APLNG commissioning confidence

THE achievement of first LNG at BG Group’s Queensland Curtis LNG project is expected to help lift the shares of nearby Australia Pacific LNG project operator Origin Energy and ConocoPhillips.

Blair Price

This first gas milestone for QCLNG is expected to provide confidence in the commissioning process for all the Curtis Island-based CSG to LNG projects according to Macquarie Wealth Management, which has an outperform rating and a 12-month price target of $15.50 on Origin’s shares.

A participant in the recent APLNG site tour, MWM said Origin’s goal of commissioning the project in less than six months was not unreasonable.

It also believed that BG was “on track” with the five-month commissioning goal of the QCLNG project, although it noted there was “a significant level of investor scepticism on whether QCLNG will meet this timeline”.

In terms of the Origin’s APLNG update, a key change MWM identified was a “highlighted spend on sustain phase” operations, third party projects and exploration.

“Part of this reflects the uncertainty of when sales of ramp gas to QCLNG and [the Santos-operated] GLNG will commence,” MWM said.

“Offsetting this, APLNG is quickly emerging with additional wells than required to service its own requirements, providing the opportunity to sell gas to third parties.”

The broker said Origin faces headwinds in energy markets and structural changes in oil prices.

“However over the next nine months the risk profile will drop as QCLNG and GLNG start production, thus confidence will grow APLNG can achieve the same outcome,” MWM said.

“This is the driver of the [outperform] valuation and is likely to outweigh the headwinds.”

The APLNG project is targeting first LNG in mid-2015 and has arrangements to also supply gas to the GLNG project from its upstream CSG fields.

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