Beach, Santos tipped a suitors for Exxon’s Bass Strait assets
Beach Energy and Santos could be among companies considering bidding for ExxonMobil’s Bass Strait assets.
Beach Energy and Santos could be among companies considering bidding for ExxonMobil’s Bass Strait assets, although liabilities likely to run into billions of dollars to clean up the ageing assets may act as a roadblock for some suitors, analysts say.
Exxon plans to sell its half-stake in the assets, with a deal potentially fetching $3bn to $4bn and raising speculation about whether its joint venture partner BHP may follow suit and also offload its 50 per cent share.
Backed by billionaire Kerry Stokes, Beach is seen as a top contender for the assets. Santos could also be tempted, although potentially more likely as part of a consortium, according to Credit Suisse.
Given a mooted two to three-year time frame to complete the sale, Beach may have the balance sheet capacity to pull off a second transformative deal after buying Lattice for $1.58bn from Origin Energy.
“Beach might just be able to buy all of Exxon’s upstream Bass Strait assets — with a little oil price support between now and a possible deal close in two to three years — but not BHP’s interests as well,” Credit Suisse analyst Saul Kavonic said. Should BHP sell it could also consider an equity raise to scoop the entire deal.
“Given the right deal terms and potential prize here, this may be a rare instance where we could view an equity raise for an acquisition positively. A $US2.2bn ($3.24bn) raise in 2022 could enable Beach to acquire both Exxon and BHP’s interests for a total acquisition price tag of $US5bn, on our initial estimates. Alternatively, Beach could partner with bigger balance sheet players in a consortium.”
Foreign companies attracted to Australia’s tight east coast gas market, producers specialising in squeezing the most out of assets late in their life and private equity players could also consider an offer, Mr Kavonic said.
However, another analyst said liabilities to clean up the historic oil and gas assets would run into the billions of dollars, which may rule out some suitors.
The Exxon deal is part of a broader shake-up in Australia’s oil and gas sector ranging from Woodside’s desire to sell down stakes in Scarborough and Pluto 2 through to speculation ConocoPhillips may also dispose of its northern Australia assets.
Corporate activity could also come from Inpex, which runs the Ichthys LNG project off northern Australia, after broker Bernstein suggested it may weigh a partial listing of its Australian operations following investor meetings in Darwin this week.
Inpex dismissed the speculation.
Consultancy WoodMackenzie said last month up to $50bn of deals could be struck in Australia’s energy industry over the next few years as a combination of corporate takeovers, a rejig of LNG plant ownership and oil giants reshuffling their assets shake up the market.
Italy’s Eni may also look to shift out of key Australian assets to focus on better options in the Middle East and Mozambique, while in terms of big corporate deals the Papua New Guinea-focused Oil Search, which fought off a $11.6bn bid from Woodside Petroleum, still looms as a likely target given its LNG exposure.