Origin Energy Emerges Stronger, Enters LNG Deal with ConocoPhillips

New Zealand Crown Minerals

Origin Energy has emerged financially stronger after resisting a takeover from BG Group and entered instead a cash-up-front partnership deal with ConocoPhillips.

Both BG and ConocoPhillips focussed on gaining access to Origin's large coal seam gas resources on the Queensland coal fields for exporting as liquefied natural gas (LNG).

Under the ConocoPhillips 50-50 deal, the large US multinational will pay Origin A$5 billion upfront plus another A$1 billion in contributions to carry Origin's share of the LNG part of the development.

An independent expert report by Grant Samuel & Associates says that Origin will have net cash of approximately A$2.5 billion after repatriation of Conoco's contribution.

Origin proposes to pay shareholders an additional 25 cent dividend and commence a $1.275 billion on market buyback.

Grant Samuel says that even after these initiatives, Origin will have very substantial financial capacity to continue to meet its existing capital commitments and to develop its other business operations.

The failure of the BG takeover also ended question marks that existed about the future of Contact Energy, the New Zealand electricity and gas company in which Origin Energy has a controlling shareholding.

New Zealand is a major center of new prospects and developments for Origin. Origin is operator of the Kupe gas condensate project and now owns the TAWN and Rimu-Kauri fields in onshore Taranaki.

Origin has also developed substantial prospects in the Canterbury and Northland basins.

In the Canterbury Basin, Origin has committed to drill a deepwater well in its very large Carrack-Caravel double prospect in deepwater off Dunedin. Origin says the two prospects may together contain unrisked estimates of 750 million barrels of recoverable oil or 2.8 trillion cubic feet of gas plus 500 million barrels of condensate. Origin is looking for a partner with deepwater experience to drill the well.

In Northland, Origin and partner OMV have worked up three potential prospects close offshore to Auckland with at least one planned to be drilled next year. These prospects are estimated to contain between 300 and 800 billion cubic feet of gas. Further offshore in Northland three "encouraging" giant leads one of which could yield up to 10 TCF of gas have been located in deeper water.

Conoco was involved in New Zealand in the 1990s when (in partnership with Todd Energy) it drilled this country's first deepwater well in offshore Northland and later drilled the Karewa gas discovery.