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Origin Secures Additional Funds with $300M Oil, Condensate Sale

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Origin Energy disclosed Friday that it has entered an agreement to sell a portion of its future oil and condensate production at a price linked to a current oil forward pricing curve.

The company said in a statement that upon the settlement of the agreement – which is scheduled to take place on Friday – the company will receive $300 million, for which it will use to draw down existing debt.

"Under the terms of the agreement, Origin has agreed to sell a portion of oil and condensate from its Australian East Coast and New Zealand production assets from 2015," the company said in the statement.

Origin is currently in a capital-intensive phase of its growth, which includes funding construction of the $20 billion Australia Pacific liquefied natural gas (APLNG) project; a liquefied natural gas (LNG) project with partners ConocoPhillips and Sinopec.

In an earnings address made in August, Origin noted that it expects 2013 to be more challenging than in prior years, with less growth expected from new capital investments. The company also acknowledged during its address that it was grappling with cost increases associated with the Australia Pacific liquefied natural gas (APLNG) project.

Taking a long-term view of the APLNG project, it is likely that Origin will continue to struggle with costs associated with the construction and start-up of APLNG.

The company announced on Jul.4 that it has offloaded additional stakes in APLNG to Sinopec. The deal saw Origin’s interest in APLNG drop to 37.5-percent – equal to that of ConocoPhillip’s stake – while Sinopec’s share rose from 15-percent to 25-percent. In its disclosure about the sale of its stake, Origin had said that it was looking at further opportunities to dilute its share in APLNG as it seeks to improve its funding position.

The APLNG project sees the construction of two 4.5 million tonnes per annum (mtpa) CSG-to-LNG trains. The first train will start its first LNG exports from mid-2015, while the second train is scheduled to commence its first LNG exports from early-2016. Most of the plant's production will be sold to Sinopec through a 20-year contract for 7.6 mtpa of LNG purchases from 2016. APLNG also has a 20-year supply agreement with Japan's Kansai Electric for one million tonnes of LNG per year from 2016.

The CSG fields that the APLNG project aims to develop are in the Surat and Bowen Basins. A 323-mile (520-kilometer) gas pipeline will link the gas fields to the two-train LNG facility in Gladstone, Queensland.
 

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