Origin Energy Limited (ORG) Update

Submitted by Jim Thesiger on 8 May, 2008 - 14:09

Origin Energy Limited (ORG) has retained their price target at the potential bid price of $14.70 from Australian stockmarket analysts from Citi.

Upgrades CSM potential to 10 TCF

Upgrades CSM potential to 10 TCF

2008 2P CSM reserves targeted at 3470 pj:

More importantly, states that at current Asian LNG netbacks a resource base of 10000 PJ (10 TCF) may be recoverable from CSM acreage. Previously had stated 3P resource of 4578 at July 2007. ORG noted, unsurprisingly, that cost structures varied across its CSM ground, noting that "not all viable reserves will be equally profitable."

UBS ascribes A$400m to A$700 m NPV per TCF of undeveloped CSM:

Based on LNG FOB prices of around $US10-$US14 MBTU and our LNG netback to the gas field boundary model. Based on ORG's 10 TCF that's an estimated CSM value of $4bn to $7bn.

UBS estimates the indicative BG bid values ORG's CSM at A$4.5 - $6bn:

We back out high and low estimates of ORG's non CSM assets from the $15.3 bn enterprise value implied by the proposed BG bid of $14.70.

Valuation retained at $14.70

Today's announcement gives us a better view of ORG's potential CSM resource and therefore its valuation. We back solve to an estimated LNG price of between US $10 MMBT and US$14 MMBTU. Some recent spot transactions are higher still and with oil at US$120, prices as high as US$19 per MMBTU could be implied. Nevertheless we retain our price target at the potential bid price of $14.70. Assuming 10 TCF is the right number for CSM the LNG price needs to be over US$16 MBTU for ORG to look cheap.