Origin Energy Ltd receives $245 million on pipeline sale. Is this an opportunity?

What: Origin Energy Ltd (ASX: ORG) shares are trading 2.3% higher at $5.70 at 2 pm on Friday after the energy giant announced that it has entered into an asset sale agreement with SEA Gas Mortlake for the sale of its Mortlake Pipeline for $245 million.

So What: The sale would appear to have been struck at an attractive valuation from Origin’s perspective at a multiple of 14.4 times financial year 2017 estimated earnings before interest, tax, depreciation and amortisation, reminding investors of the continued solid demand for infrastructure assets.

The latest sale brings the total recent asset sales by Origin to around $400 million which marks the half way mark on the group’s stated intention of generating at least $800 million in cash through asset divestments.

Now What: Origin’s announcement comes at an important time considering the increasingly positive momentum in the oil sector.

Oil Search Limited (ASX: OSH) has just today announced a $2.2 billion acquisition agreement, while Brent Crude oil looks set to test the US$50 a barrel mark next week.

Despite the recent positive news flow, the share prices of leading ASX-listed oil and gas producers such as Woodside Petroleum Limited (ASX: WPL) and Santos Ltd (ASX: STO) remain down 21% and 45% respectively over the past year.

The depressed share prices could suggest that opportunities are still available to investors looking for the bottom of the energy cycle contrarian plays.

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Motley Fool contributor Tim McArthur owns shares in Origin Energy Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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