(Adds RBC comments, updates share move)
By Shruti Sonal and Arundhati Dutta
April 16 (Reuters) - Australia's Origin Energy Ltd ORG.AX cut its annual profit guidance for energy markets on Friday, after an arbitrator ordered it to pay Beach Energy BPT.AX more for gas supply following a contract price review.
Origin shares fell nearly 9% to hit their lowest in more than five months while Beach Energy climbed more than 6% to touch a two-month high, following the news on gas supply pricing from Beach Energy's Otway Basin fields.
The dispute arose last year when the two parties were unable to agree to terms of long-term gas supply agreements included under Beach's A$1.6 billion ($1.24 billion) deal in 2017 to buy Origin's Lattice Energy gas production business.
"This (outcome) will result in a gas price that does not reflect market prices, and it is therefore a very poor outcome," Origin Chief Executive Officer Frank Calabria said.
The electricity and gas retailer said the outcome would result in a A$30 million-A$40 million increase in supply cost for 2021, rising further to A$60 million-A$80 million next year.
This led Origin to lower its energy markets underlying EBITDA guidance for 2021 to a range of A$940 million-A$1.02 billion from A$1 billion-A$1.14 billion, along with challenging operating conditions and COVID-19 uncertainty.
The outcome is binding till 2023 with limited rights to appeal, Origin said, adding that it would now assess the extent to which the increased supply cost can be mitigated.
"From a Beach perspective, this result is possibly better than our forecast for a A$1-2 G/J gas price increase on Beach's existing Lattice contractual pricing," RBC Capital Markets said in a note.
RBC expects future repricing of legacy volumes to deliver higher gas revenues for Beach. Beach has a further 8PJ of gas supply from the Cooper Basin to Origin Energy that is expected to undergo a price review in FY22.
In a separate statement, Beach said the outcome was consistent with its expectations.
($1 = 1.2907 Australian dollars)