The Origin Energy Ltd (ASX: ORG) share price will be on watch today after speculation that the planned sale of its Queensland-based Ironbark project could be canned.
The coal seam gas development is wholly-owned by Origin and has been up-for-sale since August last year, with speculation that major players including Australia Pacific LNG and Senex Energy Ltd (ASX: SXY) were in the hunt for Ironbark.
The Ironbark project was purchased by Origin in August 2009 but has been plagued by issues throughout the last 12-18 months. Origin took a $355 million after-tax impairment on the value of the gas field in February 2018 after a re-assessment of the site's gas extraction found it would yield an estimated 129 petajoules of gas, nearly half the previous 249 petajoules anticipated at the time of purchase.
Origin has started 2019 with a bang, as its share price has surged 14.50% to $7.22 at the time of writing, following a torrid 12 months which saw a 22.07% decline. This strong start to the year is in line with other ASX200 energy stocks including Beach Energy Ltd (ASX: BPT) and Woodside Petroleum Ltd (ASX: WPL) which have seen surges of 31.78% and 11.32%, respectively.
Foolish takeaway
Origin Energy has raced out of the blocks this month alongside other major energy stocks which have contributed to the ASX200's early gains. Energy and gas retailers are subject to significant regulatory risk from the Federal Government's energy policy changes and this is likely to intensify as we approach the May 2018 Federal election.
Low oil prices contributed to last year's poor return for Origin and I expect oil price volatility to continue throughout 2019 as geopolitical tensions intensify, however, in the medium-term this should revert to its long-run average price.
I believe the technical environment for Origin remains supportive with significant tailwinds and should a renewables-friendly Labor government be elected in May, Origin's current share price of $7.22 could be an attractive buy for a stock with great upside potential.
