Origin Energy's December 2024 Quarterly Report reveals a 3% revenue increase in its Integrated Gas segment despite a slight production dip, while Octopus Energy continues rapid customer growth, becoming the UK's largest retailer.
- Australia Pacific LNG revenue up 3% driven by higher LNG volumes and prices
- FY25 LNG production guidance lowered by 2-3% to 670-690 PJ due to operational setbacks
- Origin LNG trading EBITDA surges 270% to $285 million in HY25
- Energy Markets segment stable with steady electricity sales but gas volumes decline
- Octopus Energy adds 680,000 customers, now largest UK energy retailer with 7.3 million accounts
Integrated Gas Performance and Production Outlook
Origin Energy’s December 2024 Quarterly Report highlights a mixed performance across its core segments. The Integrated Gas division, anchored by the Australia Pacific LNG (APLNG) joint venture, posted a 3% increase in revenue to $2.7 billion for the quarter, buoyed by higher LNG volumes and improved pricing. The average realised LNG price rose slightly to US$12.20 per mmbtu, reflecting a favourable market environment despite some volatility in spot and contract sales.
However, production volumes edged down 1% quarter-on-quarter to 172.2 PJ, prompting Origin to revise its FY25 production guidance downward by 2-3% to a range of 670-690 PJ. This adjustment stems from lower-than-expected well optimisation benefits at Condabri, Talinga, and Orana fields, alongside unplanned maintenance and underperformance at non-operated assets. Despite these challenges, unit capital and operating expenditures remain steady at $3.9 to $4.3 per GJ, supported by cost-saving initiatives and accelerated well optimisation planned for the second half of the year.
Energy Markets Segment Holds Steady Amid Volume Shifts
The Energy Markets segment demonstrated resilience with electricity sales volumes stable compared to the prior year, balancing increased customer numbers and warmer weather against reduced consumption due to solar uptake and energy efficiency measures. Conversely, gas sales volumes declined by 9%, driven by a 5% drop in retail volumes and an 11% decrease in business volumes, the latter affected by contract expirations and diminished short-term trading activity.
Origin also advanced its renewable energy strategy, approving the third stage of the Eraring battery project. This expansion will add 700 MWh of storage capacity, extending the battery’s dispatch duration to approximately four hours and enhancing grid support capabilities in a transitioning electricity market.
Octopus Energy’s Rapid Customer Expansion
Octopus Energy continues to be a standout performer, adding over 680,000 new customer accounts across the UK and international markets during the quarter. This growth propels Octopus to become the largest energy retailer in the UK, now serving 7.3 million customers domestically and more than 1.8 million internationally. The Kraken technology platform, which underpins Octopus’s retail operations, has expanded its global footprint to 62 million contracted customer accounts, on track to meet its 100 million target by 2027.
Following strong earnings from its UK retail and Kraken businesses, Octopus has increased investments in manufacturing and installation capabilities to support its energy services expansion, signaling a strategic push into integrated energy solutions beyond retail supply.
Financial and Strategic Implications
Origin’s CEO Frank Calabria acknowledged the operational hurdles impacting LNG production but emphasised the company’s portfolio of levers to manage gas supply, including well optimisation, development drilling, and exploration. The company’s disciplined capital expenditure approach and cost management underpin its stable unit cost guidance despite the production revision.
Meanwhile, the Energy Markets segment’s steady performance and the battery project expansion align with Origin’s broader transition towards renewables and storage solutions. Octopus Energy’s rapid customer acquisition and platform growth underscore its rising influence in the global energy retail landscape.
Bottom Line?
Origin’s lowered LNG production outlook tempers near-term growth but its diversified strategy and Octopus Energy’s momentum position it well for evolving energy markets.
Questions in the middle?
- How will ongoing operational challenges at key gas fields affect Origin’s medium-term production and cost structure?
- What impact will the Sinopec LNG contract price review have on future cash distributions from Australia Pacific LNG?
- Can Octopus Energy sustain its rapid international expansion while maintaining profitability and service quality?