Origin's shares surge on plans to sell off its oil and gas assets

LNG ship. Image: Australia Pacific LNG

Origin Energy will put its oil and gas assets into an IPO in 2017 to reduce debt and concentrate on its energy markets business.

A short time ago, its shares were up more than 4% to $6.69.

The new company will be a mid-cap exploration and production company listed on the ASX. Its assets will include Origin’s interests in the Otway Gas Project, BassGas Project, Kupe Gas Project, and the Perth, Cooper, Bonaparte and Canterbury basins.

A value hasn’t been put on the assets but they could go as high as $3 billion.

Origin will keep its interests in Australia Pacific LNG, Ironbark and the Browse and Beetaloo basins.

“The divestment of Origin’s conventional upstream business will be a major step towards restoring the company’s financial flexibility and is expected to improve Origin’s return on capital,” says Frank Calabria, who became CEO in October.

Origin chairman Gordon Cairns says: “The divestment of Origin’s conventional upstream business will allow the company to focus on its Energy Markets business and the simplified Integrated Gas business. The decision to divest is consistent with Origin’s strategy to focus the business, reduce debt and improve returns for shareholders.”

The company has been shedding staff, selling assets and reducing debt in response to falling oil prices. In 2016, Origin reduced net debt by $4 billion to $9.1 billion.

Origin supplies power to more than 4 million homes and businesses in Australia.

In 2016, the company posted a loss of $589 million. Revenue was down 14% to $12.17 billion

The company has appointed Macquarie Capital and UBS AG to act as joint financial advisers and joint lead managers for the IPO.

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