Beach buys Origin’s Lattice for A$1.58bn

PERTH (miningweekly.com) – Australian oil and gas producer Origin Energy has struck a deal with fellow listed Beach Energy to divest of its conventional upstream oil and gas subsidiary Lattice Energy for A$1.58-billion.

Beach told shareholders on Thursday that the acquisition of Lattice would be a transformational transaction for the company, significantly enhancing its scale and creating a leading ASX-listed oil and gas mid-cap with diversity of production and growth options.

CEO Matt Kay said that the acquisition represented a significant milestone for the company as it executed its strategy to become a premier upstream oil and gas company.

“The transaction greatly enhances our platform for continued growth, delivers a diverse asset portfolio with significant upside and provides material value accretion for Beach shareholders.

“It establishes Beach as a major supplier of gas to domestic markets, and provides a step-change in production, operating capabilities and geographic exposure. It also provides attractive long-term gas contracts with Origin Energy and other high quality counterparties, which underpin returns, cash flow generation and a rapid deleveraging profile.”

Lattice Energy holds a 67% interest in the Otway gas project, in Victoria, as well as interest in various adjacent exploration permits, along with the Halladale, Speculant and Black Watch gasfields in the Otway basin. Lattice also owns a 42.5% interest in the Bass gas project, also in Victoria, as well as interests in discoveries located in nearby exploration permits.

Origin CEO Frank Calabria said on Thursday that in signing the divestment agreement, Origin had delivered on its commitment to divest of Lattice consistent with its plans to simplify the company, reduce debt and improve returns to shareholders.

“Importantly, Origin retains access to future Lattice east coast gas production and liquefied petroleum gas, to help us continue to meet the energy needs of our domestic customers.

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

Calabria noted that proceeds from the sale would be used to pay down debt, putting Origin on track to reduce its net debt to below A$7-billion by the end of June 2018.

Beach meanwhile said that it would raise some A$301-million through a 3-for-14 pro-rata accelerated nonrenounceable entitlement offer to partly fund the acquisition. The entitlement offer would be priced at 75c a share.

About A$233-million of the entitlement offer would be fully underwritten, with the balance of the offer representing the entitlements of major shareholder Seven Group Holdings.

The entities controlled by Seven Group Holdings had committed to take up their entitlements in full, and sub-underwrite the offer up to 68.2-million new shares, which would take their overall shareholding in Beach from 22.73% to 25.73%.

The balance of the acquisition would be funded through new committed senior secured syndicated debt facilities of up to A$1.5-billion. These facilities represented a refinancing of existing facilities and cover general operations, bonding and the acquisition financing.