Sydney-based Origin Energy, agreed to sell its conventional upstream oil and gas business, Lattice Energy, to Beach Energy for A$1.59 billion ($1.24 billion) as it looks to reduce debt.
As part of the sale, Origin has secured access to a significant portion of Lattice Energy’s future east coast gas production under long-term gas supply agreements to support its domestic gas business, Origin said in a statement.
Origin CEO, Frank Calabria said the divestment of Lattice Energy is consistent with the company’s plan to simplify its Origin business and reduce debt.
“Importantly, Origin retains access to future Lattice Energy east coast gas production and LPG, to help us continue to meet the energy needs of our domestic customers,” Calabria said.
To remind, Origin, together with Santos and Shell has committed to cover the expected domestic market gas demand shortfall in 2018.
Proceeds from the sale will be used to pay down debt, putting Origin on track to reduce adjusted net debt to below $7 billion by 30 June 2018.
Net proceeds will also reflect the acquisition of Benaris’ interests in the Otway basin, transaction costs and the closing out of two oil forward sale agreements that Origin signed in FY2013, estimated to be $270 million depending on oil price at the time of completion.
Following the sale, Origin’s simplified Integrated Gas business unit will comprise its 37.5 percent interest in Australia Pacific LNG for which it is upstream operator, as well as Ironbark (100 percent) and Beetaloo Basin (70 percent) exploration assets.
Origin will also retain a number of dormant onshore permits near Port Campbell in Victoria (Heytesbury) which may provide a future opportunity to develop a gas storage facility.
1 AUD = 0.782278 USD