BG makes another offer for Origin

By Rick Wilkinson
OGJ Correspondent

MELBOURNE, June 25 -- BG Group has launched another takeover bid for Origin Energy Ltd., making a direct cash offer to shareholders worth a total of $13.8 billion (Aus.).

Analysts have said BG's bid stems from its desire for a stake in the future Asian LNG market. BG said it wants to become one of the first companies worldwide to convert coal seam gas into LNG.

BG's previous offer failed because of differences regarding the value of Origin's coal seam gas reserves. Other companies also are reported to be interested in Australia's coal seam gas reserves.

Initially, BG offered $14.70/share for Origin, and its latest offer is $15.50/share. Origin withdrew from negotiations on the first offer when Petronas of Malaysia bought a stake in Origin's rival, Santos.

Petronas agreed to buy an interest in coal seam methane reserves from Santos for $2.1 billion. After that deal was announced, Origin said its coal seam gas reserves were worth $16 billion. BG's latest offer was made directly to Origin's shareholders, of which one third are retail investors, and the balance, institutional shareholders.

LNG projects proposed
In February, BG bought 10% of Brisbane-based Queensland Gas Co., plus 20% of that company's Surat basin coal seam gas assets. BG and Queensland Gas plan an LNG plant at Gladstone. BG would own 70% of the plant.

Frank Chapman, BG's chief executive, said he believes Origin shareholders have limited visibility of the risks inherent in the company's current reserves position and its LNG joint venture alternatives.

Origin has said it wants to produce LNG from coal seam gas and export the LNG to Asia. BG said Origin has overvalued its coal seam gas reserves. BG notes that making LNG from coal seam gas will require billions of dollars in capital investment and that such a project, if successful, probably would not produce cash flow until 2015.

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