Thanks Cenkos20 Sep 2022 09:14
Origin Divests Beetaloo Interest Falcon’s Beetaloo JV partner, Origin Energy has announced its intention to exit all of its upstream exploration permits as part of a strategic decision to focus on cleaner energy and customer solutions. As part of this strategy, Origin has agreed to divest 100% of its interest in the Beetaloo Basin to a JV of Tamboran Resources and Bryan Sheffield for an upfront consideration of A$60m and a 5.5% royalty on future production from Origin’s 77.5% working interest. At US$60m the upfront consideration for Origin’s 77.5% Beetaloo interest is c14x lower than the implied valuation as per Falcon’s US$10m private placement in March, and therefore appears to be a cut-rate sale. Under the terms of the JOA with Origin, Falcon has a right of first refusal over Origin’s 77.5% working interest, with the Falcon Board currently reserving its legal position in respect of those rights.
Work Programme Unaffected – Its worth highlighting that the transaction will not impact the timing of the current Stage 3 operations. As a reminder, the Stage 3 work programme will include the drilling, fracture stimulation and extended production testing (90-180 days) of two 1,000m+ horizontal wells targeting the Amungee Member B shale. In addition to drilling one well from the existing Amungee NW-1H well pad, Falcon will also drill a 10km step-out well, providing the company with a bigger platform from which to launch a multi-pad, multi-well programme in 2023/24
A Potential Pre-Emption Opportunity – Falcon has announced that it is reserving its right to exercise its pre-emption rights as part of the JOA with Origin Energy, following the announcement by Origin that it is to fully divest of its entity that holds a 77.5% working interest in the Beetaloo as part of a wider strategic decision to exit all of its upstream exploration permits. At A$60m, the upfront consideration is significantly below recent transaction values and below Origin’s own book value. If exercised, and subject to funding, this would provide Falcon with full control over 4.6m gross acres and 6.6Tcf of gas. In doing so, Falcon would also be able to dictate the pace and scope of Beetaloo work programme and be able to bring in a partner of its choosing on the company’s terms. We estimate Falcon would need A$60m to fund the upfront consideration plus an additional A$80m to fund the upcoming work programme. At A$140m, this would be equivalent to 84% of the Company’s market cap but would provide it with c4.4x the asset exposure.
A Fire Sale – At A$60m, the upfront consideration is c.14x less than the equivalent price paid by Sheffield Holdings as part of the US$10m private placement announced by Falcon in March 2022. Even including the 5.5% overriding royalty, which we value at A$82m (based on the US$6m paid by Falcon to reduce the TOG Group ORRI by 2%), the total transaction value of A$142m is significantly less than the implied cA$822m valuation for Origin as per Sheffield Hold
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