As a part of the agreement, Beach Petroleum Ltd. sold its 40 percent stake in the Tipton West project in Queensland state to Arrow Energy Ltd. for A$400 million. Arrow and its joint venture partner Royal Dutch Shell (ASX: RDSB) already own 60 percent of Tipton West.
Arrow's Australian chief executive, Shaun Scott, said that the deal would rationalize the company’s liquefied natural gas strategy. The acquisition will also enhance Arrow’s established and possible reserves by 40 percent.
Scott said, “The reserves valuation implied by this transaction compares favorably with other recent transactions in the coal seam gas sector even before considering that it is a producing field, with infrastructure in place and exploration upside in the surrounding acreage."
Arrow will pay A$260 million in cash and A$70 million in shares to Beach upfront. The balance payment of A$70 million shall be paid subsequently, depending on the developments in reserves certification and gas production.
Arrow will shell out another A$15 million if it supplies gas to any LNG project by the end of 2016. An additional A$15 million will have to be paid by Arrow if any of the LNG projects generates a minimum of one million tons of LNG per annum by the end of 2017.
Beach Petroleum has been able to cash in on Australia's coal seam gas rush. Beach’s managing director, Reg Nelson, said, “The cash generated from what was a material, but non-core asset, leaves Beach in a strong net cash position.”
Beach is expected to utilize the cash in developing its existing assets. The land owned by Beach in the Cooper and Eromanga Basins of South Australia and Queensland is likely to be upgraded. The company may also mull over buying companies that intend to source capital.
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