Origin Energy (ASX:ORG) share price on watch following $2b deal

The Origin Energy Ltd (ASX: ORG) share price could be a mover on Monday after the company agreed to sell a 10% interest in Australia Pacific LNG.

Origin sells LNG interest for $2.12 billion

Origin has executed an agreement with a leading institutional investor in the global energy sector, EIG, to sell a 10% shareholding in Australia Pacific LNG for $2.12 billion.

Upon completion of the transaction, Origin will maintain a 27.5% holding in Australia Pacific LNG. The other major stakeholders are ConocoPhillips (37.5%), Sinopec (25%), and EIG (10%).

Origin said that it will retain its existing seats on the Australia Pacific LNG board. In addition, EIG will gain one board seat with voting rights to reflect its 10% shareholding.

From an operational perspective, Origin said it will continue its role as an upstream operator of the LNG asset. It will retain responsibility for activities such as exploration, development and production.

Origin expects the transaction to be complete by 31 December 2021. The net proceeds will amount to approximately $2 billion after adjustments and transaction costs.

The cash flow guidance for Australia Pacific LNG for FY22 is not expected to change. The cash flow guidance is greater than $1 billion, with the divestment offset by an improvement in commodity prices.

The completion of the sale is subject to pre-emption rights in favour of the other two major shareholders. Those shareholders are ConocoPhillips and Sinopec.

Management commentary

Origin CEO Frank Calabria commented on the deal:

Divesting a 10 per cent interest allows Origin to crystalise some of the significant value we have created in Australia Pacific LNG, while retaining upside to further value creation through a continuing substantial shareholding.

A diverse asset portfolio, combined with strategic investments over the past 18 months, have put Origin in a strong position to lead the energy transition. The material cash injection from this divestment provides further flexibility to deliver returns to shareholders and pay down debt, while allowing Origin to accelerate investment in growth opportunities.

Origin Energy share price snapshot

The Origin Energy share price is up 7.25% year to date after a sluggish performance in the first half.

Origin and the broader ASX 200 energy sector has surged in recent weeks. That's as oil prices rise to 7-year highs of around US$85 a barrel.