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4 reasons why Origin Energy is hitting new highs

Over the past week the S&P ASX All Ordinaries Index (ASX: ^XAO) has been pretty flat, partly due to the Federal budget. Standing out and rising to new highs is Origin Energy Limited (ASX: ORG). On Monday, the energy supplier set a 52-week high of $15.42 and is up about 5.6% in the last month.  It has been trending upwards since it hit a low of $10 in late 2012.

Here are four reasons why Origin Energy is hitting new highs:

1- The company is drawing closer to delivering the first LNG of its Australia Pacific LNG project (APLNG), scheduled for mid-2015.  Origin holds a 37.5% stake in the project. Once the APLNG projects starts delivering LNG, under its existing long-term contracts, the shareholders can expect a step-change in earnings and cash flow from 2016.

2- March figures, reported an increase in the underlying net profit of 5%, although the interim revenue was down 3%.  Thanks to increased production, higher average commodity prices and third–party sales this is a 27% rise in revenue from the corresponding period.

3- Development of gas resources is going ahead in such places as the Surat and Bowen Basins in QLD, which will supply the APLNG production. Also, Origin Energy is working together with companies like Senex Energy Ltd  (ASX: SXY) and Beach Energy Limited (ASX: BPT) in the Cooper Basin, where it plans to develop unconventional gas from shale oil and tight sands.

4- Gas prices are expected to rise dramatically as the APLNG and two other separate projects begin exporting LNG. As more LNG is contracted for overseas markets, domestic markets in the eastern states may see limited supply. Company revenues could rise from price increases.

Origin’s steadily rising share price is in anticipation of the LNG project-related sales and earnings expansion. It may be a year or two before everything is in place, but the stock market is a forward-looking beast.

Investors are positioning themselves now for those future potential earnings.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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