Energy sector update October 2013

ENERGY
SECTOR UPDATE
WWW.CORRS.COM.AU
CORRS
AUSTRALIAN
OCTOBER 2013
Insights and trends for
the leading edge of
the energy industry
9702938
60%.  If AWE does choose to continue
drilling, it will become the operator
of the permit until June 2014. 
Further to our story in the August
2013 edition of the Australian Energy
Sector Update, on 16 September
2013, ASX-listed AGL announced
its intention to acquire all of the
ordinary shares it does not already
own in ASX-listed Australian Power
and Gas (APG) on-market.  These
shares will be acquired at a price of
A$0.52 per share, representing the
price that AGL made in its off-market
takeover offer for APG earlier in July
2013.  AGL received confirmation
from the Australian Competition &
Consumer Commission (ACCC) on
12 September 2013 that it would not
oppose the proposed acquisition of
APG.  On 19 September 2013, AGL
announced it has acquired relevant
interests in excess of 90% of both
the shares and options in APG, and
therefore AGL has successfully
reached over 90% ownership of APG.
On 2 September 2013, ASX-listed
DUET Group announced that,
through its wholly owned subsidiary
DBP Development Group, it
has reached an agreement with
Chevron Australia to link the
domestic gas plant of Chevron’s
Wheatstone Project to the Dampier
to Bunbury Natural Gas Pipeline
(DBNGP).  Under the agreement,
DBP’s existing 87 kilometre, 10
interest) and Bridgeport Energy
(with a 15% interest).  With a variety
of conventional and unconventional
plays having been identified, Cooper
Energy has stated that it believes
these two permits have the potential
for both oil and gas in the Sawpit
and Casterton formations. 
On 4 September 2013, ASX-listed
AWE announced it has executed
a farm-in agreement with ASXlisted WHL Energy to acquire a
60% working interest in offshore
Victoria permit Vic/P67.  The permit
contains the currently undeveloped
La Bella gas discovery, as well
as several additional exploration
targets.  WHL Energy has reported
gross 2C Contingent Resources for
the La Bella gas discovery, with total
unrisked Prospective Resources of
577 PJ on a P50 basis for the permit. 
Under the farm-in agreement,
AWE will pay three-quarters of the
total cost to conduct 3D marine
seismic survey over the La Bella
field and surrounding exploration
targets, capped at US$9 million. 
Environmental approvals are in
place for the seismic survey, which
is anticipated to begin before the
end of 2013.  After reviewing the new
seismic data, AWE will be afforded
the option to either surrender its
interest in Vic/P67 or to sign up to
the drilling of two exploration wells
at a working interest of either 30% or
Introduction
Recent announcements
Welcome to the October 2013
edition of the Australian Energy
Sector Update, a monthly
publication prepared by Corrs
Chambers Westgarth for clients
who are interested in the
Australian energy industry.
This publication brings together
a brief summary of information
on recently completed deals,
market rumours and potential
opportunities, and relevant
regulatory updates. 
ASX-listed Cooper Energy
announced on 3 September 2013
that it has been granted two new
exploration permits by the Victorian
Government.  Cooper Energy’s wholly
owned subsidiary Somerton Energy
will hold a 20% interest in PEP 150
and a 25% interest in PEP 171.  Initial
activity consisting of the acquisition
of 3D and 2D seismic in the permits
is anticipated to commence in 2014,
with exploration drilling expected
to follow.  ASX-listed Beach Energy
holds the remaining 75% interest
in PEP 171, while PEP 150 is also
held by Beach Energy (with a 50%
interest), Bass Strait Oil (with a 15% PAGE 2
OCTOBER 2013
Wet Gas Project, which consists of
PEL 106A and PEL 513, as well as
agreeing to fund a work program
valued by Drillsearch at up to A$120
million aimed at accelerating the
commercialisation of wet gas. 
Further, Santos has purchased the
28.5% interest in PEL 100 owned
by Drillsearch and is farming in to
a 33% interest in Inland-Cook Oil
Fairway ATP 549P West.  Under
the transactions, Drillsearch has
secured a gas sales agreement
for the production of Western
Cooper Wet Gas which includes
both fixed and oil-linked pricing. 
Further, Drillsearch’s interest in the
Tintaburra Block has increased by
29% to a total 40% interest, further
adding to its existing Cooper Basin
oil reserves and production. 
On 4 October 2013, ASX-listed Dart
Energy announced it has completed
a A$20.7 million capital raising. 
A$11.9 million was raised from a
share placement to institutional
and sophisticated investors
through issuing nearly 132 million
ordinary shares at an issue price
of A$0.09 per share.  An additional
A$8.8 million was raised by a fully
underwritten non-renounceable
entitlement offer whereby eligible
shareholders may subscribe for one
new ordinary share for every 9 shares
already held, also at an issue price of
A$0.09 per share.  The entitlement
offer was significantly oversubscribed
by almost A$14 million.  The issue
of new shares under the entitlement
offer will be completed on 9 October
2013, with the new shares expected
to commence trading on the ASX
on 10 October 2013.  Wilson HTM
Corporate Finance and Bell
Potter Securities acted as joint
On 10 September 2013, ASXlisted Drillsearch announced the
satisfaction of the mutual due
diligence conditions in relation to
several binding transactions with
ASX-listed Santos.  Under those
transactions, Santos has acquired a
60% interest in the Western Cooper
Recently completed deals
inch pipeline linking Ashburton
West to a compressor station on
the DBNGP will be refurbished.  An
additional 87 kilometre, 16 inch loop
will be constructed adjacent to the
existing 10 inch pipeline, while a
new 22 kilometre, 16 inch pipeline
connecting Ashburton West to the
Wheatstone Project’s domestic
gas plant will also be constructed. 
An initial 100% take or pay gas
transportation contract between
DBP and Chevron Australia has also
been agreed for 30 years.  The gas
pipeline project, valued at A$94.9
million, is expected to be completed
by December 2014. 
On 12 September 2013, ASX-listed
drilling services provider Boart
Longyear announced that a US$300
million debt offering will take place
through its wholly owned subsidiary
Boart Longyear Management.  The
net proceeds from the debt offering
are expected to be used to reduce
Boart Longyear’s revolving credit
facility.  Subject to the completion of
that offering, Boart Longyear also
announced on 12 September 2013
that it has entered into an agreement
to amend its revolving credit facility,
with all changes to the facility aimed
at lowering the company’s ability to
incur additional indebtedness.
lead managers and bookrunners
to the capital raising, as well as
underwriters of the entitlement offer. 
ASX-listed DUET Group announced
the successful completion of a
A$100 million fully underwritten
placement on 3 September 2013. 
The bookbuild for the placement
was oversubscribed, achieving a
final price of A$2.06 per new stapled
security, and a total of 48.5 million
new stapled securities will be
issued (to rank equally with existing
stapled securities).  DUET has stated
that the funds raised will be used
towards the Wheatstone Ashburton
West Pipeline Project, which was
announced on 2 September 2013
(discussed above).  Sole lead manager
and underwriter to the placement was
the Australian Branch of UBS AG.
According to the Herald Sun, Royal
Dutch Shell has confirmed it is in
active talks with potential buyers for
its Geelong oil refinery after receiving
encouraging interest regarding a
potential sale.  Reportedly, Shell has
previously stated it intends to convert
the oil refinery’s site into a fuel
import terminal should it not achieve
a successful sale on undisclosed
terms.  Shell reportedly aims to
complete the sale by the end of 2014.
Further to our stories in the August
and September 2013 editions
of the Australian Energy Sector
Update, Mergermarket has reported
that Korean state-run electricity
provider KEPCO is in talks for an
information memorandum in respect
Market rumours and
opportunitiesPAGE 3
OCTOBER 2013
of the sale of the New South Wales
state-owned electricity generator
Macquarie Generation, although
no final decision to place a bid has
yet been made.  Alinta and Chinabased Huaneng Group have also
been reported as other potential
suitors in the sale process, while the
Chinese coal company Shenhua has
reportedly appointed Morgan Stanley
and Macquarie Capital to advise on
a potential bid.  ASX-listed AGL’s
Head of Corporate Communication
Karen Winsbury is said to have
confirmed that AGL has executed a
confidentiality agreement in relation
to the Macquarie Generation sale in
order to consider the assets, however
AGL’s Chief Executive Officer Michael
Fraser has reportedly stated that the
New South Wales Government’s price
expectations may be too ambitious. 
According to the Australian Financial
Review, Goldman Sachs, the New
South Wales Government’s advisor,
have dispatched an indicative
timetable for the sale process,
requiring first round bids by October
2013 and final offers in January
2014.  Reportedly, completion of
the Macquarie Generation sale is
anticipated by June 2014.
According to Mergermarket, private
Australian oil and gas company
Real Energy intends to list on the
ASX in October 2013 and is looking
for cornerstone investors for its
upcoming initial public offering
(IPO) valued at A$10 million.  Real
Energy’s Chief Executive Officer Scott
Brown has reportedly stated that
interest has already been received
from institutions in countries
including Singapore, Hong Kong,
the United States and Australia. 
Real Energy already holds permits
in the Toolachee and Patchawarra
formations in the Cooper Basin. 
Potential customers of Real Energy
may include mining companies such
as ASX-listed BHP Billiton, Glencore/
Xstrata and Aureca, in addition to
both domestic and international gas
markets.   Following the launch of
the IPO, Real Energy reportedly
intends to begin drilling.
The Australian Financial Review
has reported that ASX-listed AWE
is considering potential acquisition
opportunities in countries including
Australia.  After reporting a A$20
million profit for the last financial
year, AWE’s Chief Executive Office
Bruce Clement has reportedly
stated that the company intends
to prudently review opportunities,
particularly in underdeveloped
projects where AWE may add value.
Mergermarket has reported that
Korean state-owned energy company
Korea Gas Corporation (Kogas)
is contemplating the sale of noncore assets in order to reduce its
current debt and to restructure its
investment portfolio.  Kogas is said to
have appointed Samsung Securities
and Rothschild for the potential
divestment of assets.  Samsung
and Rothschild have reportedly also
been mandated by Kogas to possibly
sell their 15% interest in the GLNG
project, although no definite sale
plans have yet been announced. 
Kogas also holds a 10% interest in
the Prelude Floating LNG project.
According to the Australian Financial
Review, ASX-listed Karoon Gas is
reportedly keen to secure a partner
in order to develop the Grace
exploration well located in the
North Carnarvon Basin.  Karoon Gas
currently holds a 90% interest in
permit WA-314-P but may reportedly
reduce its holding to 50%.  The
development costs of WA-314-P
are estimated at A$100 million and
finding a partner will help alleviate
Karoon Gas of these expenses.
Despite being the subject of recent
speculation regarding potential
acquisitions, The Australian has
reported that ASX-listed Beach
Energy is intending to prioritise
growth projects over acquisitions. 
Beach’s Managing Director Reg
Nelson has reportedly stated that
although the company does stay alert
to potential acquisition opportunities,
the current project pipeline should
generate sufficient growth for Beach. 
The Australian Financial Review
has reported that ASX-listed Infigen
Energy has decided to halt plans to
divest its Australian wind farm assets,
citing the uncertainty regarding a
further review of the Renewable
Energy Target (RET) post election. 
Reportedly, Infigen’s divestment
strategy was aimed at reducing its
A$1 billion debt burden.  Infigen’s
Chief Executive Officer Miles George
has reportedly noted that despite
the current market not favouring
the sale of renewable assets, the
company will continue to investigate
potential sale opportunities. 
According to the Australian
Financial Review, Pacific Equity
Partners (PEP) may seek to sell its
83% interest in ASX-listed Energy
Developments which is valued at
an estimated A$670 million.  Energy
Developments manages a diverse
portfolio of power generation
projects around the world including
in Australia, Europe and the Untied
States.  Reportedly, utilities and
infrastructure funds abroad may be
interested in the acquisition of the PAGE 4
OCTOBER 2013
substantial Energy Developments
interest.  PEP’s decision to divest
its 83% interest reportedly followed
Energy Developments’ strong
financial numbers and it has been
noted that PEP may elect to re-IPO
Energy Developments, selling the
listed equities to investors.
The Wall Street Journal has reported
that Investec is seeking to sell its
Hornsdale wind farm project to be
located in the mid-north of South
Australia.  Investec Australia’s acting
Chief Executive Officer Ciaran Whelan
has reportedly stated that if offered
a ‘reasonable’ price for Hornsdale,
it would be sold without hesitation
and that the company’s projectfinance team is currently looking at
divestment opportunities.  The cost
of construction of the proposed 315
MW Hornsdale wind farm project is
approximately A$900 million and the
project is set to be one of Australia’s
largest wind farms once built.
In other wind farm related news,
Mergermarket has reported that
China’s CECEP Wind Power
(CECEP) has been scouting potential
investments in Australia’s wind power
sector, participating in discussions
with Australian legal and financial
advisors, as well as contacting
potential targets.  Reportedly,
CECEP has not yet retained any
financial advisors and is open to
approaches with potential investment
opportunities.  Projects that would
reportedly be of interest to CECEP
would be those with around 100 MW
of capacity, valued between US$32.68
million to US$49 million.  CECEP has
a registered capital of US$246 million
and CNY9 billion worth of assets.
According to The Australian, ASXlisted Transfield Services does
not intend to sell its Easternwell
minerals drilling business in a fire
sale despite having to recently make
A$285 million worth of write-downs
and put the business up for sale
due to the use of drilling rigs having
dramatically dropped.  Reportedly,
Transfield’s Chief Executive Officer
Graeme Hunt has stated that even
though the company has received
several approaches from interested
parties to acquire the mineral drilling
business of Easternwell, those offers
had not met price expectations for the
business.  Transfield has previously
announced its intention to establish
a joint venture in order to generate
funds to purchase new drilling rigs
so that a higher return rate on capital
can be achieved than if Transfield
was to purchase such rigs on its own.
PIPELINES REGULATION
2013 (NSW)
Commencing on 1 September 2013,
the Pipelines Regulation 2013 (NSW)
remakes the repealed Pipelines
Regulation 2005 (NSW).  Among
others, the Regulation implements
provisions covering:
•  applications for authorities to
enter and survey land for the
determination of proposed
pipeline routes, as well as
applications for licences
authorising the construction,
alteration or reconstruction and
operation of pipelines under the
Pipeline Act 1967 (NSW);
Regulatory updates
•  the standards regarding the
design, construction, operation,
maintenance and management
of licensed pipelines; and
•  reporting and auditing
requirements, as well as applicable
fees in relation to pipelines.
Other news
INVESTING IN THE
AUSTRALIAN PETROLEUM
INDUSTRY – CORRS
FLAGSHIP PUBLICATION
RELEASED
The Australian resources sector
is moving into a new era, with the
future of the industry marked by
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the petroleum industry.  A growing
focus on the global resources
market reveals key project and
investment opportunities in the
oil and gas sector with particular
emphasis on unconventional gas
and LNG.  Australia’s upstream
oil and gas industry has entered a
period of unprecedented growth and
transformation, with almost A$200
billion currently being invested in oil
and gas projects including seven major
LNG projects across the country.
We have recently released our
flagship publication for the oil and
gas sector titled Investing in the
Australian Petroleum Industry, which
provides background information
in relation to the Australian oil and
gas industry and explores key legal
considerations for investing in or
developing an oil and gas project in
Australia.  Click here to read.PAGE 5
OCTOBER 2013
The contents of this document are provided solely for information purposes.
This document has been compiled using publicly available information from sources including newspapers,
the websites of companies listed in this document and other publicly disclosed documents prepared by those
companies.  In some instances, references to the source documents relied upon in preparing this document
have been provided in the footnotes.  Although we have taken care in compiling this document, we do not in
any way warrant that the information contained in this document is accurate, complete or correct and do not
assume any responsibility or liability for that information.  We do not make any recommendation that you
should invest in any of the companies listed in this document.  If any person intends to invest in one or more
of the companies referred to in this document, they should first undertake, among other things, financial, tax,
technical, engineering, geological and legal due diligence on the company or project (and the company’s or
project’s assets) before making that investment.
TIMOR-LESTE OFFERS
A$800 MILLION
INVESTMENT TO
ATTRACT ONSHORE GAS
PROCESSING
ABC News has reported that TimorLeste’s Petroleum Minister Alfredo
Pires has announced that the TimorLeste Government is willing to offer
an A$800 million investment in order
to attract onshore gas processing
of the Greater Sunrise gas fields’
reserves.  The Sunrise LNG project
area is governed by the International
Unitisation Agreement, signed by
Australia and Timor-Leste.  While the
Sunrise Joint Venture participants
(consisting of ASX-listed Woodside
Petroleum (33.44% interest),
Conoco Phillips (30% interest), Shell
(26.56% interest) and Osaka Gas
(10% interest)) have chosen FLNG
as their preferred concept to develop
the Greater Sunrise gas fields, they
remain locked in a six-year stalemate
with the Timor-Leste Government
over how to process the subsea
extracted gas.  Reportedly, Australia
and Timor-Leste are expected to
pursue arbitration over the revenue
sharing agreement in relation to the
Greater Sunrise gas fields. 
A$15 BILLION ARROW
LNG PROJECT RECEIVES
QUEENSLAND
GOVERNMENT APPROVAL
On 10 September 2013, the
Queensland Coordinator-General
Barry Broe announced the approval of
Arrow CSG (Australia)’s A$15 billion
LNG plant located at Gladstone. 
Through staged development, the
plant is expected to produce up to
18 Mtpa of LNG.  If Arrow proceeds
with development, the LNG plant will
become the fourth on Curtis Island,
however Arrow still needs to finalise
financial close and CSG supply
components for the plant.  The project
is now subject to environmental
assessment by the Federal
Government, which should announce
a decision within 30 business days
as required by legislation. 
A$85 MILLION NATURAL
GAS TENDER TO UNLOCK
VICTORIA’S REGIONAL
POTENTIAL
Victoria Deputy Premier Peter Ryan
has announced an A$85 million
investment to supply natural gas to
regional communities across the
state of Victoria.  Under a partnership
between the Victorian and Federal
Governments, an A$85 million
request for tender has been released
for innovative delivery strategies
to connect ‘abandoned’ regional
communities to compressed natural
gas (CNG) or liquefied natural gas
(LNG) supplies.  The tender consists
of A$30 million for the provision
of natural gas to Murray River
communities and A$55 million to
supply the remaining priority towns
as part of the Energy for the Regions
program.  Bids for the tender will be
assessed on the basis of maximising
the number of regional Victorian
communities which receive natural
gas for the available funding.
LAND ON CURTIS ISLAND
BECOMES PROTECTED
AREA
Queensland Environment Minister
Andrew Powell and National
Parks Minister Steve Dickson have
announced that 2,900 hectares of land
at the southern end of Curtis Island
has been declared as a protected
area.  The conversion of this exgrazing land, forming part of the
environmental management precinct
adjacent to the LNG industrial
site, represents progress towards
environmental offsets required by
conditions of the Curtis Island LNG
project approval.  For the next 25
years, LNG proponents are committed
to funding the management of
declared protected areas.PAGE 6
OCTOBER 2013
BRISBANE
MELBOURNE
SYDNEY
PERTH
BRUCE ADKINS
Partner, Brisbane
Tel +61 7 3228 9431
Mob +61 418 874 241
[email protected]
CLARE CORKE
Partner, Melbourne
Tel +61 3 9672 3255
Mob +61 405 275 045
[email protected]
ANDREW CHEW
Partner, Sydney
Tel +61 2 9210 6607
Mob +61 407 453 443
[email protected]
JOHN KELLY
Partner, Brisbane
Tel +61 7 3228 9368
Mob +61 417 757 153
[email protected]
LIMING HUANG
Special Counsel, Melbourne
Tel +61 3 9672 3132
Mob +61 450 679 477
[email protected]
ANDREW LUMSDEN
Partner, Sydney
Tel +61 2 9210 6385
Mob +61 418 110 665
[email protected]
MICHAEL MACGINLEY
Partner, Brisbane
Tel +61 7 3228 9391
Mob +61 417 621 910
[email protected]
PETER JAROSEK
Partner, Perth
Tel +61 8 9460 1804
Mob +61 420 856 281
[email protected]
LINDA HUAN
Associate, Melbourne
Tel +61 3 9672 3415
Mob +61 410 625 786
[email protected]
LIZZIE KNIGHT
Partner, Sydney
Tel +61 2 9210 6437
Mob +61 402 793 072
[email protected]
SHAUN McGUSHIN
Partner, Sydney
Tel +61 2 9210 6915
Mob +61 414 225 340
[email protected]
JAMES MINCHINTON
Partner, Brisbane
Tel +61 7 3228 9333
Mob +61 420 907 478
[email protected]
RUSSELL PHILIP
Partner, Perth
Tel +61 8 9460 1673
Mob +61 400 299 098
[email protected]
JEREMY HORWOOD
Partner, Brisbane
Tel +61 7 3228 9790
Mob +61 422 150 625
[email protected]
ROBERT FRANKLYN
Partner, Perth
Tel +61 8 9460 1706
Mob +61 409 787 224
[email protected]
DAVID BECKETT
Partner, Brisbane
Tel +61 7 3228 9318
Mob +61 423 822 647
[email protected]
TIGHE WHELAN
Partner, Perth
Tel +61 8 9460 1653
Mob +61 411 475 766
[email protected]
STEPHANIE DAVESON
Partner, Brisbane
Tel +61 7 3228 9493
Mob +61 438 787 402
[email protected]