The Origin Energy Ltd (ASX: ORG) share price has barely flinched on news that ConocoPhillips (NYSE: COP) has exercised its pre-emptive rights to purchase Origin’s 10% stake in Australia Pacific LNG (APLNG) for $2.21 billion.
Shares in the ASX energy giant dipped 0.2% to $5 in morning trade as the S&P/ASX 200 Index (ASX: XJO) hovered at break even.
The Origin share price has since gone green but it is only slightly up. At the time of writing, it is trading at $5.02, up 0.20%.
A large cash injection from divestments usually generates more excitement for the ASX shares involved. But there’s a good reason why investors have barely batted an eyelid in Origin’s case.
Origin share price unmoved by $2bn deal
The ConocoPhillips move is in response to Origin’s proposed sale of its stake in the APLNG joint venture to EIG Partners. EIG was hoping to become the world’s first private equity group to buy into an operating integrated LNG project.
But Origin’s JV partner ConocoPhillips has pre-emptive rights and has chosen to effectively lock out EIG from the deal.
The other JV partner in APLNG is China Petroleum & Chemical Corporation (HKG: 0386), also known as Sinopec. It hasn’t indicated what it will do. Sinopec has until 17 December to exercise its respective pro-rata pre-emption rights, according to Origin.
Why the Origin share price is not reacting
Following the sale of Origin’s 10% stake, it will still own 27.5% of APLNG. It will also remain the operator of the gas project. ConocoPhillips currently owns 37.5% of the JV, with the balance in Sinopec’s hands.
The Origin share price is shrugging off the news because investors are not expecting a capital return.
Origin management plans to keep the sale proceeds to help it transition to a carbon-friendly energy company.
More M&A in ASX energy sector expected
This is unlike other ASX 200 companies that have returned all, or part, of the cash from asset sales. It really matters little to shareholders who buys Origin’s minority stake in APLNG.
The Queensland-based APLNG is one of the largest natural gas producers in eastern Australia. It has a long-term supply contract with Sinopec and Japan’s Kansai Electric.
The only obvious loser is EIG, which will need to find a new way of getting back into the ASX.