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Origin set to review future of $8bn in upstream assets

Origin Energy is believed to be embarking on a strategic review of upstream assets worth over $8 billion as it contemplates a future solely as an electricity retailer and generator.

The company has strongly denied that a review is underway.

However, it is understood that banks were invited to pitch to undertake the strategic review to be completed by Christmas of all of the company’s oil and gas assets, with the possible opportunity of becoming a joint defence adviser to the company with Macquarie Capital.

Macquarie is close to Origin (ORG), advising the company on the sale of its Lattice Energy offshoot to Beach Energy last year for $1.585 billion, but it is understood that an additional bank or boutique is being sought.

Sources say that up for review is Origin’s interest in APLNG, which is said to be worth at least $8 billion, its Beetaloo Basin exploration project in the Northern Territory and its Ironbark coal seam gas project in the Surat Basin in Queensland.

The Ironbark project is already known to be for sale through the Royal Bank of Canada.

Sources in the market say that Origin sent out a request for proposals to appoint an adviser for the strategic review in the past two months.

APLNG makes up the vast majority of the value of Origin’s upstream assets, with analysts pegging its equity value at $8 billion.

Beetaloo is said to have strong prospects, but it remains in the stage of appraisal and is expected to cost more than $100m.

The value of Ironbark is said to be about $300m, with the project yet to be prove it can produce gas at a profitable level.

It was purchased by Origin from Paul Fudge’s Panage Oil and Gas in 2009 for $660m.

UBS, Bank of America Merrill Lynch and Luminis Partners have previously worked with Origin.

Resource Minister gives companies assurance that there is good reason to be optimistic about beginning exploration of the Beetaloo Basin this coming dry season. To look at this with a glass half empty view - does being 'optimistic' mean that maybe there is a chance that the new regs might delay our 2019 drilling season. Maybe that uncertainty plays into our stock price? I personally think Gunner is pushing hard to get these regs issued - the question is can he herd his cats.


Give energy to our economic progress
NT News
September 10, 2018 6:28pm
Subscriber only
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WHAT a difference a good economic decision by government can make.
Last week, Darwin was host to some of the biggest companies in Australia’s oil and gas industry at the annual SEAAOC conference.
The mood was upbeat and one of confidence in their sector and in particular the Northern Territory as a prospective place to invest and do business.
The reason for that was the NT Government’s decision to lift the moratorium on hydraulic fracturing and accept the 135 recommendations of the independent scientific inquiry into hydraulic fracturing.
Companies such as Origin, Santos and Pangaea all told of massive Territory investment plans. This week 500 members of the Australian Pipelines and Gas Association are in Darwin and there is the same positive feeling.
They also want to get on with it. They want to invest and grow our energy sector. The Territory Government must do likewise.
The 135 recommendations must not be allowed to drift in their implementation and get caught up in red tape.
The onshore gas industry must be back on the ground exploring in the Beetaloo Basin next dry season. As we edge closer to the final quarter of the year the implementation team tasked to implement the recommendations needs to step up the pace.
Resources Minister Ken Vowles told the pipeline conference there was good reason to be optimistic for all businesses and industries who stand to benefit from the onshore gas industry. He has our support on that.

https://www.ntnews.com.au/news/opinion/give-energy-to-our-economic-progress/news-story/e73278d1cce89f39de92ef66d76e0ad4?nk=e39d21e301b043f2f804082acda4bc47-1536698266

Funny how Mr Keiser knows better than these bidding international and regional oil companies about the economics of fracking. The industry just keeps paying more and more for acreage - guess they just don't understand the economics or production declines as well as MK :^)

This is stacked OIL play acreage so don't equate $95,000/acre to the Beetaloo's gas/condensate plays. Notice RBC's comment about contiguous acreage - Beetaloo is one huge contiguous piece.

Permian Oil Auction Gets Record $1 Billion as Bidding Soars
By Kevin Crowley and Ryan Collins
September 6, 2018, 1:31 PM CDT Updated on September 7, 2018, 1:02 PM CDT
Tracts in New Mexico side of Permian garner $95,000 per acre
Two-day event raises more than all of 2017, double prior high

WTI Crude
67.75USD/bbl.

The price to access unexplored shale assets on the New Mexico side of the Permian Basin soared to $95,001 an acre in a federal government auction, a record high for North America’s biggest oil field.

The state’s previous record was $40,001 an acre set in December, according to a statement by the U.S. Department of the Interior Thursday. Overall, the two-day auction saw bids on 142 parcels of land and raised $972 million, more than the whole of 2017 and double the 2008 record.

Land leases sold for the highest price ever in the Permian
EOG Resources Inc., Devon Energy Corp., Exxon Mobil Corp. and Chevron Corp. would be “logical buyers” of the tracts because they own nearby drilling rights, Scott Hanold, an Austin-based analyst at RBC Capital Markets LLC, wrote in a note Friday. Contiguous leases are essential for drilling long, horizontal wells.

The auction provides a rare peek into how oil producers value drilling rights in the Permian, most of which is in Texas, where land and minerals are privately owned. Record prices show that despite a recent slowdown in activity due to pipeline shortages, explorers view the Permian’s stacked layers of oil-soaked rock as a unique long-term asset.

The New Mexico auction’s high price is “tremendous positive read-through” for Permian oil stocks, which have an average valuation of about $32,000 an acre, according to analysts at Seaport Global Securities LLC.

The leases are for a 10-year term and a royalty of 12.5 percent, according to the Bureau of Land Management. That gives operators better terms than Texas properties on the other side of the border, where leases typically last up to five years with about 25 percent royalties.

The $95,001 price tag for the drilling rights is about 16 percent higher than what Concho paid earlier this year for RSP Permian Inc. On the day that deal was announced, the amount generated heartburn for Concho investors, who sent the stock tumbling 10 percent.

The auction was competitive, with multiple rival bidders pushing up the price of the New Mexico acreage, Dukes said.

“This could be a company that has another thousand or two acres around it that they really can’t drill wi

I bet Origin is chomping at the bit. They have sold a lot of their P&D property to reduce debt load and plans to proceed full speed forward with the Beetaloo. That is one of the reasons I am pretty optimistic about the 2019 drilling program - I think that black box of confidential information and the willingness to forgo the last vertical test well in stage 1 speaks volumes as to what they are planning and anticipating. IMO they are saying full speed ahead.

Once again, not money in the bank, but I feel very good about this years program.

Mirabeau: Nice article. We all knew this was going on behind the scenes but it is always nice to see it in writing. Good things are coming.

For my records can you post the source of the article please.

Thanks Nano. How can I become confused when I don't know what I am talking about to begin with!. I stand corrected.

Are DSTs not performed on shale zones? I assume logs, core samples and other unknowns to me must tell them the shale characteristics they need to know? Damn - must have missed that PE class.

Anyway - thanks for helping keep us technologically straight and thanks for keeping our expectations in check. From an optimism point most on this board would make good geologist - not good engineers!

Lately we are seeing more and more references to the liquids rich shale in the Beetaloo. This is likely referring to the Kyalla shale and the wet sections of the Middle Velkerri. IMO If Falcon/Origin find what they are anticipating in the Kyalla shale the Beetaloo concession takes a huge step forward in being declared a commercial discovery.

Nano is correct in not being overly exuberant regarding the next two wells scheduled in 2019. Though the Kyalla shale's DST in the Beetaloo W-1 looked promising to Close and company that zone has never been horizontally fracked, therefore the Kyalla's a bit of an unknown. The recently announced wet section of the Middle Velkerri is a step out and has never been horizontally fracked so this also is uncharted territory

While Nano is certainly more qualified to express an opinion ithan I, I don't know that Falcon or Origin would classify the success of the 2019 drilling program as 'extremely low'. Dr. Close seemed more optimistic and upbeat on the Kyalla's potential than someone who might classify its potential as extremely low - Maybe just a matter of semantics.

The Kyalla and wet Velkerri certainly are not money in the bank but I don't believe Origin/Falcon would spend valuable resources on what one would might call a very low probability of success. We know here is confidential information being held back - something in that box looks pretty promising to Origin/Falcon. The 2019 program will give Origin a wealth of knowledge and more insight as to what treasures the Beetaloo holds. GLA

Welcome Phoenix. I think most of this board has the same sentiments as you regarding a reverse split. I think I can safely say it is not going to happen but still it gets tiresome hearing that same pitch over and over again- I'm beginning to feel like POQ :^)

This investment is coming together nicely - it's maddening that our investment, due to the moratorium, was set back a couple of years but so it goes sometimes in the investment world. I feel good about the vast potential in store if Falcon can see its way through the next 4 wells or possibly more it they participate in further exploration.

Look forward to seeing you and others at the AGM.

GLA

Your concern, my concern and I think POQ's concern. Origin needs to get another well or two completed before someone comes in and tries to acquire Falcon on the cheap. Hopefully POQ can keep his big shareholders sitting tight until Origin proves up more acreage/zones. The stock is fairly tightly held - thats a two edged sword but if POQ can hold the troops together then I think we will be ok.

It just amazing to me that Falcon share price is stuck at the current levels - doesn't make sense but it is what it is. Maybe once drilling plans/activity begin surfacing POQ can start with some institutional promotion that can put a little meat on our bones!

Camelot: Concerning the pipeline news your guess is as good as mine. Maybe Malcy is ignoring it because of the early stages of talk? I don't fully understand the function of Proactive - I get the feel that they may be paid to put out news - nothing wrong with that but until someone puts the pipeline on their plate maybe nothing happens - what do you think?

The new proposed pipeline is not a 'newsworthy' item for Falcon IMO. You and I can guess as to its importance but that is because we are wishful investors. It is really of no importance to Falcon as there is already an existing pipeline for the exploration/appraisal phase of the Beetaloo project. The proposed line might be brought up in a presentation because of the 'huge resources potential' of the Beetaloo Basin but that is just color and not news at this early stage of talks.. That's just my WAG

I am still looking for the Origin Energy news release detailing the 2019 drilling program. I suspect once that is put out we will likely see Phillip back out on the road doing his dog and pony show.

Great News on the potential new pipeline. I guess Jemena's partner State Grid sees the huge potential of the NT's Beetaloo area. I just wish the stock market was forward thinking enough to price this potential into our Falcon Stock. Someday!

jfhealy: I am currently in the process of scheduling a trip to Ireland, Scotland, London that will coincide with Falcon's AGM. I will be the tall good looking guy according to my wife :) Funny how I can walk right by hostess' desk etc. incognito based on my spouse's description! - Did I mention she is also my best friend and even though her eyesights not up to par!

Anyway, I can't get into the Conrad Hilton - it appears to be fully booked on the 17th so I will just be coming over for the meeting. Look for the old grey haired balding guy with the nice looking blonde - she's my starter wife - its pretty obvious I have taken better care of her than she has of me. That's a more accurate description and I'm betting we will find each other - looking forward to putting a face with a name.

Thanks guys for posting.

The referenced vertical well has since been cancelled with funds moved into the 'stage2' program as other news outlets are reporting. It's always nice to see the 6.6 Tcf contingent resource in print - and to think this is only on 1 zone of a possible 4 shale plays - the 'Middle Velkerri 'B' shale' and then on only 1/12th of the Beetaloo's acreage - the Middle Velkerri is thought to cover 95% of the concession's 4.6 million acres. Never yet tested, the Middle Velkerri 'C' shale looks to be a twin of the 'B' shale in rock characteristics and aerial extent.

Someday the market is going to wake up and realize the treasure that Falcon and Origin have discovered. Falcon has a bright future - only 8 more months and counting down before the drilling starts back up 😉 Patience my friends, patience!

Can anyone unlock this for pay article? It regards Origin and Santos exploration of the NT shale play.

Duo eye NT shale pursuit

Maybe Falcon is not in such poor financial shape as some on this board would suggest! Of course some will disagree and see Falcon in dire straits with the only life raft being a reverse split.- IMO they are right on budget and plan. Could it be that the sky isn't falling afterall. Store your umbrella for the next year or two.

Falcon Oil & Gas in strong financial position to advance its projects
07:55 23 Aug 2018
Falcon Oil & Gas narrowed its first-half loss as it continued to focus on tight cost control
falcon oil
Falcon says the Beetaloo Basin in Australia has shale oil and gas commercial potential
Falcon Oil & Gas Ltd (LON:FOG) revealed on Thursday that is in a strong financial position to advance its projects.

The oil and gas company ended the first six months of the year debt-free with cash of US$7.7mln.

Its loss narrowed to US$1.2mln from US$3.2mln the same period a year ago as it continued to focus on tight cost control, cutting its expenses to US$1.2mln from US$1.3mln. Total assets stood at US$49.9mln and revenues came to US$3,000.

In a separate management discussion and analysis statement, the company said the Beetaloo Basin in Australia’s Northern Territory remains “relatively under-explored” and has shale oil and shale gas commercial potential.

Operator Origin Energy has identified four additional potential plays in the Beetaloo sub-basin in addition to the existing and explored Velkerri shale dry gas play.

In August Falcon and Origin agreed to accelerate exploration activity for the Beetaloo shale project.

READ: Falcon Oil & Gas and Origin Energy agree to ramp-up Beetaloo activity
Together they now deem the Stage 1 campaign to be complete, essentially meaning that in light of the 2014 successes – drilling three vertical wells and one horizontal, fracture stimulated well – that it is now appropriate to move ahead.

With the launch of the Stage 2 campaign the partners are increasing the ‘cost cap’ (i.e. the portion of costs covered by Falcon’s farm-out deal with Origin) by A$15mln, with the programme now comprising two horizontal, fracture stimulated wells and will not include the fracking of a vertical well.

In South Africa, Falcon said it expects the exploration right over the acreage in the Karoo Basin will be awarded in 2019. Karoo Basin about 173 million acres and contains thick, organic-rich shales such as the Permian Whitehill formation.

Falcon is also continuing to review its operations in Hungary, which includes the Makó Trough, to deliver shareholder value.

IT: Can I double down on your sigh!. I gave up trying to respond to our friend's outlandish comments. Someone might want to point out to him that per the contract the clock quit running during the moratorium - so back up the end date another year.

If Origin and Falcon didn't feel the necessity to continue stage1 of the contract and elected to move directly to stage2 IMO that is a good thing. One can consider that $15 million as an added insurance policy in the capped stage2 and stage3 programs. Origin has already proven up the Velkerri B so logically the next two wells are HFT of the Kyalla and the Velkerri Wet Gas. Origin/Falcon want to prove up as much additional contingent reserves as possible - stage2 gives Origin the best shot at directing the stage3 funds for the extended laterals in 2020 - The goal of 2020 is to claim commerciality of the Beetaloo - that's when the Falcon shareholder dreams will be realized.

I am wondering if $15 million is unused in stage2 and then carried to stage3, what becomes of any unused funds at the end of the stage3?- might Falcon be allowed to apply left over funds towards a 30% participation in any additional exploration funding package? Obviously we have a lot more questions than answers at this point.

Camelot: I wouldn't be surprised if Staff and board are issued a bundle of new stock options with a .22 cent strike price - IMO the stock was driven down just prior to the Origin/Falcon news release for some reason. I will be the first to admit I don't understand how pricing is set - I will be curious to see the pricing of new options. I am not opposed to stock options as an incentive but I will be disappointed if a large amount are issued this year as a reward for basically watching the moratorium clock run. We will soon know.

I am traveling with limited news access. I stand corrected on the next 3 wells. It looks like the last vertical well will not be drilled under stage 2. From what I now believe, the $15 million will be applied to drill another HFT? Please correct me if this is not the case. Thanks

Good recap newt. POQ gave us some good insight into the 2019 program when he said the Stage 3 2020 program be two longer horizontal wells in the best of the 3 shale zones. Therefore we can expect a test of the Kyalla and the wet gas Velkerri shales this year.

IMO, the next Kyalla HFT as you said will be in the area of the W-1. I am only guessing but The W-1 vertical gives Origin the data they need for that test. I am thinking the next vertical well will test the Wet Gas Velkerri areas in the north or the south to then be followed by a HFT of that zone.

I am on the run and just saw the news release. I take the $15 million shift from stage 1 to stage 2 to be the result of a well frac not being performed on one of the prior vertical uncapped stage 1 wells. That savings is being moved to stage two's 'capped' wells. IMO, that may or may not come into play depending on the actual cost incurred in drilling the remaining wells - the $15 million is there as insurance against overruns. I am glad to see POQ work that into a news release - that is what we need to see at this stage and the continued s/p decline..

As far as concerns about future raises - those raises are not going to happen unless we see continued success on the remaining 5 wells. If those wells are successful then Falcon's s/p will we much higher - pick a number! At a higher price there will be less dilution of the stock for say a $100 million raise. That will only be done if Falcon sees a multiple benefit of the raise - as an example, raise a $100 million to increase the market cap $1 billion.

Looking forward to Origin releasing the specifics on the upcoming 3 wells. All is good in these dog days of summer.