BG Bids A$12.9 Billion for Origin, Has Record Profit

BG Bids A$12.9 Billion for Origin, Has Record Profit

April 30 (Bloomberg) -- 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 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.

Bid Uncertainty

``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.

Goldman Sachs Group Inc. and Gresham Advisory Partners are advising BG on its bid.

BG fell as much as 4.1 percent, the biggest drop in a month, in London trading. The shares traded down 3.8 percent at 1,259 pence as of 10:09 a.m. local time, paring their gain for the year to 9.3 percent.

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.

Production Gain

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.

BG's LNG operating profit rose 69 percent to 395 million pounds in the first quarter.

``Seasonal demand from Asia was strong, resulting in 90 percent of cargoes being diverted,'' the company said.

Chapman expects operating profit from marketing and shipping LNG 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, which is also 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 starting in 2012.

BLOOMBERG