Heavyweight US private equity investor EIG Global Energy Partners has made a decisive return to Australia's coal seam gas sector, committing $400 million or more to advance a Senex Energy gas project in Queensland.
Touting the potential for the Western Surat gas project to become a "tier-one" asset, EIG has taken a stake of at least 12 per cent directly in Senex and has agreed to provide up to $US300 million ($397 million) of debt funding to take the venture forward.
Western Surat is "in prime position to supply gas into the structurally short east coast gas market," said EIG chief executive R. Blair Thomas.
"EIG has been an early investor in coal seam gas in Queensland since the late 1990s, and we believe now is the opportune time to develop these assets as fundamentals are supportive," Mr Thomas said.
Emphasising the financial power of the US investor, news of the deal was confirmed the morning after a $US3.8 billion acquisition by EIG-backed Chrysaor Holdings of North Sea fields from oil giant Shell.
Senex managing director Ian Davies said the tie-up would allow work on the Western Surat project to be accelerated and opened up opportunities across a range of growth projects, both within the company and potentially beyond.
As flagged in Street Talk, EIG has taken the bulk of a $55 million placement of shares by Senex, or about 12.6 per cent, and already owns a 2.7 per cent stake bought on the market earlier.
It will also provide up to $US300 million of loan funding for the Western Surat project, which Mr Davies said could see an initial tranche of investment, of about $45 million to fund 30 wells, within a few weeks.
While the deal was enthusiastically received by some analysts, Senex shares reacted more soberly, trading 7.1 per cent higher at 30¢ at 2.44 pm AEDT in Sydney.
The shares had been halted since Monday for the institutional offer in which EIG and others bought stock at 31.5¢, a 12.5 per cent premium to the previous close.
EIG's track record of $US23 billion of investments includes major US names such as LNG player Cheniere Energy and Chesapeake Energy, and oil rig supplier Sete Brasil. In Australia it was a backer of Tipperary Corp, owner of the Fairview coal seam gasfield that now forms part of Santos' GLNG venture in Gladstone, as well as of Queensland Gas Co, now part of Shell.
Senex chairman Trevor Bourne said the company looked forward to having an EIG representative join the Senex board "in due course".
Senex has a 20-year agreement to sell up to 50 terajoules a day of gas from the Western Surat venture to Santos' GLNG venture at oil-linked prices but could also sell into the domestic market, Mr Davies said. He pointed to a "material" opportunity to sell gas to the local market during the ramp-up phase before the sales contract starts up with GLNG.
Senex's retail shareholders will also be able to buy new stock in a separate sale capped at $40 million where shares will be sold at the lower of the 31.5¢ offer for institutional investors and a 5 per cent discount to the market.
EIG is not the only financial player to be looking with interest at opportunities arising from the tight east coast gas market, with Macquarie Group positioning itself as a player in Northern Territory gas with a recent deal to buy into the Mereenie fields and a pending bid for Central Petroleum.
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