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Why a weak quarterly couldn’t sink the Origin Energy share price

The Origin Energy Ltd (ASX: ORG) share price made gains along with the energy sector after it reported a sharp increase in revenue from its flagship Australia Pacific LNG (APLNG) project.

The overnight jump in the crude price is also helping push the Origin share price up 1% to $7.94 in after lunch trade when the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index dipped 0.3%.

Origin isn’t the only outperformer among its peers. The Santos Ltd (ASX: STO) share price added 2.1% to $7.23, the Oil Search Limited (ASX: OSH) improved 0.6% to $7.12 and the Woodside Petroleum Limited (ASX: WPL) share price eked out a 0.3% gain to $34.78 at the time of writing.

Full year up, quarterly down

Origin announced that FY19 revenue from APLNG jumped 36% to $2.8 billion although sales in the June quarter fell 16% when compared to the March quarter.

The strong increase in the full year figure was driven by higher effective commodity prices, although the falling oil price in the last quarter of the year dragged on the June figure.

Full year production output was also largely flat at 254.7 petajoules (PJ) and that’s a good result given the scheduled shutdowns due to upstream maintenance.

More cash than expected

Investors also cheered the fact that Origin received $943 million in FY19, which was significantly more than the $850 million it originally forecasted.

On the flipside, its electricity retail division went backwards by 3% in the financial year due to lower customer accounts and usage. This wasn’t unexpected though as electricity retailers have been under pressure for a while.

Its natural gas sales also dipped by an equal percentage as higher business sales only partially offset lower volumes to generation.

Foolish takeaway

Overall, this isn’t a bad result and it highlights why I prefer Origin to AGL Energy Limited (ASX: AGL) with the latter owning power plants and a retail distribution business.

AGL is more exposed to political pressure with the government holding a big stick over the sector to keep power price down, while the weak outlook for wholesale electricity prices is also biting.

While much of Origin’s income is coming from the liquified natural gas (LNG) export market, AGL lacks diversification benefits.

This is driving AGL to hunt for an acquisition although its called-off attempt to buy Vocus Group Ltd (ASX: VOC) wasn’t well received.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. Connect with him on Twitter @brenlau.

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 Scott Phillips.

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