AGL Agrees $800 Million Sale of PNG Oil, Gas Assets

By Angela Macdonald-Smith

Oct. 30 (Bloomberg) -- AGL Energy Ltd., Australia's biggest power and gas retailer, said it agreed to sell its oil and gas interests in Papua New Guinea, including a 3.6 percent stake in a planned gas export project, for $800 million.

The sale, to an ``international oil and gas company,'' is subject to pre-emptive rights held by partners in the venture, Sydney-based AGL Energy said today in a statement to the Australian stock exchange. AGL will earn proceeds of about A$1.1 billion ($735 million) after closing out oil hedges, it said.

The sale of AGL's stake in producing oil and gas fields and in an Exxon Mobil Corp.-led liquefied natural gas project in the Pacific nation is the latest in a series of divestments planned by the energy utility to raise funds for expansion in power generation, gas production and energy retailing in Australia. Earlier this week AGL provisionally agreed to sell its 22 percent stake in Queensland Gas Co. for A$1.18 billion.

``This is an excellent outcome for AGL, particularly in the light of global market conditions,'' Managing Director Michael Fraser said in the statement. ``The PNG sale is a milestone for us as it finalizes the non-core asset sale program we commenced late last year.''

Oil Search Ltd., Papua New Guinea's biggest oil producer, and Santos Ltd., Australia's third-biggest oil and gas company, are among partners holding pre-emptive rights over AGL's stake. The pre-emption process, which allows any of the partners to match the agreed sale price on the same terms and conditions, will take about 30-45 days to complete, AGL said.

Shares Rise

Oil Search jumped as much as 30 percent in Sydney trading to A$4.82, the biggest gain since 1989, and was at A$4.43 at 10:23 a.m. local time. Santos rose 11 percent to A$14.04 and AGL gained 2.7 percent to A$14.12.

The sale price is at the top end of a range of A$800 million to A$1.1 billion cited by JPMorgan Chase & Co. in a Sept. 3 report as being the range expected by the market.

Eni SpA, Italy's largest energy company, which Oct. 8 said it signed an accord with the Papua New Guinea government for oil and gas development, may be interested in the assets, Citigroup Inc. analyst Di Brookman said earlier this month.

No capital gains tax will be payable on the sale proceeds either in Papua New Guinea or Australia, AGL said.

Details of the sale and of the effect on expected earnings in the year ending June 30, 2009, will be released when the sale is completed, expected in mid-December, AGL said.

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