June 24 (Bloomberg) -- BG Group Plc took its A$13.8 billion ($13.1 billion) bid for Australia's Origin Energy Ltd. direct to shareholders, saying management was wrong to reject the offer and may have overvalued its coal-seam gas reserves.

The hostile all-cash offer values Australia's biggest producer of gas from coal seams at A$15.50 a share, 48 percent more than they were trading at before BG, the U.K.'s third- largest oil and gas producer, first bid April 30.

Origin rose above the offer price to a record as investors bet the bid may be increased to win shareholder support. BG wants the Sydney-based company's gas resources in eastern Australia, which may feed a proposed liquefied natural gas project supplying utilities in northern Asia. Chinese oil companies plan to build more than 10 LNG terminals along the coast to meet a government target of doubling gas use by 2010.

``BG is giving itself room to move,'' said Gavin Wendt, resources analyst at Fat Prophets Funds Management in Sydney. ``This may not be the last offer on the table.''

Origin's suggestion that its coal-seam gas reserves were worth A$16 billion overstated their value, BG Chief Executive Officer Frank Chapman said in conference call today. The Australian company board rejected a bid of A$15.50 on May 30, citing the increased value of its reserves.

`Confident'

``We are confident that this offer represents a compelling case to shareholders,'' Chapman said. ``BG is not here to steal something, we think the bid is very credible and we're not ashamed of it. It's not our intention to raise our price, but we reserve the right to do so.''

Origin rose as much as 93 cents, or 6 percent, to a record A$16.45 and closed at A$16.42 in Sydney. BG dropped 24 pence, or 1.9 percent, to 1,236 pence in London.

``The fact that BG has not increased the headline offer price is a positive move,'' David Thomas, a London-based analyst at Citigroup Global Markets Inc., said in an e-mailed note. ``A significantly higher offer would not have sat well with BG's shareholders.''

Should the acquisition go through, it would be the second- largest foreign takeover of an Australian company after the $14.2 billion purchase last year of Rinker Group Ltd. by Cemex AB, North America's largest cement producer.

Origin shareholders should take no action over Reading, England-based BG's offer, the company said in a statement to the Australian stock exchange.

Earlier Board Rejection

Origin's board rejected the previously agreed offer after doubling its coal-seam gas reserves. It also said the decision by Petroliam Nasional Bhd., Malaysia's national oil company, to pay $2.51 billion for a stake in a rival LNG project being developed by Santos Ltd. showed its resources were worth more.

Petronas May 30 agreed to pay A$4.91 a gigajoule for proven and probable coal-seam gas reserves from Adelaide-based Santos. That's more than the A$2.16 a gigajoule offered by BG for all of Origin's oil and gas reserves calculated from BG's bid price, Origin's debt and other businesses value.

``There are a lot of analysts out there at the moment who think that the value of Origin is much higher, some in excess of A$20'' a share, Michael McCormick, who helps manage about $155 million at Leyland Private Asset Management in Sydney, said in a Bloomberg Television interview.

The BG bid will be funded with BG's own cash and a syndicated loan arranged by Banco Santander SA, HSBC Holdings Plc, Societe Generale and Royal Bank of Scotland Group Plc. It's being advised by Goldman Sachs International, Gresham Advisory Partners, Deutsche Bank AG and Morgan Stanley Australia Ltd.

`Same Offer'

``It's unusual that BG has come out with basically the same offer as before,'' said Rob Patterson, who manages the equivalent of $3.8 billion at Argo Investments Ltd. in Adelaide. ``BG wants the opportunity to tell shareholders why it believes its bid is good, while Origin will again be giving them reasons to reject it.''

LNG demand is set to increase by 10 percent a year through 2015, more than five times the estimated gains in crude oil, as power producers switch to cleaner fuels, according to Citigroup. LNG is gas chilled to liquid form for transportation by tanker. Coal-seam gas, mostly comprising methane, bonds as a thin film on the surface of coal and is released when pressure is reduced, usually after water is removed.

BG, the largest supplier of LNG from the Atlantic Basin into Asia, in February formed a venture with smaller coal-seam gas producer Queensland Gas Co. to build an A$8 billion LNG export project in Gladstone. The venture is one of five rival projects in the northeastern Australian city based on coal seam gas, which hasn't previously been used as a fuel for LNG.

To contact the reporter on this story: Jason Scott in Perth at Jscott14@bloomberg.netEduard Gismatullin in London at egismatullin@bloomberg.net

Last Updated: June 24, 2008 12:12 EDT