Source: The Wall Street Journal
BG Group PLC on Tuesday said it would sell a gas pipeline in Australia for $5 billion, the largest deal in the British oil and gas company’s history.
BG said it had agreed to sell its wholly-owned subsidiary QCLNG Pipeline Pty Ltd, which in turn owns the 543-kilometer pipeline running from two of its natural gas fields in southern Queensland to liquefaction and export facilities on Australia’s east coast, to gas infrastructure company APA Group .
The disposal is part of BG’s plans to sell off noncore assets, and it had previously said it would look to sell the pipeline before the end of 2014. BG also expects to deliver its first liquefied natural gas from its QCLNG by the year-end, potentially a significant milestone for one of its expansion projects.
The company, once a darling of the U.K. stock market, has struggled in recent times with stagnating production and cost overruns on projects. Buffeted also by falling oil prices, its shares have recently fallen to a more-than five-year low, though it is still valued at nearly $50 billion.
BG said it expected to complete the pipeline network sale in the first half of next year, and would use the proceeds to pay down some of its debt and for future investment.
BG will pay tariffs for use of the pipeline to APA Group, and said it expected that to deliver $390 million of earnings before interest, tax, depreciation and amortization for APA in 2016.
“The sale of the QCLNG pipeline is in line with our strategy to focus on BG Group’s core areas of oil and gas exploration and production and liquefied natural gas,” Andrew Gould , BG’s interim executive chairman, said in a statement.
The pipeline is part of a $20.4 billion liquefied natural gas project that is the first in the world to attempt to tap gas trapped in coal seams and liquefy it for export. BG’s project is among three such venture being built at the port of Gladstone in Australia’s Queensland state due to come online over the next 12 months.
All three projects have experienced cost blowouts caused by everything from unfavorable currency swings, labor shortages, run-ins with landowners and troubles perfecting new drilling techniques.
BG’s QCLNG project, which counts China’s Cnooc Ltd. as a partner and major customer, is already running 36% over its original budget, forcing the company to consider selling project infrastructure such as pipelines and water treatment plants to try and boost sagging projected returns.
APA Group, Australia’s biggest operator of natural gas pipelines, launched an issue of new shares to raise $1.53 billion to help pay for the deal.