Last Friday's meeting of the Organisation of the Petroleum Exporting Countries (OPEC) has failed to halt the rout in global oil markets with the oil price crashing to a near seven-year low.
Overnight a barrel of Brent crude (which is the global benchmark) tumbled 5.3% to US$40.72.
Wall Street fell in response as it was led lower by energy stocks; investors are bracing for the ASX to follow suit today.
The fall in the oil price is set to put further strains on leading Australian energy producers. In the past six months alone the share price of Santos Ltd (ASX: STO) has crashed 52%, Beach Energy Ltd (ASX: BPT) has slumped 56.5%, while the $24 billion oil and gas giant Woodside Petroleum Limited (ASX: WPL) has lost around 21%.
Like most energy producers, the above three are directly exposed to the price of oil, however, there is one vertically integrated energy producer which is arguably in a better position to withstand the current market rout…
Origin Energy Ltd (ASX: ORG) has in fact experienced the greatest fall of all amongst the major energy producers with its share price down roughly 60% over the past six months to about $5 a share.
At this price the company commands a market capitalisation of just $9.5 billion despite owning a range of assets and business interests in the electricity generation space which are not directly affected by the oil price.
That's an important differentiating factor, as although a significant proportion of Origin's future is indeed tied to its massive APLNG investment – which exposes it to the oil price – the group did achieve earnings before interest and tax of $956 million from its energy markets division in financial year 2015. This division is primarily related to domestic electricity wholesaling and retailing.
While Origin certainly isn't out of the woods yet with the near term strains on the APLNG business hard to quantify selling pressure may continue to weigh on Origin's share price in the short term.
Taking a medium to longer-term view however, there is arguably more upside than downside risk in the stock at current prices.
