Origin shares jump on upbeat forecast

SYDNEY - Shares in Origin Energy, Australia's second-biggest energy retailer, headed for their biggest one-day gain in seven months after the company raised its forecast for full-year earnings on a "strong" first quarter.

Net profit for the year ending June 30, 2006, is expected to be between 10 per cent and 15 per cent higher than the company's restated earnings for last year, chairman Kevin McCann said yesterday in an address to shareholders. Origin had previously forecast a 10 per cent increase in profit.

Origin, which also produces oil and gas, is operator of the delayed BassGas project off southeastern Australia, which was originally scheduled to start production last year.

Contact Energy (owned 51 per cent by Origin) said this month that profit growth would start to slow this year because of rising gas costs.

"The market had become quite nervous over the last six weeks with all the delays at BassGas and with Contact Energy saying it was going to suffer a margin squeeze," said Stephen Bartrop, a resources analyst at Sydney-based Stock Resource.

"Now it appears Origin was a bit too cautious six weeks ago" when it forecast 10 per cent profit growth, he said.

Shares in Origin rose as much as 29c, or 4.5 per cent, to A$6.72, closing up 9c at A$6.52.

Origin's results in the first quarter of each business year - the winter quarter - help determine the company's performance for the full year, McCann said.

Gas sales for companies such as Origin and its larger rival Australian Gas Light are boosted in periods of colder weather.

"Despite a reasonably mild winter our first quarter results have been quite strong and have set us up well for the balance of the year," McCann said.

"Based on first-quarter results and despite further delays in BassGas and an easing in oil prices, our current expectations are that recurrent earnings for the full year will be 10 to 15 per cent higher than our re-stated earnings last year."

The BassGas project, owned 38 per cent by Origin, is expected to start commissioning in December and to be operating in the first quarter of next year.

- BLOOMBERG