June 2 (Bloomberg) -- Origin Energy Ltd. agreed to buy Karoon Gas Australia Ltd.’s stake in a ConocoPhillips natural gas project for about $800 million, giving the seller’s shares the biggest gain in more than five years.
ConocoPhillips, the third-largest U.S. oil company, is operator with 40 percent, while PetroChina Co. holds the balance of the project in the Browse Basin off Western Australia.
Origin, Australia’s largest energy retailer, is already ConocoPhillips’s partner in the Australia Pacific liquefied natural gas venture in Queensland state, one of seven export developments going ahead in the country to tap Asian demand. Origin, whose stock fell 3.6 percent, also plans to sell about $1 billion in shares to refinance the acquisition.
“Having strong venture partners like Conoco, PetroChina and now Origin give this project a very good chance at being developed,” Evan Lucas, a market strategist at IG Ltd. said today by phone from Singapore.
Karoon shares jumped 43 percent to close at A$3.51 in Sydney trading, the most since October 2008. The stock had been suspended since April. Origin, whose A$24.7 billion ($23 billion) APLNG project is due to start exports next year, declined to A$14.55.
Chevron Corp., the second-largest U.S. energy producer by market value, and BG Group Plc, the U.K.’s third-largest oil and gas explorer, are among those investing about $180 billion in the seven projects. LNG market tightness will start to ease from 2015 with new supply, according to the International Energy Agency, after spot prices rose to a record in February.
Options for development of the Poseidon field in the Browse Basin include transporting the gas to LNG production facilities in Darwin or relying on a floating LNG facility, Origin said. A decision on how to develop the gas may be made as early as 2017, Origin Managing Director Grant King told reporters today on a call.
The purchase gives Origin entry into one of the largest offshore gas discoveries at a “competitive entry price when compared to recent transactions in the Browse-Bonaparte region,” King said in the statement. It also follows investments in the Cooper and Beetaloo Basins, he said.
PetroChina, Asia’s biggest oil producer, agreed in December 2012 to pay BHP Billiton Ltd. $1.63 billion for its holding in Woodside Petroleum Ltd.’s Browse LNG venture in Western Australia. Woodside last year ditched plans to build an onshore plant to exploit its Browse resources, estimating it would have cost more than A$80 billion ($74 billion).
“This is a step in the right direction for Origin as it needed to diversify its gas output outside Queensland,” IG’s Lucas said. “It may also put more pressure on Woodside to clarify its intentions for its gas fields.”
Origin’s investment is favorable compared with other deals, William Allott, a Sydney-based analyst at Commonwealth Bank of Australia, said today in a note. While it implies a multiple of $3.57 per barrel of oil equivalent, compared with $5.17 per barrel in the BHP and PetroChina agreement, there’s significant risk in proving the size of the reserves, he said.
Karoon is also negotiating with potential partners in South America and planning to attract $200 million to $300 million to fund its exploration plans in Brazil and Peru, Executive Chairman Robert Hosking said today by phone. Karoon is seeking to reach an agreement in Brazil “shortly,” while discussions in Peru may extend into next year, he said.
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