PERTH (miningweekly.com) – ASX-listed Origin Energy has struck a $2.12-billion agreement with global energy investor EIG to sell a 10% interest in the Australia Pacific liquefied natural gas (LNG) project.

“Divesting a 10% interest allows Origin to crystalise some of the significant value we have created in Australia Pacific LNG, while retaining upside to further value creation through a continuing substantial shareholding,” said Origin CEO Frank Calabria.

“Origin will continue our important role as upstream operator of the world class Australia Pacific LNG asset.”

Following completion of the sale, the Australia Pacific LNG joint venture shareholders will comprise ConocoPhillips, which holds a 37.5% interest, Origin, which will hold 27.5%, Sinopec, with 25%, and EIG with 10%.

Origin will retain its existing seats on the Australia Pacific LNG board, while EIG will have one board seat, with voting rights commensurate with its 10% shareholding. The divestment will not change Origin’s role as upstream operator, responsible for upstream exploration, development and production activities.

Based on an estimated completion timing of the end of December 2021, the net proceeds of the sale are expected to be approximately $2-billion after adjustments and transaction costs. Following the sale, Origin’s guidance for cash flow from Australia Pacific LNG for the 2022 financial year is unchanged at greater than $1-billion net of Origin oil hedging.

The dilution of 10% in the second half is estimated to be broadly offset by the improved commodity price outlook, the company said on Monday.

“A diverse asset portfolio, combined with strategic investments over the past 18 months, have put Origin in a strong position to lead the energy transition. The material cash injection from this divestment provides further flexibility to deliver returns to shareholders and pay down debt, while allowing Origin to accelerate investment in growth opportunities,” said Calabria.

“We are very proud of what we have helped build alongside our partners, and the performance of Australia Pacific LNG continues to go from strength to strength. The quality of its assets and resource base, and the hard work over recent years to materially reduce the cost base, have rightly made Australia Pacific LNG an attractive proposition for investors.

“We look forward to the contribution our new joint venture partner, EIG, will make to the venture in the years ahead,” Calabria said.

As part of the transaction, Origin has agreed that it will guarantee EIG’s obligations to satisfy any future cash calls made by Australia Pacific LNG. An entity controlled by EIG will indemnify Origin in respect of the guarantee.

Completion of the sale is subject to pre-emption rights in favour of ConocoPhillips and Sinopec and also ConocoPhillips being reasonably satisfied that EIG is capable of satisfying its obligations under the Australia Pacific LNG shareholders’ agreement with the benefit of Origin’s supporting guarantee.