Could the energy crisis be providing an opportunity for Origin?
The post Why has the Origin (ASX:ORG) share price rallied 17% in 3 weeks? appeared first on The Motley Fool Australia. –
The Origin Energy Ltd (ASX: ORG) share price has been on a tear in recent weeks. In fact, shares in the energy company have gained 17% in the space of just three weeks.
Many ASX-listed energy shares have been rising in recent weeks as high demand meets constricted supply for energy resources. Illustrating the situation, the price of natural gas in Europe at the moment is at least 5 times higher than it was last year.
Keeping the lights on
A number of various factors have combined to create a difficult energy scenario in Europe. In addition, fears are building that lacking energy supply will flow across China and India in the near term. While the gas industry believes this situation will be a temporary one, that doesn’t change the current scarcity.
As such, countries are buying up supplies where they can at almost any cost. On 1 October, the Chinese government instructed its energy companies to secure supply at all costs, compounding the global price hike. Despite this, China continues to experience widespread power outages as it struggles to meet demand.
All of this bodes well for Origin and its share price. As the company’s CEO Frank Calabria stated in its FY21 annual report:
Australia Pacific LNG was outstanding, safely curtailing output when the market was subdued, and rapidly ramping up production when demand recovered, matching previous daily production records and shipping a record 130 cargoes for the year.
Investors are likely speculating over the potential benefit the shortages could bring to the growth of Origin’s Octopus Energy investment. Already, it’s been revealed that Octopus Energy has tripled in value to £3 billion since its original investment in May 2020.
With fossil fuel prices spiralling out of control, more customers may be drawn to Octopus Energy’s renewable alternative. Octopus supplies 100% green energy sourced from solar, wind, or hydro sources.
Origin share price snapshot
Although the Origin share price has performed well recently, it still is dwarfed by the benchmark on longer timeframes.
For instance, the energy company’s shares have increased 14% in value over the past 12 months. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) delivered a gain of 17.5% during the same period.
Similarly, Origin shares have gained 4% since the start of the year while the ASX 200 is up nearly 9%.
Lastly, for dividend investors, the company is offering a dividend yield of 3.94% at the current Origin share price.
Should you invest $1,000 in Origin Energy right now?
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.