It makes you wonder why BG Group of the UK didn’t think of the idea first, instead of charging off after Origin in a rush of ambition.
Only a few weeks after abandoning that hostile $13.8 billion bid for Origin, BG popped up Friday to claim what some said was a consolation prize: its first target, Queensland Gas Company.
QGC and its largest shareholder, AGL Energy, entered simultaneous trading halts Friday morning and then the news trickled out late in the day in obviously leaked briefings to the media, judging by the newspaper reports on Saturday morning.
A deal is expected to be announced to the market later today, with the details to be tied up yesterday. Some reports claimed the deal might not happen, but others suggested it was all a matter of signing documents.
QGC shares last traded at $3.20, down from a peak of $6.39 in May.
The deal would involve AGL agreeing to sell its 25% stake in QGC to BG. QGC and BG are partners in a proposed $8 billion liquefied natural gas project at Gladstone.
That would immediately increase BG’s stake in QGC from just under 10% to 35% and serve as a strong platform from which to launch its friendly takeover.
AGL took a 29% stake in QGC last year as it fought off Santos in an approach that was later knocked on the head by the ACCC.
In return AGL would be granted the right to coal-seam gas resources – possibly through a direct equity ownership in permits.
That was why AGL sought a stake in QGC to put its foot on gas supplies in Queensland for its South East Queensland gas distribution and retail business picked up in a Queensland government sell-off.
AGL has been considering options for its valuable stake in QGC for months, but there was no mention of its possible direction at the AGM earlier this month in Sydney.
AGL had been looking to buy gas from the long-mooted PNG gas project that would have seen gas from the Oil Search (and other) fields in PNG piped thousands of kilometres down the eastern Australian Coast.
Santos was part of that project, but effectively killed it off when it bid for QGC. The PNG gas will now go to fuel an export LNG project that will compete with the coal seam projects of QGC/BG, Santos/Petronas and Origin/ConocoPhillips.
AGL wanted the gas to fix a shortfall. It sells more gas through its retail business than it has in reserves, forcing it to buy gas from other suppliers.
Santos’ deal with Malaysia’s Petronas helped knock over BG’s bid for Origin, which turned around and agreed to a partnership with the ConocoPhillips.
QGC recently moved to extend its holdings through takeovers of Sunshine Gas and Roma Petroleum.
It said it needed to buy more gas reserves to meet the needs that BG Group (and itself) in driving plans for its export LNG project at Gladstone.
Shares in rival coal-seam gas producer Arrow Energy rose 24c, or 12%, to $2.23 on the news on Friday. It has a deal with the huge Shell oil group.
Santos shares closed 67c, or 6%, higher at $11.56. Santos’ 15% shareholding cap is coming off and there could be some corporate activity. But the global credit and bank crunch will see it very difficult to raise the cash for a bid for Santos. Any deal would have to be fully financed internally, or offer shares.
