Origin's Expert Judges Conoco Plan in Best Interest

By Angela Macdonald-Smith

Sept. 15 (Bloomberg) -- Origin Energy Ltd.'s proposal to sell 50 percent of its coal-seam gas business in Australia's Queensland state to ConocoPhillips is in the best interest of shareholders, a report commissioned by Origin shows.

The transaction with Houston-based ConocoPhillips supports a valuation for Sydney-based Origin that is ``substantially above'' a A$15.37-a-share takeover offer from BG Group Plc, Grant Samuel & Associates Pty said in a report lodged today with the Australian stock exchange.

BG, the U.K.'s third-biggest oil and gas company, last week said it would let its offer lapse after the Australian target announced the investment of as much as $8 billion by ConocoPhillips. Origin Managing Director Grant King said yesterday the company would release the full report from Grant Samuel after saying Sept. 8 the expert estimated its value at between A$28.55 and A$30.71 a share.

``Origin's coal-seam gas assets have emerged as its most valuable set of assets,'' Grant Samuel said. ``The ConocoPhillips proposal substantially enhances the prospects of successful development but there is nevertheless a risk that the ultimate development of coal-seam gas is less successful than currently expected.''

Origin, Australia's biggest producer of natural gas extracted from coal seams, today fell 41 cents, or 2.4 percent, to A$16.60 in Sydney trading on the exchange. The drop compared with a decline of 1.1 percent in the exchange's benchmark energy index.

Grant Samuel valued Origin's coal-seam gas business at as much as A$17.4 billion, its conventional oil and gas unit at as much as A$2.8 billion and its energy retailing and power generation business at as much as A$9.2 billion. It valued its 51.3 percent stake in New Zealand's Contact Energy Ltd. at as much as A$2.4 billion. Head office costs, other assets and liabilities and net borrowings reduced the total estimated value to as much as A$27.4 billion.

Merrill Lynch & Co. in a Sept. 10 report estimated Origin's value at A$19 a share, assuming the venture with ConocoPhillips builds one liquefied natural gas production unit, of the four being proposed. That rises to A$22.10 a share should the venture have enough reserves for a second LNG unit, it said.

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