Bid Fails to Capture Australian Gas Firm

The British gas producer BG Group admitted defeat Tuesday in its $11 billion hostile bid for the Australian coal-bed methane producer Origin Energy, just a day after Origin formed an $8 billion joint venture with the U.S. oil company ConocoPhillips.

Analysts said that BG might shift its focus to another target or become a target itself.

BG said it would not increase or extend its offer of 15.50 Australian dollars, or $12.66, a share, which closes on Sept. 26. It said that it had expected the offer to lapse after Origin announced the deal with ConocoPhillips.

“The price implied by this newly announced joint venture is higher than BG Group is able to justify,” BG’s chief executive, Frank Chapman, said. “We wish Origin and ConocoPhillips every success with their joint venture.”

Origin said Monday that it had agreed to spin off its huge coal- seam gas assets in Queensland into a joint venture in which ConocoPhillips would inject up to $8 billion.

BG had hoped to use the reserves to expand a liquefied natural gas export terminal it planned to build with Queensland Gas.

Some analysts had predicted BG would abandon its bid after the Origin-Conoco tie-up, prompting BG’s shares to rise 5.8 percent on Monday. But the shares were trading 1.7 percent lower Tuesday afternoon in London.

Origin shares closed down 1.42 percent at 17.40 dollars before the announcement.

An Origin Energy spokesman said, “We look forward to completing what we believe is an outstanding deal with ConocoPhillips and increasing value for our shareholders.”

BG could now shift its sights to another Australian gas producer, analysts said.

“I think BG will continue to look for opportunities in Australia and there is a chance that BG could look to secure control over Queensland Gas,” said Mark Greenwood, an analyst at JPMorgan in Sydney.

In February, BG said it had agreed to acquire a 20 percent interest in Queensland’s coal-seam gas assets and a 9.9 percent stake in the company, and to build a liquefied natural gas production facility to export the gas from its fields.

Some analysts said the energy company Santos, which has also proposed a liquefied natural gas project using coal-seam gas in Queensland, could also become a target for BG once the government lifts its 15 percent shareholding restriction on Santos in November. Santos, however, already has a partnership with Petronas of Malaysia to build a liquefied natural gas facility.

Coal-seam gas, or coal-bed methane, is extracted from coal fields by drilling into the coal seams. It is a more complex procedure than producing from traditional gas reservoirs, but as oil and gas companies face difficulties in making new finds, Australian coal- seam gas has become a hot area for investment.

Originally published by Reuters.

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