2009-08-16-2008-10-01

To purchase 50% interest in CBM development & LNG project in Australia.

Houston-based ConocoPhillips (NYSE: COP) plans to acquire a 50% interest in a coalbed-methane development project in Queensland, Australia, of Origin Energy Ltd., (Australia: ORG) Australia's largest integrated energy company, for approximately US$8 billion. ConocoPhillips will contribute US$5 billion to the joint venture and carry Origin Energy for the first A$1.15 billion. ConocoPhillips will then make up to four additional payments of US$500 million on project milestones. ConocoPhillips will receive 50% equity in Origin Energy CSG Ltd., which holds Origin Energy's coalbed-methane assets. Origin values the deal at US$0.38 per thousand cubic feet. U.K.-based integrated energy services company BG Group Plc (London: BG) has an outstanding offer to acquire Origin Energy for approximately US$13 billion. The joint venture would be comprised of coalbed-methane (CBM) development, operated by Origin Energy, and a liquefied natural gas (LNG) project, operated by ConocoPhillips. As planned, the joint venture would market the LNG, primarily targeted to Asian markets, with ConocoPhillips leading the marketing venture for the first 10 years. The joint venture would be managed by a board of directors composed evenly of ConocoPhillips and Origin Energy representatives with the project director supplied by ConocoPhillips. Origin Energy estimates a gross resource base of 42 trillion cubic feet of CBM, including 17 trillion of prospective resources in the Bowen and Surat basins in Queensland. Four or more LNG train will each process an estimated 3.5 million tons of LNG per year. The companies estimate 20,500 wells to supply both the domestic gas market and the LNG development. Initial plans for a four-train development would enable production of 23 trillion cubic feet gross (11.4 trillion net) with significant upside potential. Based on the resources for the four-train development plan, the transaction value is $0.70 per thousand cubic feet. ConocoPhillips anticipates peak production of 175,000 net barrels of oil equivalent per day in 2023. Based on Origin Energy estimates as of June 30, ConocoPhillips anticipates booking reserves of approximately 100 million barrels equivalent from this project in 2008. ConocoPhillips chairman and chief executive Jim Mulva days, "With this investment, ConocoPhillips has gained access to the leading CBM resource in Australia, comprising 8.1 million net acres. Moreover, the company has enhanced its LNG position with the creation of an additional Australian LNG hub serving Asia-Pacific markets." He says the project will better balance ConocoPhillips' oil and gas resource mix. Origin managing director Grant King says, "ConocoPhillips' investment gives confidence in the delivery of a CBM-to-LNG project. The joint venture combines Origin's extensive coalbed-methane reserves and resources and operational capabilities with ConocoPhillips' proven LNG and CBM development and operating capabilities. We believe the joint venture will deliver both companies with a strong and competitive position in a rapidly growing market for LNG." The deal is expected to close in October. Credit Suisse is advisor for ConocoPhillips.