Origin Energy (ASX:ORG) share price on watch following $2b deal

A $2 billion cash injection is coming Origin's way.

| More on:
A man sits bolt upright watching something intently on his television.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Origin Energy Ltd (ASX: ORG) share price could be a mover on Monday after the company agreed to sell a 10% interest in Australia Pacific LNG.

Origin sells LNG interest for $2.12 billion

Origin has executed an agreement with a leading institutional investor in the global energy sector, EIG, to sell a 10% shareholding in Australia Pacific LNG for $2.12 billion.

Upon completion of the transaction, Origin will maintain a 27.5% holding in Australia Pacific LNG. The other major stakeholders are ConocoPhillips (37.5%), Sinopec (25%), and EIG (10%).

Origin said that it will retain its existing seats on the Australia Pacific LNG board. In addition, EIG will gain one board seat with voting rights to reflect its 10% shareholding.

From an operational perspective, Origin said it will continue its role as an upstream operator of the LNG asset. It will retain responsibility for activities such as exploration, development and production.

Origin expects the transaction to be complete by 31 December 2021. The net proceeds will amount to approximately $2 billion after adjustments and transaction costs.

The cash flow guidance for Australia Pacific LNG for FY22 is not expected to change. The cash flow guidance is greater than $1 billion, with the divestment offset by an improvement in commodity prices.

The completion of the sale is subject to pre-emption rights in favour of the other two major shareholders. Those shareholders are ConocoPhillips and Sinopec.

Management commentary

Origin CEO Frank Calabria commented on the deal:

Divesting a 10 per cent interest allows Origin to crystalise some of the significant value we have created in Australia Pacific LNG, while retaining upside to further value creation through a continuing substantial shareholding.

A diverse asset portfolio, combined with strategic investments over the past 18 months, have put Origin in a strong position to lead the energy transition. The material cash injection from this divestment provides further flexibility to deliver returns to shareholders and pay down debt, while allowing Origin to accelerate investment in growth opportunities.

Origin Energy share price snapshot

The Origin Energy share price is up 7.25% year to date after a sluggish performance in the first half.

Origin and the broader ASX 200 energy sector has surged in recent weeks. That's as oil prices rise to 7-year highs of around US$85 a barrel.

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Energy Shares

smiling worker stands before power generator technology
Earnings Results

Origin Energy share price charging higher on growing profits

Origin Energy shares are racing ahead of the benchmark on Thursday.

Read more »

Two mature-age people, a man and a woman, jump in unison with their arms and legs outstretched on a sunny beach.
Energy Shares

Dividend investors: 2 top ASX energy shares for February

Energy shares an be a great source of passive income...

Read more »

Worker inspecting oil and gas pipeline.
Energy Shares

Buying Santos shares? You'll want to read this

More than 40% of Santos’ oil and gas reserves are held in international assets.

Read more »

Female engineer at wind farm.
Earnings Results

Up 36% in a year, why is the AGL share price leaping higher again today?

ASX 200 investors are bidding up the AGL share price on Wednesday. But why?

Read more »

Workers inspecting a gas pipeline.
Energy Shares

With the Woodside share price down 21% in a year, should you buy more?

Is the ASX 200 oil and gas stock now trading for a bargain?

Read more »

A miner stands in front oh an excavator at a mine site
Energy Shares

Nuclear energy is on-trend: Is this ASX uranium share my best option?

This business has a compelling future, in my view.

Read more »

Oil worker using a smartphone in front of an oil rig.
Energy Shares

Buying ASX 200 energy shares? Here's Citi's 2025 oil price forecast

ASX 200 energy shares struggled amid a slumping oil price in 2024.

Read more »

Two fists connect in a surge of power, indicating strong share price growth or new partnerships for ASC mining and resource companies
Energy Shares

These 2 ASX 200 utilities shares are reporting next week

Two of the nation's biggest utilities companies will release important shareholder information next week. 

Read more »