Beach signs billion-dollar deal with Origin

Deal will boost already healthy revenues.

a woman

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Beach Energy Limited (ASX: BPT), through its 100% owned subsidiary Delhi Petroleum has signed a gas sales agreement with Origin Energy Limited (ASX: ORG) worth $1 billion.

Although the sale price of this deal has been kept confidential, Australians on the East coast currently purchase natural gas for between $3 and $4 per gigajoule. However, analysts have predicted that Australian gas prices could be pushed up by 10 giant gas-export terminals on the East coast of Australia, which will be operational by 2017. Designed to meet Asia's increasing demand for cleaner energy, the gas-export terminals will require huge amounts of natural gas that would usually be going to domestic markets.

Currently, Origin Energy is Australia's biggest energy retailer with a market capital of just under $14 billion. The agreement announced yesterday will enable Origin to purchase up to 147 petajoules from South Australia's Cooper Basin Joint Venture (JV), the Patchawarra East JV and the South West Queensland Unit JV.

Beach's Managing Director, Reg Nelson, said it is a "significant contract for Beach" that has the "potential to deliver significant gas revenue over the life of the contract at attractive prices". Beach has been looking for contracts that would unlock and capitalise the strategic position of the Cooper Basin gas supply.  Commencement date for the supply is between July 2014 and June 2015.

Upon receiving the announcement yesterday, the market positively responded to Beach's share price, sending it up 3.87% to $1.475. With a market capital of $1.76 billion the contract will represent a healthy addition to the company's revenue base which broke records last financial year with $619 million in sales revenue.

Foolish takeaway

Origin responded with a small gain of 0.55% yesterday but remains a good prospect for the energy heavy weight. The company provides healthy exposure to the energy sector with a diversified business model expanding throughout South East Asia, Chile, Kenya and the Pacific.

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