Detailed Financial Analysis of Origin Energy: Accounting Issues Report

This report provides a comprehensive financial analysis of Origin Energy, an Australian energy company, focusing on the factors influencing its share price volatility between August 2017 and August 2019. The analysis investigates both internal and external factors, including insider trading, asset sales, macroeconomic trends (such as economic slowdown and oil price fluctuations), investments in Australia Pacific LNG, and the impact of trade wars. The report details how these factors have impacted Origin Energy's financial performance, including the company's responses to market changes and strategic decisions. The study includes a graphical presentation of share price data and offers recommendations for the company's future financial strategies, emphasizing the importance of forecasting macroeconomic factors, operational efficiency, and thorough analysis of investment activities. The report concludes by summarizing the key findings and their implications for Origin Energy's financial stability and growth.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary Issues in Accounting
Name of the Student:
Name of the University:
Author’s Note:

1CONTEMPORARY ISSUES IN ACCOUNTING
Executive Summary
The aim of the assignment is to conduct a financial analysis on the Origin Energy an
Australian Company that is operating as one of the leading energy provider in Australia. The
financial analysis of the company was done with the view of analyzing the various factors that
have caused the changes in the share price of the company for a two-year of trend period. The
changes observed in the share price of the company were primarily due to the changes in the
internal and external factors that have caused the reason behind such large changes. The trend
period taken into consideration for the company was for a sum of two years for the company
from the period 1st August 2017 to 1st August 2019. The reasons outlined primarily were due to
the market factors like economic slowdown and fall in oil prices and business factors write down
in the value of assets that affected the large changes in the share price of the company.

2CONTEMPORARY ISSUES IN ACCOUNTING
Table of Contents
Introduction......................................................................................................................................3
Financial Analysis...........................................................................................................................3
Insider’s Buying More Shares.....................................................................................................3
Asset Sale by Origin Energy........................................................................................................4
Macro Factors Affecting Stock’s Volatility................................................................................5
Investments in Australia Pacific LNG.........................................................................................6
Trade War....................................................................................................................................7
Conclusion.......................................................................................................................................7
Recommendations............................................................................................................................8
References........................................................................................................................................9
Appendix........................................................................................................................................11
1) Origin Energy Share Price Data.........................................................................................11
1) Graphical Presentation of Share Price................................................................................12

3CONTEMPORARY ISSUES IN ACCOUNTING
Introduction
The Origin Energy an Australian Public Listed Energy Company with its headquarters in
Sydney. The company is listed in the Australian Stock Exchange with its ticker symbol as ORG.
The share price of the company has been quite volatile in the trend period analyzed for the
company whereby there were various factors that affected the movement or have been the key
reason for the purpose of wide increase in the volatility of the stock. The reasons outlined
primarily were due to the market factors and business factors that affected the large changes in
the share price of the company (Finance.yahoo.com 2019).
Financial Analysis
Insider’s Buying More Shares
In the time period of June-August 2018, the share price of Origin Energy Company have
increased significantly and the same has been due to the increased investment in the shares of
company by the insiders of the company. Insiders of the company have brought around 9.8
million shares of the company which indeed have been the key reason for a hike in the share
price of the company in the three month of time period. The graph below indicated with the
green signal reflects the additional amount of share purchased by insiders and instutional
investors that are associated with the company (St 2018). There are high expectations when seen
from the analysts point of view in the view approach of this company in terms of growth of
revenue and the associated profitability of the company. Developments done by the company in
delivering better energy solutions and better market penetration of the company are the key bets
on which analysts are extimating the future growth of the company in the energy sector
(Markets.ft.com 2019).

4CONTEMPORARY ISSUES IN ACCOUNTING
Trade Information
Asset Sale by Origin Energy
The share price of the Energy Company took a 0.8% fall in the intraday season when it
announced February 2019, that it had sold the stake of Ironbark Coal Steam Gas Project which
accounted for a sum $231 million. The share price of the company ended at $7.66 following the
announcement. The company said that it would be selling the specified asset to the Asia Pacific
LNG ( a joint venture with which it is a member). At the time of investment an all total of $655

5CONTEMPORARY ISSUES IN ACCOUNTING
million was invested by the company in the year 2009 (Fool.com.au 2019). The company did
record a write down in the value of Ironbark and would also be recognizing an impairment
charge of $34 million in the FY 2019. In accordance with the statement presented by the
company the executive said that the sales represents an optimum way for maximizing the value
from Ironbark. The statement released by the company also stated that Origin Energy would be
deriving value from the development of Ironbark Asset through the investment done in Australia
Pacific LNG.
Macro Factors Affecting Stock’s Volatility
The share price of the Origin Energy got materially affected on 25th March 2019 whereby
the share price almost fell by around 4.5% due to macro-economic factors that are closely tied up
with the business operations of the company. The operations of the company is in the Oil and
Gas Company which states that the a portion of the revenues of the company is simply correlated
with oil prices that have seen a price fall in recent times due to global economic slowdown fears.
In the six moth ending December 31 2018. Origin Energy did post a profit of $796 million with
an adjusted debt outstanding in the financials of the company to be around $6 billion. In the first
half of the year the integrated gas division of the company including the Australia Pacific LNG
Operation whose EBITDA grew by about 43% to roughly around $900 million that was highly
due to the significant rise in the oil price (Fool.com.au 2019). However, with the increased
volatility and the fall in the oil price of the company it is expected that the same would be
affecting the EBITDA and the overall financial performance of the company. Due to the global
economic slowdown and other key factors competitors of the Origin Energy Company like
Woodside Petroleum Limited also saw a fall in the share price of the company by around 2.8%
after it has announced that bad weather condition can affect the operations of the company.

6CONTEMPORARY ISSUES IN ACCOUNTING
Investments in Australia Pacific LNG
The Origin Energy is on track for posting another heavy full-year loss, in order of $2.5
billion after taking the impairment charges against the stake that it has in the Australia Pacific
LNG Project and the value of a collection traditional oil and gas assets that are bundled together
for spun off as a Lattice Energy (ABC News 2017). The financial statement of the company
would be significantly affected by the impairment as the reported profit or the earnings of the
company would not be that adequate that it would be able to support the overall expected
earnings of company $520 million. Origin Energy would be reporting a full year loss of around
$2.5 billion after taking into account the cumulative losses that are accrued by the company since
the year 2015 amount to $3.8 billion. The financial performance of the company would be
significantly affected by the associated business factors and the overall business stability (ABC
News, 2017).

7CONTEMPORARY ISSUES IN ACCOUNTING
Trade War
The material and energy stocks saw a major decline and drove in Australian Shares on
Tuesday as the escalation between the US-China Trade War is putting pressure on various
commodity and oil prices. The S&P/ASX Index also saw a major decline in the share index as
the tension over trade war increases between the two giant economies. The share price of the
Origin Energy Ltd dropped by around 3.1% to almost a one week-low. The key reasons behind
the major fall could be in the way of introduction of tariffs done by both the economies on
various goods and services. If the tariff rate increases then the same would apply less business
operations and growth operations for the company which in turn would be resulting in a less
amount of oil demand and the overall increase in sales of oil and oil products to various
companies and organizations (The Economic Times 2018).
Conclusion
The financial analysis of the company was done by including the key business and
macro-economic factors that have been the key reason for the volatile share price of the company
in the trend period analyzed for the company. The financial analysis of the company was done
with the view of analyzing the various factors that have caused the changes in the share price of
the company for a two-year of trend period. The changes observed in the share price of the
company were primarily due to the changes in the internal and external factors that have caused
the reason behind such large changes. The reasons outlined primarily were due to the market
factors like economic slowdown and fall in oil prices and business factors write down in the
value of assets that affected the large changes in the share price of the company.

8CONTEMPORARY ISSUES IN ACCOUNTING
Recommendations
The key recommendations that would be given to the company is that it should well
forecast the various macro-economic factors like the interest rate, oil price forecast and the
overall business cycle under which the operations of the company is well linked. Business
factors including the operational aspects could be well dealt with technological efficiency that
would be brought down in the operations. On the other hands investment activity done and
carried out by the company should be well analyzed and introspected in terms of cash flows that
would be flowing to the company after taking into account the various risk and return factors
associated with the same.

9CONTEMPORARY ISSUES IN ACCOUNTING
References
ABC News. 2017. Origin Energy takes another $1.2bn hit over LNG investment. [online]
Available at: https://www.abc.net.au/news/2017-08-10/origin-energy-takes-another-1.2bn-hit-
over-lng-investment/8794686 [Accessed 12 Aug. 2019].
ABC News. 2017. Origin plunges to $2.2b loss, while Woodside profit up on stronger oil prices.
[online] Available at: https://www.abc.net.au/news/2017-08-16/woodside-origin-results/8811418
[Accessed 12 Aug. 2019].
Finance.yahoo.com. 2019. Yahoo is now part of Oath. [online] Available at:
https://finance.yahoo.com/quote/ORG.AX/history?
period1=1501525800&period2=1564597800&interval=1mo&filter=history&frequency=1mo
[Accessed 12 Aug. 2019].
Fool.com.au. 2019. Why the Origin Energy share price is tumbling | Motley Fool Australia.
[online] Available at: https://www.fool.com.au/2019/03/25/why-the-origin-energy-share-price-
is-tumbling/ [Accessed 12 Aug. 2019].
Fool.com.au. 2019. Why the Origin Energy share price is underperforming today | Motley Fool
Australia. [online] Available at: https://www.fool.com.au/2019/02/19/why-the-origin-energy-
share-price-is-underperforming-today/ [Accessed 12 Aug. 2019].
Markets.ft.com. 2019. Origin Energy Ltd, ORG:ASX forecasts - FT.com. [online] Available at:
https://markets.ft.com/data/equities/tearsheet/forecasts?s=ORG:ASX [Accessed 12 Aug. 2019].
St, S. 2018. Why Did Origin Energy Limited’s’ (ASX:ORG) Insiders Buy Up More Shares?.
[online] Simply Wall St. Available at: https://simplywall.st/stocks/au/energy/asx-org/origin-

10CONTEMPORARY ISSUES IN ACCOUNTING
energy-shares/news/why-did-origin-energy-limiteds-asxorg-insiders-buy-up-more-shares/
[Accessed 12 Aug. 2019].
The Economic Times. 2018. Australian shares slip as trade war hits materials and energy
stocks; NZ flat. [online] Available at:
https://economictimes.indiatimes.com/markets/stocks/news/australian-shares-slip-as-trade-war-
hits-materials-and-energy-stocks-nz-flat/articleshow/65854240.cms?from=mdr [Accessed 12
Aug. 2019].

11CONTEMPORARY ISSUES IN ACCOUNTING
Appendix
1) Origin Energy Share Price Data
Origin Energy Australia
Date Close Change (%)
8/1/2017 7.65
9/1/2017 7.48 -2.22%
10/1/2017 7.94 6.15%
11/1/2017 8.93 12.47%
12/1/2017 9.42 5.49%
1/1/2018 9.34 -0.85%
2/1/2018 9.05 -3.10%
3/1/2018 8.7 -3.87%
4/1/2018 9.75 12.07%
5/1/2018 9.6 -1.54%
6/1/2018 10.03 4.48%
7/1/2018 9.77 -2.59%
8/1/2018 7.95 -18.63%
9/1/2018 8.26 3.90%
10/1/2018 7.29 -11.74%
11/1/2018 6.48 -11.11%
12/1/2018 6.47 -0.15%
1/1/2019 7.16 10.66%
2/1/2019 7.36 2.79%
3/1/2019 7.2 -2.17%
4/1/2019 7.37 2.36%
5/1/2019 7.18 -2.58%
6/1/2019 7.31 1.81%
7/1/2019 7.94 8.62%
8/1/2019 7.16 -9.82%