BEACH Energy Ltd has entered into a binding agreement with Origin Energy Limited to acquire all of the latter’s shares in Lattice Energy Limited for $1,585 million.

Beach says the acquisition, made a cash and debt free basis, is transformational as it significantly enhances the company’s scale and has created the leading ASX‐listed oil and gas mid‐cap with diversity of production and growth options.

Beach CEO, Matt Kay, said the acquisition represents a significant milestone as the company executes its strategy to become a premier upstream oil and gas company.

“The transaction greatly enhances our platform for continued growth, delivers a diverse asset portfolio with significant upside and provides material value accretion for Beach shareholders.

“It establishes Beach as a major supplier of gas to domestic markets, and provides a step‐change in production, operating capabilities and geographic exposure. It also provides attractive long‐term gas contracts with Origin Energy and other high quality counterparties which underpin returns, cash flow generation and a rapid deleveraging profile.”

“We now look forward to completing the transaction, welcoming Lattice’s staff and integrating these complementary businesses with highly capable oil and gas teams. We also look forward to continuing our longstanding relationship with Origin,” Mr Kay said.

Lattice’s portfolio of assets provide diversified exposure to the Australian East Coast, West Coast and New Zealand gas markets with a mix of production and exploration assets.

Mr Kay said the combination significantly expands Beach’s footprint across multiple basins, production hubs and jurisdictions and increases the company’s 2P reserves by ~200% to 232 MMboe3 and FY18 production guidance by ~150% to 25‐27 MMboe.

“Lattice delivers a step‐change in operatorship capabilities and expertise, including gas processing and offshore production. Operated production increases from ~50% to ~70% and offshore operations are expected to account for ~50% of production,” Mr Kay said.

He said the key production and development projects and the exploration portfolio will position Beach for longer‐term growth. Furthermore, there is significant upside potential through optimal allocation of capital, strategic partnering and infrastructure ownership across the portfolio.

Origin CEO, Frank Calabria said the signing of the sales agreements delivered on

The company’s commitment to divest Lattice Energy consistent with a plan to simplify the Origin business, reduce debt and improve returns to shareholders.

“Importantly, Origin retains access to future Lattice Energy east coast gas production and LPG, to help us continue to meet the energy needs of our domestic customers.

“The sale to Beach represents the best overall value to Origin shareholders, through the combination of the upfront sale proceeds and ongoing supply of gas and LPG, which allows Origin to retain the benefits of our integrated business model.

“Origin and Beach have a long history of working together through joint ventures and existing gas supply arrangements, and we look forward to continuing that relationship as Beach will remain a major supplier of gas to Origin into the future,” Mr Calabria said.

Acquisition Funding

Beach intends to raise approximately $301 million through a 3 for 14 pro‐rata accelerated non-renounceable entitlement offer to partially fund the acquisition

Approximately $233 million of the Entitlement Offer will be fully underwritten. The remaining $68 million represents the pro‐rata entitlements of major shareholder, Seven Group Holdings Limited (SGH). Entities controlled by SGH have committed to take up their entitlements in full and sub‐underwrite the Entitlement Offer up to 68,260,311 new shares.