Beach seals $1.6bn Lattice deal
KERRY Stokes-backed Beach Energy will purchase Origin Energy’s Lattice Energy business for almost $1.6 billion.
Lattice is Origin’s oil and gas exploration arm with assets in the Otway, Bass, Cooper, Perth and Bonaparte basins, as well as stakes in New Zealand projects.
Beach said it would raise $301m for the acquisition in a rights offer, with the remaining amount funded through debt facilities.
Stokes’ Seven Group Holdings will provide $68m of the capital, raising its stake in Beach to 25.73 per cent.
Beach chief executive Matt Kay said the acquisition would be “transformational” and represented a key milestone in its goal 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,” he said.
“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.”
The acquisition increases Beach’s east coast gas sales and ethane production by more than 300 per cent from three core gas processing hubs, with a combined FY17 production equivalent of about 15 per cent of east coast gas demand last year.
More mega projects need to come online to avoid supply side pressures and resultant price spikes.