Ann: Results of Institutional Offer, page-38

We need to get some balance here IMHO.
Macq has always been at the bottom end of Broker target prices.
I also was surprised at the headline price - I thought it would be closer to a $200m tag, than a $300m tag.

But without a doubt the price now paid was a reflection of the totally different market dynamics for gas, as a result of the international price of gas, the Ukraine conflict, and the energy supply shortfall in domestic markets.

I think it is very, very clear that APA was not going to sell Orbost at firesale prices in such a bullish gas market as we have now.
This my understanding:
The purchase price is $270m plus performance top-up.
The upfront payt is $210m, then $40m payable July 2023, plus another $20m payable July 2024.
So COE is on the hook for $270m at that stage.

The contingent performance payments are only payable for the period between Financial Close and the time at which COE is awarded the fresh MHL (hazard licence). "Operations Service Period" ) (OSP). That is expected around 4mths - 6mths.

If during the OSP APA only achieves an average prodn rate of less than 50tjd average daily prodn rate, then APA gets no perf payment.
It looks like the 1st Perf Payments (if required) is payable at around July 2024, and then 3rd Perf payment around July 2025. So they are deferred. ie I read it, that if MHL is awarded to COE in say 6mths (say by 31 Dec 2022, if any Perf payments are due to APA, then they are not actually payable until July 2024 and July 2025.

According to preso, if Orbost averages 50tjd no perf bonus. (To average 50tjd, given absorber cleans, Orbost needs to produce maybe 55tjd-60tjd when both absorbers are operating. my guess).

Then if Orbost averages 55tjd APA gets $15m (payable around July 2024.) IF OSP duration is say 6mths, and averages 55tjd, thats about 182 days at 55tjd = 10,010tjd for that 6mths = they get $15m bonus. So bonus is worth $1.50 gj ! So APA gets the operational mgt fee plus that bonus of $1.50.
But COE gets benefit of average 55tjd, and sale of excess gas into a spot market capped at $40gj.
So COE gas contracts 47tjd out of Orbost, So COE can sell excess of 8tjd at spot say $40gj each day.
SO then COE can sell 8tjd x 182 days at ($40gj less operational mgt fee say $2.00gj less bonus of $1.50gj) = say $36.50gj - $53m revenue for that 6mths.

But if APA can average 65tjd during that 6mths APA gets total of $60m bonus.
So if 65tjd x 182days = 11,830tj get $60m bonus. $60m / 11,830tj = $5,071 per tj or $5.07 per gj of bonus.
So COE gets to sell excess 18tjd (65tjd less contract of 47tjd) at say spot of $33/gj( $40 less mgt fee say $2.00gj less $5.00 bonus = $7.00gj total).
Thus APA can get Orbost to average 65tjd for 6mths, COE gets revenue of (18tjd x 182 days x $33 gj = $108m for 6mths).
Thus we pay APA a bonus of $60m and COE receives revenue of $108m.

I cannot see Orbost averaging 65tjd between July 2022 ,and the awarding of MHL in up to 6mths anyway.
Thus no way COE will pay anything like full $330m for Orbost.

I think the benefit to COE of the acquisition is clearly very significant, and much of that benefit is not reflected in the upfront payment number.
It is not as simple as that.

COE will get prod up - DM has been saying that he sees Orbost processing in excess of 68tjd nameplate. Time will tell.
But once OSP is finalised, and APA gone, COE will ramp up prod, probably install 3rd absorber, and importantly get benefit of these high gas prices.

This is highlighted by COE preso stating deal is cashflow positive at financial close, and EBITDA positive.
And that is based on assumption of gas price of only $10gj !!!

The other factor not focussed on, is that COE may have opportunity to on-sell Orbost to an infrastructure investor. COE operates Orbost, and pays a fee to owner. Plenty of examples around. COE would have achieved consistent rates out of Orbost, and set up to expand prodn. They would have achieved ownership of Orbost facility for say $300m, when it cost APA over $500m - all at a time at historical highs for gas price. They could do same with Athena at some point.

I think there is much more to this deal that Macq Bank alludes to.
I hope my numbers are in the ballpark