LIQUEFIED NATURAL GAS: British Gas, Bids A$12.9 Billion for Origin, Has Record Profit

LIQUEFIED NATURAL GAS: British Gas,  Bids A$12.9 Billion for Origin, Has Record Profit
BG Group Plc, the U.K.'s third- largest oil company, made an unsolicited $A12.9 billion ($12 billion) bid for Origin Energy Ltd. to add reserves for an Australian gas venture and reported record first-quarter profit.

Talks will take place with Origin, BG said today in a statement after posting a 78 percent jump in net income to 767 million pounds ($1.5 billion). The cash offer values shares of Australia's biggest coal-seam gas producer at A$14.70 each, 40 percent more than yesterday's close. BG has ``got a lot of cash to make major acquisitions,'' Peter Hitchens, an analyst with Seymour Pierce in London, said in a phone interview. The Reading, England-based company ``is remarketing its cargos in places like Europe and Asia and making a huge amount of money on the back of it.''

The U.K. gas producer will gain access to gas fields as it seeks more opportunities to supply liquefied natural gas to Asia after linking with Queensland Gas Co., or QGC, for an A$8 billion LNG export project in Australia. Prices for LNG paid by utilities in Japan, the world's biggest importer of the fuel, have reached almost double the U.S. benchmark, consultant Facts Inc. said. BG fell 5.9 percent to 1,231 pence in London. That was the stock's biggest drop in more than a month, paring its gain for the year to 7 percent.

`Strong Run'
`The shares have had such a strong run and people are now looking at the acquisition and thinking it's a bit steep,'' Hitchens said. ``But I'm not worried by the price.''

BG plans to supply LNG to Singapore from Australia, Chief Executive Officer Frank Chapman said on a conference call. He declined to comment further on the bid for Origin.

``At this level, assuming full debt funding, we see the deal as broadly neutral on a cash flow basis,'' Mark Iannotti, a London-based analyst at Merrill Lynch & Co., wrote in a report.

Goldman Sachs Group Inc. and Gresham Advisory Partners are advising BG on its bid. Origin will be advised by Macquarie Group Ltd., company secretary Bill Hundy said by phone. ``Acquiring Origin to secure its Asia Pacific footprint is logical for BG,'' Richard Griffith, an analyst at Evolution Securities Ltd. in London, wrote in an e-mailed report. ``However last year a proposed merger between Origin and AGL Energy Ltd. collapsed so a successful offer is not a foregone conclusion.''

AGL Energy, Australia's biggest electricity and gas retailer, is the largest shareholder in Queensland Gas, with a 27.5 percent stake. Origin rejected a merger bid from AGL in February last year that at the time valued Origin at A$7.5 billion.

Beat Estimates
Profit excluding disposals and other one-time items was 789 million pounds. That beat the 715-million pound median estimate of eight analysts surveyed by Bloomberg. Profit was buoyed by higher commodity prices as oil traded at $100 a barrel for the first time on Jan. 2. Japan boosted LNG imports after an earthquake in July shut the Kashiwazaki Kariwa nuclear power plant.

Chapman said BG plans to invest 3.1 billion pounds in projects this year, including 300 million pounds in QGC. The company generated 1.6 billion pounds in cash from operations in the first quarter.

Total output increased 4 percent to 60.7 million barrels of oil equivalent (667,000 barrels a day) during the quarter, BG said. The median estimate of six analysts surveyed by Bloomberg was for production of 662,500 barrels a day.

Cargoes Diverted
``Seasonal demand from Asia was strong, resulting in 90 percent of cargoes being diverted,'' the company said. BG sold 58 LNG cargoes in the quarter, of which only six were shipped to the Elba Island terminal in the U.S., without any deliveries to the Lake Charles point. Chapman expects operating profit from marketing and shipping to rise to about 1.1 billion pounds this year. The LNG ``market is tight, there is a very strong demand at the moment,'' he said.

Japan increased imports of the fuel for immediate delivery in March to the highest level since October. It purchased 640,894 metric tons from Algeria, Egypt, Nigeria, Norway and Trinidad & Tobago, according to Ministry of Finance data.

BG, the biggest LNG supplier from the Atlantic Basin to Asia, this month won a 20-year contract to provide the fuel to Singapore's first import terminal from 2012.

The company reiterated today that its Dragon LNG import terminal being built in Wales will be completed by December.

Source: Bloomberg|By Eduard Gismatullin and Angela Macdonald-Smith

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