Beach Energy to buy Origin’s gas assets for $1.25 billion
SYDNEY: Australia’s Beach Energy has agreed to buy gas assets from Origin Energy for $1.25 billion in a deal that will more than double the oil and gas producer’s output and step up its exposure to a tight energy market in eastern Australia.
The deal will triple Beach’s oil and gas reserves, transforming a company valued at A$1.5 billion ($1.2 billion) that has long been focused on one basin in central Australia to give it a foothold across Australia and New Zealand, onshore and offshore.
At the same time, it has locked in gas sales to Origin from the Lattice Energy business it is acquiring at higher prices than it averaged in the year to June 2017, serving a market that is likely to see gas demand soar for power plants.
Origin, Australia’s top energy retailer, spun off the gas assets into a separate arm last year, aiming to sell or float the business to help it cut debt which it had taken on to build the Australia Pacific LNG project.
Beach Chief Executive Matt Kay said that besides expanding the company’s output and reserves, the deal offered certainty of cashflow from the gas sales agreements, which stretch out to 2033.
“The combined business is a cash cow which is robust to the downside,” Kay told investors on a conference call.
Beach plans to fund the acquisition through a A$301 million entitlement offer to shareholders and new debt facilities, which it expects to be able to pay down within three years.