Origin to Sell Lattice Energy Unit for A$1.585 Billion

Australia’s Beach Energy (BPT.AX) has agreed to buy gas assets from Origin Energy Ltd (ORG.AX) for $1.25 billion in a deal that will more than double the oil and gas producer’s output and step up its exposure to a tight energy market in eastern Australia.

Lattice Energy’s projects include the Otway joint venture, which comprises offshore gas fields, incorporating Thylacine in Tasmania and Geographe in Victoria, and produces an average 60 petajoules (PJ) a year.

Origin racked up billions of dollars in debt during the construction of the APLNG plant, but has been forced to sell assets and suspend its dividend in an effort to fix its balance sheet after oil prices fell.

Beach Chief Executive Matt Kay said that besides expanding the company’s output and reserves, the deal offered certainty of cashflow from the gas sales agreements, which stretch out to 2033.

The agreement also establishes long-term gas supply deals between Origin and Beach to support Origin’s domestic gas supply.

As part of the sale, Origin has firmed up access to a significant portion of Lattice Energy’s future east coast gas production.

Beach, which has a market value of 1.55 billion Australian dollars (US$1.22 billion), said it would fund the deal for Lattice through a mix of new shares and debt.

The decision, which followed a meeting between Prime Minister Malcolm Turnbull and energy companies, came just days after an Australian regulator warned that gas shortages in 2018 could be three times worse than previously thought.

“The sale to Beach represents the best overall value to Origin shareholders, through the combination of the upfront sale proceeds and ongoing supply of gas and LPG, which allows Origin to retain the benefits of our integrated business model”.

Beach’s proved and probable reserves lift to 232 million barrels of oil equivalent (MMboe) and its guidance for 2017-18 to between 25 and 27 MMboe. As a result, Seven Group’s holding in Beach could rise from 22.73 per cent to 25.73 per cent.

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