Beach Energy Buys Origin’s Gas, Oil Assets in $1.25 Billion Deal

Australia’s Beach Energy Ltd. agreed to buy Origin Energy Ltd.’s conventional oil and gas business, Lattice Energy, for A$1.59 billion ($1.25 billion) in a deal set to triple the Adelaide-based company’s reserves.

Beach will fund the acquisition through a A$301 million share sale and a new A$1.58 billion debt facility, the company said in a statement Thursday. The agreement will boost Beach’s proved and probable reserves by 200 percent to 232 million barrels of oil equivalent, while lifting its 2018 production guidance by 150 percent to between 25 to 27 million barrels.

The deal “establishes Beach as a major supplier of gas to domestic markets and provides a step-change in production, operating capabilities and geographic exposure,” Beach Chief Executive Officer Matt Kay said in a statement.

Its largest shareholder, Kerry Stokes’s Seven Group Holdings Ltd., will take up A$68 million of the entitlement offer with the balance fully underwritten, according to the statement.

Origin said it will receive access to a “significant portion” of future east coast gas supply as part of the agreement. The sale will put Origin on track to cut adjusted net debt to below A$7 billion by June 30, 2018, the Sydney-based company said in a separate statement.

Origin’s Chief Executive Officer Frank Calabria, who originally announced a plan in December to list Lattice, is seeking to reduce the company’s debt following cost blowouts and asset writedowns at the company’s A$25.9 billion Australia Pacific LNG export facility in Queensland state. Origin committed Wednesday to free up more gas for domestic users after Prime Minister Malcolm Turnbull threatened curbs on the state’s three export plants to alleviate shortages and price spikes.

Seven’s stake in Beach could rise to 25.73 percent from 22.73 percent previously, according to the statement.