Is it too late to buy Origin Energy Limited and Santos Limited?

One of these two stocks still looks like it could be in the buy zone.

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Recent announcements by both integrated energy provider Origin Energy Limited (ASX: ORG) and oil and gas producer Santos Limited (ASX: STO) are a reminder for investors that a step change in production volumes and revenues for both businesses is about to happen. Despite being widely acknowledged, this perhaps isn’t yet fully reflected in their respective share prices.

The recent March quarterly production figures released by Origin show strong production volumes were achieved over the prior quarter. The figures showed that Origin lifted its quarterly production by 10%, thanks largely to increased contributions from its Australia Pacific LNG Project (APLNG) and Otway Project. The 10% jump in volumes filtered through to a hefty 27% increase in revenues, thanks to higher average commodity prices and higher third party sales volumes.

Importantly the market was also provided with an update on the APLNG project. Origin’s CEO of LNG, Mr David Baldwin stated that: “APLNG remains on track to deliver first LNG in mid-2015, with the upstream component approximately 67% complete and the downstream component approximately 68% complete.”

Meanwhile Santos has just announced to the market that the PNG LNG Project – which Oil Search Limited (ASX: OSH) is also a major shareholder in – has started producing liquefied natural gas (LNG) ahead of schedule.

It’s great news for shareholders and should see LNG beginning to be shipped to Asian markets within the next couple of months. Santos’ MD David Knox also took the opportunity to reaffirm to the market that the Gladstone LNG (GLNG) Project was on time and on budget, with the first shipment of LNG expected to occur next year.

Foolish takeaway

With Origin’s earnings per share (EPS) forecast to jump from 68 cents per share (cps) in FY 2014 to 82 cps in FY 2015 the stock is trading on a prospective price-to-earnings (PE) ratio of 18x, which perhaps looks fully priced. Santos on the other hand, is forecast to see EPS jump from 63 cps to 103 cps by FY 2015, placing the stock on what looks to be a very appealing PE ratio of just 13.3x.

Motley Fool contributor Tim McArthur owns shares in Origin Energy Ltd.

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