BG Group Plc, the UK’s third-biggest oil and gas company, conceded defeat in its hostile bid for Origin Energy Ltd after the Australian company attracted an investment of as much as $8 billion from ConocoPhillips.
The price implied by the venture announced yesterday between ConocoPhillips and Sydney-based Origin is higher than the UK company is able to justify, BG Chief Executive Officer Frank Chapman said today in a statement. BG would have needed to almost double its offer to obtain the support of Origin's board, Merrill Lynch & Co said in a report yesterday.
ConocoPhillips, based in Houston, will buy a 50 per cent stake in Origin’s coal-seam gas unit and in a proposed liquefied natural gas venture in northeastern Australia to tap rising Asian demand. The transaction represents a premium of about 33 per cent for Origin's gas reserves compared with BG's A$13.5 billion ($10.9 billion) offer, Sanford C. Bernstein & Co said yesterday.
“I don't think anyone will be surprised” at BG dropping the bid given the price of the ConocoPhillips transaction, said Paul Johnston, a utilities analyst at Commonwealth Securities Ltd in Melbourne. “It is an extraordinary transaction. I think Origin are a bit surprised themselves that they could elicit this type of value.”
Origin, Australia's biggest producer of natural gas from coal seams, today closed at A$17.40 in Sydney trading, down 1.4 per cent, after jumping 13 per cent yesterday. BG offered A$15.50 a share for Origin, which dropped to A$15.37 after Origin declared a final dividend of 13 cents a share. BG fell 47 pence, or 4.3 per cent, to 1,046 pence in London trading, amid broader declines in energy and commodity shares, after gaining 5.8 per cent yesterday.
Valuation Range: Origin yesterday announced an assessment by an independent expert, Grant Samuel & Associates Pty, that valued it at between A$28.55 and A$30.71 a share. The valuation, which assumed the transaction with ConocoPhillips is completed, assessed Origin's coal-seam gas unit alone at between A$18.70 and A$19.49 a share, more than Reading, England-based BG offered for all of Origin, which is also Australia's second-biggest electricity and gas retailer.
“We have therefore decided not to extend or amend our offer, which we expect will now lapse,” Chapman said in the statement. “We wish Origin and ConocoPhillips every success with their joint venture.”
BG remains committed to its existing Australian LNG venture with Queensland Gas Co, Chapman said.
Coal-Seam Gas : “The calculation for Australian coal-seam gas is quite wild in some ways,” Kenney said.
ConocoPhillips's offer values Origin's coal-seam gas resource at A$1.65 per gigajoule of proven, probable and possible resources.
