Origin Gas Deal Approved

An independent assessor has approved Origin Energy’s joint venture with the US giant ConocoPhillips, highlighting the boom in coal-seam gas assets.

Yesterday's report by Grant Samuel said Origin's plans to convert its extensive coal-seam gas reserves into exportable liquefied natural gas (LNG) were in the best interest of shareholders.

The US firm has agreed to pay up to A$9.6 billion for a 50 percent share in a company that will develop the assets as part of the joint venture announced last week.

A smaller hostile bid of A$13.8billion by BG Group, which looks set to lapse late this month, was "neither fair nor reasonable", the report said.

An excerpt published last week had put Origin's value at between A$28.55 and A$30.51 a share, far surpassing BG's offer. However, Grant Samuel's full report comprehensively explained the increase in Origin's value from about A$10 a share before the BG approach in May, a rise experienced by other coal-seam gas players such as Queensland Gas and Arrow Energy.

The deal with ConocoPhillips brought technical expertise, a cash injection of A$6 billion this year and a high level of confidence in the extent of the reserves, the report said. "In this respect, the [coal-seam gas] assets are now very different assets to what they were in April 2008."

As part of its auctioning of its resources, Origin received 22 expressions of interest, which were narrowed to five proposals by companies of "undoubted substance and expertise", the report said.

With the most extensive coal-seam gas reserves in Australia, Origin is in the box seat to reap the benefit from Queensland's LNG developments, but the partners must first find adequate reserves and clear technical hurdles.

Origin shares have risen since the ConocoPhillips deal was announced but are well short of the valuation. Yesterday they lost 41c to close at A$16.60.


Author: Jo Amey