Origin Energy is heading deeper into the renewables space.
Origin yesterday revealed it had done a deal to sell its rights to a gas development in the Beetaloo Basin in the Northern Territory, as well hinting that it was looking at exiting nearly all upstream exploration permits.
Origin has already brought forward the date when its looking to exit coal fired energy production.
Now it says it will sell its 77.5% of the Northern Territory’s Beetaloo Basin prospect to a company associated with energy billionaire Bryan Sheffield in a $60 million deal that includes royalties for the life of the gas field.
Origin’s plans to conduct hydraulic fracturing (or “fracking”) – extracting the gas by forcing injected water, sand and chemicals into rock fissures underground – had come under scrutiny from shareholders concerned about global warming.
(The Beetaloo Basin is a shale sub-basin in Australia’s Northern Territory considered comparable to the Marcellus Shale, America’s main fracking gas field, but needs billions of dollars of spending on roads and pipelines before it can be developed. Origin’s joint venture partner is Buru Energy.)
Origin said it will now concentrate its future “strategy and ambition to lead the energy transition” to renewables.
Origin revealed it had signed agreements with Tamboran, an entity 50/50 owned by Tamboran Resources and its major shareholder Bryan Sheffield, to take over Beetaloo.
The company has also announced a gas sale agreement for offtake of future gas production and will exit its upstream exploration permits.
Origin also said it will review its exploration permits in the Canning Basin in Western Australia and the Cooper-Eromanga Basin in Queensland with a view to exiting those over time.
However, it remains committed to its lucrative 26% stake in Australia Pacific LNG (APLNG) stake and the coal seam gas production it operates to supply APLNG in central Queensland.
“Origin will undertake a strategic review of all remaining exploration permits (excluding its interests in Australia Pacific LNG) with a view to exiting those permits over time,” Origin’s chief executive Frank Calabria said.
“The decision to divest … will enable greater flexibility to allocate capital towards our strategic priorities to grow cleaner energy and customer solutions, and deliver reliable energy through the transition,” Calabria said.
“Notwithstanding the prospectivity 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.”
Origin will get a 5.5% royalty based on wellhead revenues produced from the three Beetaloo permits which are held by the entity being acquired by Tamboran.
The gas sales agreement is for up to 36.5 PJ per annum over 10 years, conditional on Tamboran taking a final investment decision on developing the project and getting regulatory approval.
Origin expects to report a non-cash post-tax loss of $70 million-$90 million in relation to the transaction.
In February of this year Origin announced that it was seeking approval to shut Australia’s largest coal-fired power plant seven years early, with the Eraring facility in the NSW Hunter region now set to close by August 2025.
Eraring is Origin’s only coal-fired power station, meaning that the company will have to generate power from a combination of renewables and gas to supply its retail customers.
In its place, the company said it has “well-progressed plans” for battery storage of up to 700 megawatts on the site.
Origin shares dipped 0.8% to $5.76 at Monday’s close.
Tamboran Resources shares remain suspended to allow a capital raising to help finance this deal to go ahead.
