Nexus to Sell Stake in Crux Project for $275 Million

By Angela Macdonald-Smith

Sept. 10 (Bloomberg) -- Nexus Energy Ltd., developer of the proposed $1.2 billion Crux natural gas liquids project in Australia, signed an initial accord to sell a 25 percent stake in the venture for $275 million to help finance it.

The buyer, a ``financially capable international energy company'' that Nexus didn't identify, will also fund $34 million of Nexus's costs for three wells in return for a 20 percent stake in a nearby exploration permit, the Melbourne-based company said today. The transaction values the Crux area, off northwestern Australia, at about A$1.5 billion, it said.

Nexus last year sold 15 percent of the Crux project in the Browse Basin to Japan's Osaka Gas Co. for A$75 million, reducing its holding to 85 percent. Nexus said in July it invited a shortlist of companies to assess the project for the potential sale of a further stake to assist with financing.

The sale ``demonstrates the rapidly increasing value of the Crux asset, together with the near-field potential in exploration permit AC/P41,'' Nexus Managing Director Ian Tchacos said in a statement to the Australian stock exchange. ``The funding from this current transaction is expected to provide a significant contribution to funding Nexus's share of the Crux liquids project and enhance our ability to secure project finance on favorable terms.''

Nexus Energy dropped 2 cents, or 1.4 percent, to A$1.375 in Sydney trading, after earlier rising as high as A$1.465.

Nexus will announce the buyer after board approvals, due by Oct. 8, are obtained, said Jodie Phillips, investor relations manager. Osaka Gas has a preemptive right over the stake, she said, adding that Nexus isn't using an external adviser for the transaction.

LNG Potential

Crux has proven and probable reserves of 75 million barrels of condensates, a type of light oil produced with natural gas. Production is forecast to be 38,400 barrels a day, generating pretax cash flow of about A$1 billion a year, Tchacos said in July. The final cost of developing the project is yet to be determined and won't be more than $1.4 billion.

The partners are due in the fourth quarter to approve the project for development, and production is scheduled to start about the end of 2010. Nexus previously sold the natural gas reserves within the Crux field to Royal Dutch Shell Plc's Australian unit for A$52 million.

Any additional discoveries near Crux may yield enough gas to justify expanding the project to include liquefied natural gas, Tchacos said in July. Nexus will be in a stronger position to consider LNG production should the agreement for the sale be completed, he said today.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net