Australia's Origin rebuffs BG offer

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In a statement to shareholders, Origin rejected BG's A$13.6 billion ($11.9 billion) hostile offer as undervaluing its business and future prospects, and said a number of "global participants in the energy industry" had proposed building an LNG project, using Origin's coal seam gas (CSG) reserves, the largest in Australia.

Managing Director Grant King said the candidates proposed LNG projects of various sizes, adding that the company's largest estimate of CSG reserves, also known as proved, probable and possible (3P) reserves, was close to the level required to support a two-train, 6 million tonnes per annum project.

"There's a sense that Origin has gotten quite a positive response on its CSG monetisation process, but that's still in early days so it's hard to decide which is a better option," said Jason Mabee, utilities analyst at ABN AMRO in Sydney.

"It's difficult to say what BG might do. There's a high chance they will wait until they get more details on the CSG monetisation proposals Origin has received, but they could also make a pre-emptive strike and launch a higher offer."

Origin did not detail the candidates, but bankers previously suggested Royal Dutch Shell, BP, ConocoPhillips and Chevron Corp could be interested.

Shares in Origin, which peaked at A$16.49 in June, eased 0.4 percent to A$16.08 on Tuesday, indicating investors expect a higher offer than BG's A$15.50 per share bid.

Origin argues that teaming up with a major energy group to commercialise its CSG assets may deliver better value for shareholders than BG's offer.

"The introduction of LNG channels to market for CSG from eastern Australia has the potential to further increase domestic gas prices," King told a teleconference.

He said Origin was open to committing a majority of its CSG reserves to an LNG project and would buy additional gas from third parties to fulfil its domestic gas contracts.

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