ConocoPhillips's Australian subsidiary completed the purchase of an additional 10% shareholding interest in Australia Pacific LNG (APLNG) from Origin Energy for $1.645 billion. Cash paid for the additional interest is approximately $1.4 billion.
The deal resulted from the exercise of ConocoPhillips’ preemption right to acquire the stake when operator Origin Energy had intended to sell it to US energy investment firm EIG Global Energy Partners for $2.12 billion.
APLNG produces liquefied natural gas from coal seam gas (CSG).Currently the largest known proven reserves are in Queensland’s Bowen and Surat basins. The company's website says CSG has been produced from these areas since the mid-1990s. Until recently, the bulk of supply has been derived from the Bowen Basin. However, production from the Surat Basin’s Walloon Coal Measures is now growing rapidly.
Hydraulic fracturing is used in some areas where coals are not highly permeable, according to their website. APLNG expects to fracture approximately 30 to 40% of its well to increase the release of gas and water from the underground reservoirs.
The ConocoPhillips subsidiary now owns a 47.5% interest in APLNG, with Origin Energy and Sinopec owning 27.5% and 25% interests, respectively. Based on the new 47.5% ownership interest and a full-year average Brent price of $78/bbl, ConocoPhillips would expect approximately $1.8 billion of distributions from APLNG in 2022, with roughly $0.5 billion expected in the first quarter.
“We are pleased to acquire this additional stake in APLNG, which throughout its 6 years of operations has served as a reliable and efficient supplier of natural gas to the growing Asia Pacific market, and to Australia’s East Coast gas market,” said Ryan Lance, ConocoPhillips chairman and chief executive officer. “With the global energy transition underway, we expect LNG to play an increasingly important role, as it is lower in greenhouse-gas-emissions intensity than other alternatives. At the same time, this strategic acquisition of an additional shareholding interest in APLNG further diversifies our product mix while lowering our aggregate decline rate.”
ConocoPhillips’ full-year 2021 production from APLNG was 113,000 BOED and full-year 2021 financial distributions were approximately $750 million.
