Australia's Origin rebuffs BG bid

A banker with knowledge of BG’s thinking said last week that if Origin strikes a good joint venture deal then BG would come under pressure to increase its offer, but he cautioned there was a limit to how far BG would chase the deal.

BG has already increased its offer for Origin once and analysts said the company could justify paying A$17-$18/share (9.14 - 9.67pounds/share).

"There’s a high chance they will wait until they get more details on the CSG monetisation proposals Origin has received, but they could also make a pre-emptive strike and launch a higher offer," Mabee said.

Shares in Origin, which peaked at A$16.49 in June, eased 0.4 percent to A$16.08 on Tuesday, indicating investors expect a higher offer than BG’s A$13.6 billion bid.

BG’s shares traded up 1.5 percent at 1,115 pence at 0918 GMT (10:18 a.m. BST), outperforming a 0.3 percent fall in the DJ Stoxx European oil and gas sector index <.SXEP>.

STANDALONE LNG PLAN QUESTIONED

BG already has gas assets near Origin’s in Queensland and plans to build its own LNG plant, to freeze gas to liquid so it can be exported in pressurised ships.

It would use Origin’s gas interests -- Origin’s most valuable asset -- to support and possibly expand this plant which aims to build BG’s position in the lucrative Asian LNG market.

In a telephone interview with Reuters, Almanza said it was unclear whether Origin’s gas assets were big enough to support a stand-alone LNG plant.

Origin believes it has enough gas to justify an independent LNG project and Managing Director Grant King said a number of large international energy players were interested in building it.

Origin did not identify the candidates, but bankers previously suggested Royal Dutch Shell , BP , ConocoPhillips and Chevron could be interested.

BG said in a statement that other Australian CSG firms which formed joint ventures had seen their share prices "fall materially from post-announcement levels".

The company said its offer represented a 72 percent premium to Origin’s average share price in the 90 days before its first bid was announced although Origin Chairman Kevin McCann said brokers’ targets for the shares ranged from A$17.01 to A$20.00.

King said Australia’s second-largest energy retailer had a bright future as a standalone entity, potentially supported by rising Australian gas prices as supplies are exported as LNG.

Sydney-based Origin also said its CSG assets could be worth A$9.8 billion using recent CSG sector deals as benchmarks.

King said Origin would continue to target growth in underlying earnings per share averaging 10-15 percent a year.

BG plans an A$8 billion LNG project in northeastern Australia with Queensland Gas .

Coal seam gas or coalbed methane is natural gas trapped in coal fields. Historically, it was a lethal threat to miners but as energy prices soar to record highs on strong demand, it has become economic to produce and use the gas.