Origin Energy has entered into an agreement to sell its conventional upstream oil and gas business Lattice Energy to Beach Energy for $1.585 billion.
As part of the sale, Origin has secured access to a significant portion of Lattice Energy’s future east coast gas production under long-term gas supply agreements to support its domestic gas business.
“In signing these agreements, we have delivered on our commitment to divest Lattice Energy consistent with our plan to simplify the Origin business, reduce debt and improve returns to shareholders,” Origin CEO Frank Calabria said.
“Importantly, Origin retains access to future Lattice Energy east coast gas production and LPG, to help us continue to meet the energy needs of our domestic customers.
“The sale to Beach represents the best overall value to Origin shareholders, through the combination of the upfront sale proceeds and ongoing supply of gas and LPG, which allows Origin to retain the benefits of our integrated business model.”
Under the terms of the sale, the transaction will have an effective date of July 1, 2017.
Completion is subject to satisfaction of customary conditions, including approvals from the New Zealand Minister of Energy and Resources and the New Zealand Overseas Investment Office.
Proceeds from the sale will be used to pay down debt, putting Origin on track to reduce adjusted net debt to below $7 billion by June 30, 2018.
Net proceeds will also reflect the acquisition of Benaris’ interests in the Otway basin, transaction costs and the closing out of two oil forward sale agreements that Origin signed in FY2013, estimated to be $270 million depending on oil price at the time of completion.