Macquarie eyes Bass Strait assets

Macquarie is expected to form a consortium to acquire the Bass Strait assets

Macquarie Group is believed to be gunning hard for ExxonMobil’s Bass Strait assets ahead of a sales process that will be launched next year through JPMorgan.

The expectation is that the investment bank will form a consortium to acquire the assets, as it did for its successful acquisition of Quadrant Energy in Western Australia.

Macquarie is one of the few parties getting to work early on the sales process that some now expect will not get started until the middle of next year.

A delayed start will offer suitors plenty of time to get their heads around what is expected to be a complex and challenging sales process.

ExxonMobil and adviser JPMorgan will need to wrestle with how to pitch the offering to buyers who will be asking questions about the cost of abandonment liabilities for the assets.

Also, there is the question of how the Australian Competition & Consumer Commission will view bids by certain players such as Beach Energy, and whether partner BHP will also sell its interests, with speculation mounting that it could stage an exit.

Another challenge is that the assets are being sold at a time that many international players are retreating to their home markets. These are all factors that could perhaps aid Macquarie’s pursuit of the business. Logical bidding partners for Macquarie would be Wesfarmers and Brookfield, given that the trio worked together in the past.

They made a windfall in November 2018 when they offloaded their Quadrant Energy business to Santos for $2.15bn.

This was after buying Quadrant in 2016 from Apache Corporation for $US2.1bn ($3bn), including debt, before selling off parts of the business to other investors, including Wesfarmers.

Macquarie had owned 36.3 per cent of the WA oil and gas company, while Brookfield Asset Management had 48 per cent and Wesfarmers 13.7 per cent and management the remainder.

The Gippsland Basin Joint Venture off the Victorian coast is owned by Exxon in partnership with BHP and produces oil and gas with valuation estimates of about $US2bn. It supplies between 40 and 50 per cent of east coast domestic gas demand.

As part of the joint venture, Exxon also owns the Kipper gas field in the same area, with its 30 per cent interest estimated to be worth about $US800m.

Macquarie more broadly is eager to make acquisitions in infrastructure, and the Bass Strait assets could be considered annuity assets.

Japanese trading houses and Asian buyers could line up, as could Beach Energy, AGL Energy, Santos and Mitsui, which was the Quadrant underbidder.