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Origin sells off APLNG stake as prices surge

Business

Origin Energy has offloaded a 10 per cent stake in its Gladstone APLNG project for $2.12 billion, just as global energy prices have taken off.

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The surging prices meant that even after the sale, Origin would still earn more than $1 billion in cash flow from the project in 2022.

The deal came as Morgan Stanley predicted LNG prices would jump by 50 per cent by 2030.

The sale to institutional energy investor EIG means Origin’s stake in the project will drop to 27 per cent. ConocoPhillips still holds 37.5 per cent and Sinopec 25 per cent.

Origin expects the sales proceeds to be broadly in line with the carrying value.

Origin will retain its existing seats on the Australia Pacific LNG board. EIG will have one board seat, with voting rights commensurate with its 10 per cent shareholding. 

Origin said the sale would not change its role as upstream operator, responsible for the upstream exploration, development, and production activities in the Queensland coal seam gas fields.

Despite the sale Origin maintains its cash flow from the project would still be more than $1 billion.

“The dilution of 10 per cent in the second half is estimated to be broadly offset by the improved commodity price outlook,’’ it said.

Chief executive Frank Calabria said selling the stake would allow Origin to “crystalise some of the significant value we have created in Australia Pacific LNG, while retaining upside to further value creation through a continuing substantial shareholding.

“Origin will continue our important role as upstream operator of the world class Australia Pacific LNG asset.

“A diverse asset portfolio, combined with strategic investments over the past 18 months, have put Origin in a strong position to lead the energy transition. 

“The material cash injection from this divestment provides further flexibility to deliver returns to shareholders and pay down debt, while allowing Origin to accelerate investment in growth opportunities.

“We are very proud of what we have helped build alongside our partners, and the performance of Australia Pacific LNG continues to go from strength to strength. 

“The quality of its assets and resource base, and the hard work over recent years to materially reduce the cost base, have rightly made Australia Pacific LNG an attractive proposition for investors.

As part of the transaction, Origin has agreed that it will guarantee EIG’s obligations to satisfy any future cash calls made by Australia Pacific LNG. An entity controlled by EIG will indemnify Origin in respect of the guarantee.

RBC Capital Markets said it viewed the deal as a positive for Origin.

“Our enterprise value for Origin’s 37.5 per cent stake in APLNG is $9.8 billion, implying the sale price for 10 per cent is also close to our valuation,” it said.

 

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