UPDATE: Beach Sells CSG Assets To Arrow For Up To A$400 Million
April 02 2009 - 7:44PM
Dow Jones News
Beach Petroleum Ltd. (BPT.AU) Friday cashed in on Australia's
coal seam gas rush, selling its 40% stake in the Tipton West
project in Queensland state to Arrow Energy Ltd. (AOE.AU) for up to
A$400 million.
Arrow and its joint venture partner Royal Dutch Shell (RDSB.LN)
already own 60% of Tipton West, so the buyer's identity came as
little surprise to the market. Arrow's move follows its failed tilt
for CSG producer Pure Energy Resources Ltd. (PES.AU), which was
eventually bought for A$1.03 billion by BG Group PLC (BG.LN).
The Tipton West acquisition gives Arrow and Shell more gas
reserves to help support several planned liquefied natural gas
projects at Gladstone in Queensland.
Beach, meanwhile, said the deal gives it cash to spend "in other
business areas", including developing its existing assets, such as
acreage in the Cooper and Eromanga Basins of South Australia and
Queensland. Beach said it could also consider acquiring companies
struggling to source capital.
Under the agreement announced Friday, Arrow will pay Beach A$260
million cash and A$70 million in Arrow shares upfront.
An additional A$40 million will be paid to Beach pending the
booking of additional reserves, another A$15 million if Arrow
supplies gas to any LNG project by the end of 2016, and another
A$15 million if any of those projects produces at least one million
tons of LNG per annum by the end of 2017. Arrow has previously
agreed to provide coal seam gas to a smaller-scale LNG project
targeting first gas by 2012.
On completion of the Tipton West deal, 12% of the asset will be
made available under preemptive rights to Shell, which bought 30%
of Arrow's local CSG assets last year.
Beach's chief executive, Reg Nelson, revealed to Dow Jones
Newswires in September that the company had received informal
expressions of interest in its CSG assets, which he said Beach
would sell at the right price.
JPMorgan recently valued Beach's stake in Tipton West at about
A$450 million and UBS valued it at A$212 million.
By 2327 GMT, Beach shares were up 2.8% at 93.5 cents compared to
a 1.8% rise in the S&P/ASX 200 index. The deal was largely
already priced into Beach's stock value. Investors may be a little
disappointed Beach didn't get more, considering the multiples that
have been dished out in previous CSG deals.
Pure Energy had about twice as many CSG reserves as Beach before
BG bought it for A$1.03 billion.
Even higher multiples have been paid for CSG in larger deals
between the likes of Origin Energy Ltd. (ORG.AU) and
ConocoPhillips; and Santos Ltd. (STO.AU) and Malaysia's Petroliam
Nasional Berhard (PTTY).
Beach's CSG assets, however, were never going to attract similar
multiples, given the relatively small size of its reserves base and
the shared ownership structure of Tipton West.
Still, the Adelaide-based company has made an impressive profit,
having bought its Tipton West stake in 2005 for A$35 million.
By Ross Kelly, Dow Jones Newswires; 61-2-8235-2957;
ross.kelly@dowjones.com
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