Origin Energy has entered into a conditional sale and purchase agreement with Karoon Gas to acquire its entire 40 per cent interest in two exploration permits (WA-315-P and WA-398-P) in Western Australia’s Browse Basin (Poseidon permits). These permits contain large and prospective offshore gas fields, such as the Poseidon discovery.
ConocoPhillips, the project operator, and PetroChina hold 40 per cent and 20 per cent interests in the permits respectively and also retain pre-emption rights for a limited period relating to the sale of Karoon’s 40 per cent interest in the Poseidon permits.
Following satisfaction of all conditions precedent and appropriate regulatory approvals, Origin will pay US$600 million cash consideration with additional payments of US$75 million payable upon a project Final Investment Decision (FID) and US$75 million payable on first production. A further payment of up to US$50 million will be payable on first production if 2P reserves at the time of FID reach certain thresholds.
Origin will participate in the ongoing exploration and appraisal program – including the Pharos well which is currently being drilled by the joint venture – on a proportional basis to augment Poseidon’s existing resource position. Options to monetise the Poseidon field’s resources may include transporting natural gas to LNG production facilities in Darwin or through a standalone floating LNG facility.
Origin will initially fund the acquisition from existing committed undrawn debt facilities which totalled $5.6 billion as at the end of April 2014. Given these facilities were put in place to fund Origin’s share of Australian Pacific LNG and maintain an appropriate liquidity buffer, the drawdown associated with this acquisition will be refinanced through an equity raising of around $1 billion. This will occur through a pro-rata equity offer at an appropriate time following completion of the acquisition and, in any event, sometime after the release of Origin’s full year financial results on 21 August 2014.