Chad Slater joint CIO at Morphic Asset Management ran a short position in Origin Energy (ASX:ORG) into reporting. The rationale behind this position, ‘Backdrop. Oil prices last year, structurally they broke lower... if you look at the construct of how these LNG projects are built, they all thought higher for longer for oil and you are seeing a massive reassessment of the amount of oil out there.’ How does that relate to LNG and Origin? ‘They all have linked prices here….you have a business that is committed to a capex cycle, that is going ahead with that despite the fact the underlying assumptions are changing on them… there is going to be changes in their contract in the out years….or they might have to stump up more cash, we think they need to do a equity raising.’ With the recent fall in the Origin share price Slater believes that ‘a large chunk of the move is done…we as a firm will probably be using rallying opportunities to short more rather than buy stock’. Click here to watch more from Chad.
Great video chad