By Angela Macdonald-Smith
Aug. 19 (Bloomberg) -- Origin Energy Ltd., Australia's biggest producer of gas from coal seams, urged shareholders to reject BG Group's A$13.8 billion ($12 billion) offer, saying they may benefit more from a potential coal-seam gas partnership.
The U.K. company's A$15.50-a-share offer undervalues Origin, which has short-listed potential partners for a venture to convert coal-seam gas into liquefied natural gas, Chairman Kevin McCann said today in Origin's formal response to BG's offer, sent to the Australian stock exchange.
``Continuing this process will allow Origin to determine whether direct participation in a coal-seam gas-to-LNG project may deliver additional value for Origin shareholders,'' McCann said in a letter to shareholders.
Origin shares have traded above the bid price since BG made the offer, signaling some investors expect the company to attract a higher price. BG is planning a A$8 billion LNG export project in northeastern Australia and buying Origin would bolster reserves for the venture and hand it ownership of the nation's second-biggest electricity and gas retailer.
``Origin's board and management are clearly confident that their partner selection process is likely to yield a proposal that has a higher value than the current offer from BG,'' David Leitch, a utilities analyst at UBS AG, said in a July 30 report. ``Our estimate of Origin's value is about A$18-A$20 per share.''
Price Targets
Origin closed yesterday at A$16.15 in Sydney. Brokers' average 12-month share-price targets for Origin shares range from A$17.01 to A$20, McCann said.
Before BG's offer closes, the Origin board will provide shareholders with an independent expert's report that will include a valuation of the stock, McCann said.
The investment earlier this year by Malaysia's Petroliam Nasional Bhd. in Santos Ltd.'s rival coal-seam gas venture in Queensland state indicates Origin's coal-seam gas assets may be worth 97 Australian cents a gigajoule, or A$9.8 billion, compared with BG's stated estimate of between 50 cents and 70 cents a gigajoule, Origin said in a presentation sent to the exchange.
Coal-seam gas, mostly comprising methane, bonds as a thin film on the surface of coal and is released when pressure is reduced, usually after water is removed.
LNG is natural gas that has been chilled to liquid form, reducing it to one-six-hundredth of its original volume at minus 161 degrees Celsius (minus 259 Fahrenheit), for transportation by ship to destinations not connected by pipeline. On arrival, it's turned back into gas for distribution to power plants, factories and households.
To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net
Posts
No comments:
Post a Comment