Beach Energy Ltd., Adelaide, has made a binding agreement with Sydney-based Origin Energy Ltd. to buy all the shares in Origin's wholly owned subsidiary Lattice Energy Ltd. for $1.585 billion (Aus.) on a cash and debt-free basis. Lattice is Origin's conventional oil and gas offshoot.
The move will double Beach's size and establish it as a major supplier of gas to domestic markets. It also will provide a step change in production, operating capabilities, and geographic exposure as well as providing long-term gas contracts with Origin Energy and other counterparts.
The Lattice acquisition will increase Beach's 2P oil and gas reserves by 200% to 232 million boe and increase the company's production by 150%. Lattice's portfolio includes interests in an oil and gas venture in the Cooper basin of South Australia, gas operations in Western Australia, Victoria, and New South Wales, and exploration projects in New Zealand.
Beach will receive the benefit of Lattice cash flows back-dated to July 1.
In negotiating the agreement, Beach has beaten a private equity rival and Origin's alternative option of an initial public offering float for Lattice.
The deal will be partly funded by a $301-million equity raising. This involves a 3-for-14 nonrenounceable entitlement offer, about $233 million of which is fully underwritten. The remaining $68 million represents the share of Beach's largest shareholder, Seven Group Holdings, which has committed to take up the securities in full as well as subunderwrite the offer.
For Origin, the company's commitment to divest Lattice is consistent with its plan to simplify the Origin business, reduce debt, and improve returns to shareholders.
The sale is the largest of its major asset sale program, which has been pursued to pay off the company's debt that had blown out as a result of funding requirements for its share of the Australia Pacific coal seam gas-LNG project on Curtis Island, near Gladstone in Queensland, and through the collapse of world oil prices.
Origin retains its 37.5% interest in APLNG as well as other undeveloped unconventional gas assets such as Ironbark coal seam gas field in Queensland and the Beetaloo unconventional gas project in the Northern Territory.
The acquisition is subject to approvals from the New Zealand Overseas Investment Office and the New Zealand Minister of Energy and Resources because economic exposure to Lattice for New Zealand permit programs transfers to Beach from July.
