Origin Energy plans oil and gas business spin-off

Sydney-based Origin Energy Ltd. has announced plans to sell it’s $1.8-billion conventional upstream oil and gas assets so that it can focus on the wholesale and retail energy markets as well as its LNG business in Queensland.

The company plans to float its upstream business and list it on the Australian Stock Exchange in 2017 with the aim of reducing its debt of about $9 billion and reduce spending obligations.

The $25-billion LNG project at Curtis Island near Gladstone and its supply from the coal seam gas fields in the Bowen and Surat basins will be retained.

Chief Executive Officer Frank Calabria, who took over from long-time CEO Grant King just a few months ago, said his focus was on accelerating debt reduction and improving returns.

Calabria added that the move to an IPO for the oil and gas business was one of many options considered by Origin Energy’s board. “In the end we thought that’s where the most value is created,” he said.

The company did not value the assets to be sold, but analysts believe they are worth upwards from $1.8 billion and could reach $3.7 billion.

The assets include gas projects in the Otway, Cooper, Bass, Browse, and Bonaparte basins in Australia, as well as the Kupe gas project offshore Taranaki basin and the Canterbury basin project, both in New Zealand.

The spin-off does not require shareholder approval. Macquarie Capital and UBS are advisors on the proposed IPO. The new company will have 2P reserves of 948 petajoules of gas and a production of about 75 petajoules/year, based on 2015-16 figures.

Origin Energy will establish contracts to buy gas from the new company so that it secures its own supplies and provides near-term revenue certainty for the new company, which will have an independent board and management.

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