Origin Energy Limited (Origin) reported Monday that it has entered into a conditional Sale and Purchase Agreement with Karoon Gas (Karoon) to acquire its entire 40 percent interest in two exploration permits (WA-315-P and WA-398-P) in Western Australia’s Browse Basin (Poseidon permits). These permits contain large and prospective offshore gas fields, such as the Poseidon discovery.
ConocoPhillips, the project operator, and PetroChina hold 40 percent and 20 percent interests in the permits respectively and also retain pre-emption rights for a limited period relating to the sale of Karoon’s 40 percent interest in the Poseidon permits.
Following satisfaction of all conditions precedent and appropriate regulatory approvals, Origin will pay $600 million cash consideration with additional payments of $75 million payable upon a project Final Investment Decision (FID) and $75 million payable on first production. A further payment of up to $50 million will be payable on first production if 2P reserves at the time of FID reach certain thresholds.
Origin will participate in the ongoing exploration and appraisal program - including the Pharos well which is currently being drilled by the joint venture - on a proportional basis to augment Poseidon’s existing resource position. Options to monetize the Poseidon field’s resources may include transporting natural gas to LNG production facilities in Darwin or through a standalone floating LNG facility.
Origin will initially fund the acquisition from existing committed undrawn debt facilities which totalled $5.19 billion (AUD 5.6 billion) as at the end of April 2014. Given these facilities were put in place to fund Origin’s share of Australian Pacific LNG and maintain an appropriate liquidity buffer, the drawdown associated with this acquisition will be refinanced through an equity raising of around $0.92 billion (AUD 1 billion). This will occur through a pro-rata equity offer at an appropriate time following completion of the acquisition and, in any event, sometime after the release of Origin’s full year financial results Aug. 21.
Origin Managing Director, Grant King said, “Origin’s acquisition of a 40 percent interest in the Greater Poseidon area will allow the company to establish a strategic position in one of Australia’s largest recent offshore gas discoveries at a competitive entry price when compared to recent transactions in the Browse/Bonaparte region.
“Poseidon is located in one of Australia’s most significant hydrocarbon regions and various options exist to monetize the gas through LNG export opportunities linked to growing demand in the Asian region.
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