Origin Energy divesting upstream business
Australia’s Origin Energy is going to divest its upstream business to focus on its Energy Markets and Integrated gas businesses.
The company on Tuesday said it would load off its conventional upstream business, serving Australia and New Zealand, via an Initial Public Offering (IPO).
According to Origin, the new company (‘NewCo’) will be a mid-cap upstream exploration and production company listed on the Australian Securities Exchange.
NewCo will include Origin’s interests in the Otway Gas Project, BassGas Project, Kupe Gas Project, and the Perth, Cooper, Bonaparte and Canterbury basins. Origin will retain its interests in Australia Pacific LNG, Ironbark and the Browse and Beetaloo basins.
Origin Chairman Gordon Cairns said the decision to divest was consistent with Origin’s strategy to focus the business, reduce debt and improve returns for shareholders.
“Given Origin’s ability to invest capital in the NewCo assets is constrained, their long term value will be better supported by them being an independent business,” he said.
Origin CEO Frank Calabria, appointed in September, said, “The divestment of Origin’s conventional upstream business will be a major step towards restoring the company’s financial flexibility and is expected to improve Origin’s return on capital.”
NewCo, Origin further said, will have diversified exposure to the Australian east coast, west coast and New Zealand gas markets. It will have a mix of production and exploration assets.
The new company will have an independent board and a dedicated management team. Origin said it would assist with appropriate transitional services for a limited period, but will not hold an ongoing equity interest in NewCo.
The proposed IPO will not require Origin shareholder approval and a listing of NewCo is targeted for 2017.
Origin has appointed Macquarie Capital and UBS AG, Australia Branch to act as joint financial advisors and jointly lead managers in respect of the proposed IPO.