Origin says Conoco to pay up to $8 billion for LNG venture

PERTH (Reuters) - Origin Energy Ltd (ORG.AX), fending off an $11 billion hostile bid from Britain's BG Group Plc (BG.L), has selected U.S. energy firm ConocoPhillips (COP.N) as a venture partner to monetize its coal seam gas assets through a liquefied natural gas (LNG) project.

ConocoPhillips, the third-largest U.S. oil company, would invest up to A$9.6 billion ($8 billion) for a 50 percent share of a coal-seam gas (CSG) to LNG project, Origin said in a statement on Monday.

Origin said after the completion of the transaction, it plans to undertake a A$1.5 billion capital management program, which includes an immediate payment of an additional dividend of 25 Australian cents to double the 2008 dividend as well as commence an on-market buy-back of shares of up to A$1.275 billion.

"The joint venture combines Origin's extensive CSG reserves and resources and operational capabilities, with ConocoPhillips' proven LNG and CSG development and operating capabilities," Origin Managing Director Grant King said in a statement.

"We believe the joint venture will deliver both companies with a strong and competitive position in a rapidly growing market for LNG."

Origin said ConocoPhillips will make an up-front payment of $5 billion to Origin, including an additional fixed contribution of A$1.15 billion to carry Origin's share of costs to a final investment decision on the LNG project, which is expected at the end of 2010.

The U.S. major will also make additional payments of $500 million at the point that each of the four LNG trains is approved, Origin said.

After its board rejected a friendly approach from BG at A$15.50 per share on May 30, Origin invited proposals as to how best exploit its CSG reserves, with options ranging from the sale of its gas tenements to partnership in a LNG export project.

Origin said the Conoco deal values Origin's CSG proved, probable and possible (3P) reserves at up to A$1.88 a gigajoule. Origin, which holds the largest CSG reserves in Australia, also said an independent expert, Grant Samuel & Associates, has valued its shares at between A$28.55-A$30.71 a piece.