Origin rejects BG's revised $13 bln bid

By Fayen Wong

PERTH (Reuters) - Australia's Origin Energy (ORG.AX) has rejected an improved $13 billion bid from UK gas producer BG Group (BG.L), saying its coal seam gas reserves alone are worth over $15 billion after doubling its resource estimate.

Origin, Australia's largest coal-seam gas producer, said it would now focus on how to get the best value from its reserves, possibly through partnerships to supply a liquefied natural gas (LNG) plant or even through a break-up of the company, which also has power generation and retail businesses.

"We're now back in the game and we will be aggressively pursuing those alternatives as quickly as we can," Chairman Kevin McCann told reporters on Friday.

Origin said it was open to talking to BG about supplying its planned LNG plant in Gladstone, Queensland, or any other offer.

"BG is welcome to come back in any way they want," McCann said. BG said it was surprised by Origin's rejection and was considering its options.

Origin said BG increased its offer to A$15.50 per share in cash, valuing it at about A$13.6 billion and up from an initial offer last month of A$14.70 a share. The new offer is 48 percent above Origin's closing share price on April 29, the day before BG announced its initial proposal.

Origin shares closed up 6.85 percent at A$15.6, after hitting a record A$16.15, signaling investors are hopeful of a higher bid. Its shares have surged around 80 percent since the start of the year.

Shares in BG, which was spun out of former UK gas monopoly British Gas in 1997, fell as much as 5.2 percent to 1,227 pence in early London trade on disappointment it may have to raise its bid further to clinch a deal.

Buying Origin would boost BG's position in the fast-growing Asia-Pacific gas market and help fill a hole in the British firm's liquefied natural gas business.

ESTIMATES RAISED

Origin raised its estimated reserves by 121 percent, in a move seen as raising the pressure on BG to lift its bid again.

Origin said its rejection was also influenced by Thursday's news that Malaysian state-owned oil firm Petronas PETR.UL had agreed to pay $2.5 billion for a 40 percent stake in an LNG plant planned by Australian energy firm Santos (STO.AX).

"It's not a surprise that Origin would turn it down. Santos' transaction yesterday has really set a new benchmark for the price of coal-seam gas," said Paul Johnston, a utilities analyst at Commsec Securities Ltd.

Santos said on Thursday the Petronas deal valued its proved and probable (2P) reserves at A$4.91 per gigajoule (GJ), or A$1.65 per GJ if using the largest estimate of the coal-seam gas reserves. ID:nSYD302132

Chief Executive Grant King said that using the Petronas-Santos deal as a benchmark, Origin's coal seam gas reserves, now estimated at 10,000 petajoules, alone would be worth more than A$16 billion, well above BG's offer.