Origin Energy’s plans to float at least $1.5 billion of upstream...

Origin Energy’s plans to float at least $1.5 billion of upstream energy assets is understood to have scuppered plans by Warren Buffett’s Berkshire Hathaway to make its first foray into the Australian oil and gas market.
DataRoom can reveal that Berkshire Hathaway, which already owns a stake of almost 4 per cent in the $13bn listed Insurance Australia Group, had been in the final stages of negotiating alongside Transerv Energy to buy Origin’s Perth Basin for $180 million. But this was before the company’s recently appointed managing director, Frank Calabria, opted to include the asset as part of an initial public offering through Macquarie Capital and UBS.
Berkshire Hathaway is an American multinational based in Omaha that owns $US552bn of assets globally and is chaired by Buffett, who is widely tipped as the world’s greatest stock picker.
The deal was expected to act as its foundation investment in Australia’s oil and gas market after scanning the space here for some time, and while spearheaded by Transerv, it was fully funded and backed by Berkshire, which would have owned 50 per cent.
Sceptics yesterday maintained that along with the plan by Origin Energy to float the upstream operation, there would also be strong attempts by bankers to sell the business in a trade sale.
This IPO plan is considered a safe back-up plan for Origin in case the trade sale option fails, after embarking on due diligence for the very complex assets.
DataRoom last week first flagged that Origin’s Kupe Gas and BassGas — two assets that comprise the majority value of the mooted IPO — were rumoured to be heading for a sale.
This came amid talk that Mr Calabria would exit the upstream operation as part of a shift in the company’s strategy.
Victoria’s Bass Gas and Otway operations and the Kupe Gas operation in New Zealand are estimated to be worth at least $1bn, forming the bulk of the overall value of Origin’s upstream asset proposition, with Perth Basin and the Cooper Basin assets accounting for a nominal amount.
Market analysts yesterday described the upstream operation as a solid business with contracted reserves that could make the offering attractive to a financial buyer such as Kohlberg Kravis Roberts, The Carlyle Group or Apollo, all known to have circled energy assets in the past.
The offering, which is being divested to drive down Origin’s massive debt pile, would also probably be attractive to the $1.65bn listed Beach Energy, although many say that the acquisition of the business would be a stretch for the Adelaide-based oil and gas exploration and production company