The Origin Energy Ltd (ASX: ORG) share price has fallen 4.26% so far today after the energy provider released its quarterly report for the period ending June 2020.
Origin reported that the COVID-19 pandemic has impacted natural gas and electricity demand, with some customers facing financial difficulties. But Origin received record distributions from the Australia Pacific LNG joint venture (APLNG), with the joint venture delivering record production in FY20.
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What does Origin Energy do?
Origin Energy operates in the electricity and gas markets. One of Australia's largest energy retailers with approximately 4.2 million customers, it services both large energy customers and the residential market.
Origin is a key player in Australia's energy supply chain, involved in power generation, including wind and solar technologies, as well as gas exploration and production. The company has a 47.5% interest in the APLNG joint venture, which is Australia's largest producer of coal seam gas.
What did Origin report?
Origin received record cash distributions from the APLNG joint venture of $1,275 million in FY20. This was at the top end of guidance and up from $974 million in FY19. The joint venture delivered record production. Full year revenue, however, declined 5% with increased production offset by gas inventory movements and lower domestic prices. Its gas production in the June quarter declined 3% in response to low demand as a result of the COVID-19 pandemic.
COVID-19 has had noticeable impacts on Origin's electricity demand. While residential demand increased following the implementation of lockdowns, business demand fell significantly. Business demand has recovered somewhat with the easing of restrictions, but remains below pre-pandemic levels. FY20 electricity volumes were down 7% across retail and business reflecting a combination of milder weather, lower SME customers, and COVID-19 impacts in the final quarter. FY20 gas volumes were down 4% due to lower business volumes.
Earlier this month, Origin announced post-tax charges which would reduce statutory profit after tax by $1,160–$1,240 million and underlying profit after tax by around $10 million would be recognised in FY20. The non-cash charges relate to revised commodity price assumptions, economic impacts of the pandemic, and the transition to a lower carbon energy supply.
What is the outlook for Origin?
CEO Frank Calabria recognised the joint venture highlights in FY20, citing its record production, high plant reliability, and reduction in capital and operating costs.
"Origin received record cash distributions from Australia Pacific LNG, demonstrating the value of this world-class asset to our business," he commented.
The company has been focused on supporting customers facing financial difficulties, as well as minimising the impacts of the pandemic on the business. Origin reported that it has extended its commitment not to disconnect those in financial distress and to waive late payment fees until 31 October.
At the time of writing, the Origin share price is down 35.85%, year to date, and down 31% on this time last year.
