What: Last week Origin Energy Ltd (ASX: ORG) released its quarterly production report for the quarter ending 30 June 2015.
Pleasingly for shareholders, the energy giant achieved a 15% rise in production to 42.3 PJe thanks largely to an increased contribution from Australia Pacific LNG. While lower average commodity prices were a drag, thankfully the higher production levels and sales of third party volumes saw revenues grow 9%.
For the full 12-month period production and sales volumes were relatively stable with production increasing 4% to 147.6 PJe. Sales revenue for the year was affected by lower third party volumes and lower average commodity prices, with Origin reporting a 20% decline in sales from the division to $900.7 million.
Origin's latest 2P (proved plus probable) reserves were also disclosed with the company reporting a total of 6,260 PJe at 30 June 2015 which represented a reduction of 213 PJe on the prior year.
So What: Perhaps the most important takeaway for investors from reviewing this important report from one of Australia's premier energy players is the significant 20% decline in sales that has occurred on account of the lower oil price over the prior year but also the improvement achieved in the final quarter.
With nearly all energy producers including Woodside Petroleum Limited (ASX: WPL), Oil Search Limited (ASX: OSH) and Santos Ltd (ASX: STO) exposed to and at the mercy of the oil price, investors need to be prepared for more bad news to emerge from the energy sector in coming months.
Now What: While bad news is never pleasant for shareholders, in some cases (but certainly not all) bad news signals a temporary setback rather than a dire end. This can certainly be the case for cyclical businesses which is why the current bad news of low oil prices could actually be a good time for long-term, patient investors to consider increasing their exposure to the energy sector.
