Bloomberg News

Origin May Raise $4.5 Billion by Selling LNG Stake, UBS Says

February 13, 2012

(Closes shares in fifth paragraph.)

Feb. 13 (Bloomberg) -- Origin Energy Ltd., the Australian company building a liquefied natural gas project in Queensland with ConocoPhillips, may raise more than $4.5 billion should it dispose of its entire stake in the venture, according to UBS AG.

By selling its 37.5 percent holding in the Australia Pacific LNG project, Origin would cut its spending requirements and bolster its share price, David Leitch, a Sydney-based analyst at UBS, wrote in a Feb. 10 report. China Petrochemical Corp. agreed last month to pay $1.1 billion to increase its stake in the LNG venture to 25 percent from 15 percent.

Origin, also Australia’s biggest electricity retailer, is building the first phase of a $20 billion LNG project, one of eight under development in the country. A stake sale would help end confusion among investors about whether Origin is an oil and gas company or a utility and would be easier than spinning it out into a separate business, according to the report.

“Ultimately the split personality of Origin may be difficult to sustain,” Leitch wrote in the report. “Investors get neither the leveraged ‘excitement’ of an oil and gas play, nor the safe, if sometimes dull, returns of utilities.”

Origin has fallen 16 percent in Sydney trading in the past year, while the S&P/ASX 200 Index has dropped 13 percent. Origin rose 0.4 percent to A$13.58 at the close today.

A sale of Origin’s holding in the project, one of three advancing on Queensland’s Curtis Island, would “transform Origin’s balance sheet, as well as avoiding the commitment for future APLNG capex,” according to the UBS report.

Origin doesn’t comment on speculation, the company said in an e-mailed statement in response to the UBS report. Origin is developing Australia’s largest proven and probable coal-seam gas reserves as part of the LNG venture, “which is expected to deliver substantial value to Origin shareholders over time,” according to the statement.

BG Group Plc and Santos Ltd. are also developing Queensland LNG ventures. Arrow Energy Ltd., owned by Royal Dutch Shell Plc and PetroChina Co., plans a fourth LNG development in the area.

--Editors: Ryan Woo, Baldave Singh.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.


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