Syndey-based Origin Energy announced that it is divesting its major shale-gas asset in Australia’s Beetaloo Basin along with making an exit from all upstream permits outside of its Australia Pacific LNG project.
Origin said it is selling its 77.5% interest in the Beetaloo located in the Northern Territory, Australia, to Tamboran Resources for a cash sum of $40.31 million. Located some 600 km from Darwin, Origin’s exploration permit areas in the Beetaloo cover 18,500 km2.
Origin will also maintain a 5.5% royalty of the Beetaloo asset and inked a 10-year purchase agreement for future gas production, should commerciality be achieved. Falcon Oil & Gas Australia is expected to retain its minority share of 22.5%.
“The suite of agreements executed with Tamboran allow Origin to realize value created by our investment and exploration activities to date, and ensures another operator present in the area and committed to developing its resources can continue to take the venture forward,” Origin CEO Frank Calabria said in a statement.
Origin, which is the largest operator of natural gas power plants in Australia, said that its exit from the Beetaloo will result in a writedown of up to $60.3 million.
The purchase agreement between Origin and Tamboran will depend on whether the latter follows through with a final investment decision to develop the asset’s tight-gas resources.
Separately, Tamboran announced that it raised $89 million from the sale of new shares to cover the acquisition of Origin’s Beetaloo asset and its subsequent development. Tamboran is a 50/50 partnership between Tamboran Resources shareholders and Bryan Sheffield, former CEO of US-based unconventional producer Parsley Energy which was acquired in 2020 by Pioneer Natural Resources.
The divestment comes only a month after Origin said it planned to drill two new exploration wells and was seeking environmental approval to drill up to 12 additional appraisal wells between 2023 and 2026.
The move also follows 8 years of exploration by Origin which began with the first successful multistage horizontal well drilled and completed in the Beetaloo’s Velkerri dry-gas formation in 2016.
The 1,000 m-long well had 11 stages and produced 1.23 MMscf/D during a 57-day flow test. This first well was considered by Origin to place the Beetaloo on track to become a world-class shale play with an estimated 6.6 Tcf of gross contingent gas resources.
However, despite the apparent potential of the Beetaloo, Origin and other tight-gas explorers in Australia have been challenged in scaling up development.
Operators faced their first major obstacle when the Australian government imposed an almost 2-year moratorium on hydraulic fracturing that ended in 2018. Origin did not conduct another flow test on its first well until 2020, and the basin has largely been regarded as being stuck in the appraisal phase.
At last year’s Asia Pacific Unconventional Resources Technology Conference, the Beetaloo was said to be more than a decade away from commercial production during a panel discussion on resource evaluation. The panel also raised questions about whether recoverable resource estimates in Australia’s tight-gas plays have proven to be overly optimistic.
Origin added in its announcement that it will review all of its remaining exploration permits in an effort to exit them over an unspecified period of time.
"Notwithstanding the prospectively of any of these permits, typically the experience in progressing these types of projects is that the exploration and appraisal phase can be uncertain, and it can be capital intensive to bring projects into production," Calabria said. "Ultimately, we believe Origin is better placed prioritizing capital toward other opportunities that are aligned to our refreshed strategy."
Origin’s departure from upstream will not include its 27.5% interest in the APLNG project which is a joint venture with ConocoPhillips (47.5%) and Sinopec (25%).The APLNG is a coal-seam gas development in the Surat and Bowen Basins with LNG production facilities on Curtis Island offshore Queensland, Australia.
Origin’s sale to Tamboran is subject to regulatory approval and its partner Falcon retains a pre-emptive right to acquire its entire interest.
