused on the LNG update and the shares rose 1.6% to $5.62.
