ORIGIN ENERGY LIMITED Audio Webcast

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ORIGIN ENERGY LIMITED (ORG)

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ORIGIN ENERGY LIMITED (ORG) Events

Company (Stock Code)	Date/Time	Event	Timezone: Australia/NSW
ORIGIN ENERGY LIMITED (ORG) Teleconference Briefing for Analysts and Investors	Wed, 22 Apr 2009 01:00PM	ORG - Origin to Acquire Further CSG Reserves - Mr Grant King, Managing Director
ORIGIN ENERGY LIMITED (ORG)	Thu, 26 Feb 2009 09:00AM	ORG - 2009 Half Year Results - Mr Grant King, MD and Mr Frank Calabria, CFO
ORIGIN ENERGY LIMITED (ORG)	Wed, 15 Oct 2008 02:30PM	Origin Energy 2008 Annual General Meeting - Mr Kevin McCann, Chairman and Mr Grant King, Managing Director
ORIGIN ENERGY LIMITED (ORG) Origin Announces CSG to LNG JV Partner	Mon, 8 Sep 2008 10:30AM	ORG - Origin Selects ConocoPhillips to Acquire a 50% Share in a CSG to LNG Joint Venture - Mr Grant King, Managing Director
ORIGIN ENERGY LIMITED (ORG)	Thu, 28 Aug 2008 10:00AM	ORG - Full Year Results 2008 - Mr Grant King, Managing Director and Mr Frank Calabria, Chief Financial Officer
ORIGIN ENERGY LIMITED (ORG)	Tue, 19 Aug 2008 09:45AM	ORG - Target's Statement - Mr Grant King, Managing Director
ORIGIN ENERGY LIMITED (ORG) Origin Energy Rejects BG Group's Unsolicited Conditional Takeover Bid	Fri, 4 Jul 2008 02:00PM	ORG - Response to BG Group Offer - Mr Grant King, Managing Director
ORIGIN ENERGY LIMITED (ORG)	Thu, 28 Feb 2008 09:30AM	ORG - 2008 Half Year Results - Mr Grant King, MD and Mr Frank Calabria, CFO
ORIGIN ENERGY LIMITED (ORG)	Wed, 25 Mar 2009	Date Payable
ORIGIN ENERGY LIMITED (ORG)	Tue, 10 Mar 2009	Record Date
ORIGIN ENERGY LIMITED (ORG)	Tue, 3 Mar 2009	Ex Div Date
ORIGIN ENERGY LIMITED (ORG)	Mon, 23 Feb 2009 11:00PM	Interim Results
ORIGIN ENERGY LIMITED (ORG)	Wed, 15 Oct 2008 09:30AM	Annual General Meeting Australian Ballroom, The Menzies Hotel, 14 Carrington Street, Sydney, NSW
ORIGIN ENERGY LIMITED (ORG)	Tue, 14 Oct 2008 11:00PM	Full Year Results
ORIGIN ENERGY LIMITED (ORG)	Fri, 3 Oct 2008	Date Payable
ORIGIN ENERGY LIMITED (ORG)	Tue, 9 Sep 2008	Record Date
ORIGIN ENERGY LIMITED (ORG)	Wed, 3 Sep 2008	Ex Div Date
ORIGIN ENERGY LIMITED (ORG)	Thu, 3 Apr 2008 11:00PM	Date Payable
ORIGIN ENERGY LIMITED (ORG)	Mon, 10 Mar 2008 11:00PM	Record Date
ORIGIN ENERGY LIMITED (ORG)	Mon, 3 Mar 2008 11:00PM	Ex Div Date
ORIGIN ENERGY LIMITED (ORG)	Wed, 27 Feb 2008 11:00PM	Interim Results
ORIGIN ENERGY LIMITED (ORG)	Wed, 31 Oct 2007 09:30AM	Annual General Meeting Wesley Conference Centre, 220 Pitt Street, Sydney 2000, NSW
ORIGIN ENERGY LIMITED (ORG)	Wed, 3 Oct 2007	Date Payable
ORIGIN ENERGY LIMITED (ORG)	Mon, 10 Sep 2007	Record Date
ORIGIN ENERGY LIMITED (ORG)	Mon, 3 Sep 2007	Ex Div Date
ORIGIN ENERGY LIMITED (ORG)	Wed, 29 Aug 2007	Full Year Results
ORIGIN ENERGY LIMITED (ORG)	Fri, 30 Mar 2007	Date Payable
ORIGIN ENERGY LIMITED (ORG)	Thu, 8 Mar 2007 11:00PM	Record Date
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ORIGIN ENERGY LIMITED (ORG)

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PRESENTATION BY GRANT KING, MANAGING DIRECTOR OF ORIGIN ENERGY LIMITED (ORG)

“Origin Announces CSG to LNG JV Partner”

http://www.brr.com.au/event/51052

 

MONDAY, SEPTEMBER 8, 2008, 10:30 AM.

 

            ORG    Mike, I think this is the third week in a row that we’ve asked you all or invited you all to attend the briefing. Hopefully they’ve gotten more interesting as

10                    each of the week has gone by. What I would like today is clearly to give a lot more substance and flesh around the transactions we’ve announced this morning. What I’d like to do now is to hand over to the Chairman of Origin Energy, Kevin McCann, who’ll say a few words (inaudible) (00:00:20) to begin this presentation. Kevin?

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            ORG    Well, welcome, everyone, this morning. It’s my pleasure to introduce two speakers, Grant King, our Managing Director of Origin Energy that probably needs no introduction, and our guest, John Lowe, Executive Vice-President, Exploration and Production of ConocoPhillips. I’d also like to welcome some

20                    of his colleagues, Darren Jones, who’s President of Global Gas of ConocoPhillips; (inaudible) (00:00:55) President of ConocoPhillips Australia, (inaudible) (00:00:58) runs the Australian Operations; and Mike (inaudible) (00:00:58) who’s Vice President, Commercial, ConocoPhillips Australia.

 

25                    The order of business today is that I’m going to speak of the highlights and transactions and then I’ll ask Grant to take you through more of the details. We’ll be asking John to talk about ConocoPhillips and the role that it is playing in the joint venture

 

30                    Well, ladies and gentlemen, what I’d like to do is take you through the highlights of the transaction. There are four highlights that I’d like to draw your attention to. There’s the transaction with the shareholder benefits. There’s the valuation of Origin and our partner ConocoPhillips. The transaction is one where the Origin Board has determined to select ConocoPhillips to acquire a

35                    50% share in a CSG to LNV joint venture for up to A$9.6 billion. The proposal is that Origin and ConocoPhillips will jointly developed up to a 4 train CSG to LNG project in Queensland. I’m pleased to point out that we have a CSG 3P benchmark was up A$1.88/GJ.

 

40                    What are the shareholder benefits? There’s going to be a substantial earning uplift for Origin and that will be in this current year and going forward. Secondly, we are going to have a strengthened balance sheet. The cash that we get from this transaction will leave Origin in a very, very strong financial position. I’m pleased to announce and we’ll be developing this as the

45                    presentation proceeds, if you have a A$1.5 billion capital management initiative, it would benefit the shareholders immediately.

 

                        Origin value. The Independent Expert values Origin’s CSG business at between A$16.7 to A$17.4 billion and that translates into a per share value of A$18.70 to A$19.4 a share. The Independent Expert, that’s Grant Samuel, and I’ll be talking more on that in the presentation…. The Independent Expert values Origin shares at between A$28.55 to A$30.71 a share, and as I said, I’ll be talking more to that in the presentation.

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                        The final thing about the transaction is our partner ConocoPhillips. John will be talking in more detail on this, but ConocoPhillips is a leading developer and operator of LNG plants around the world that has unparalleled experience. It is a company that’s the leader in LNG technology and it has

10                    patented technology which John will talk to as well. Very importantly for us, it is a leading developer and operator of coal seam gas in the United States, by far the greatest production in the United States, and Grant will talk to that. Very importantly also for us, it is the operator of the Darwin LNG plant, and again, we’ll be providing some more details on that.

15

                        So, let me now ask Grant to take us through the details of the transaction.

 

            ORG    Okay, thanks, gentlemen. I’ll talk through a couple of subjects, the detail of transaction and how the benefits of that transaction had been applied to

20                    Origin, and as is our normal fashion, we’ll work through the details and when all the presentation is finished, we’ll go to questions in this room and on the telephone.

 

                        As you’re aware from Kevin’s opening comments, ConocoPhillips has been

25                    the partner we’ve chosen so we just need to put ourselves through to the right side, so we’ll talk you through the transaction.

 

                        Firstly, the assets that have been sold. It’s 50%. Effectively, what we’ve done is put all our coal seam gas assets, the related production facilities, contracts,

30                    etc., which (inaudible) (00:05:59) in the company in Origin that we’ve sold with ConocoPhillips acquiring shares in that company effectively incorporated joint venture. So that’s the assets that have been sold. It’s the entire asset of our coal seam gas business.

 

35                    As you can see there from the detail, the consideration from ConocoPhillips will involve a number of transfers and upfront payment of US$5 billion. All of this is being converted at an A$0.83 exchange rate. So far, US$5 billion and A$6 billion. An additional contribution in Australian dollars of A$1.15 billion which will essentially carry us through our expected budget to FID between

40                    now and 2010, end of 2010. Then additional payments of US$500 million. Today’s rate is something like A$600 million for each train approved up to 4 trains. So the sum of those numbers in Australian dollars is A$9.6 billion.

 

                        We’ll talk about benchmarks on the subsequent slides and we’ll also talk

45                    about how we see the joint venture working and the role that each of the companies will play in the joint venture, but suffice to say that joint venture was designed to play to each company’s strengths and that will be a very powerful and strong, effective and long-lasting joint venture.

 

                        Clearly, in completing the transaction and we’ll talk a bit further about some of the approvals required but subject to those approvals, we expect the transactions to complete around end of October or during October. We would proceed to a train 1 or train 1-2, possibly 1-2 but at least to train 1 position

5                      around end of 2010 with the view that the first train will come online sometime around 2014, and we see from subsequent schedules that it is a continuous process of building our train probably through the latter part of the next decade.

 

10                    There are only two conditions precedent: The FIRB condition obviously, and secondly, any approval that we always determined to be necessary as the result of account BG offer, and details on that are included largely by way of attachment to a media release. We’d be happy to take questions on that later on if there should be any questions.

15

                        So, what’s at the heart of it? It’s clearly, Origin’s existing CSG reserves and resources. Many times in this room and on the telephones, we’ve talked about Origin’s view of the size and quality of those resources and I’ve also heard a few counter views expressed by others about the size and quality of

20                    those resources, that I would say let’s just put that beyond doubt, there should be no further discussion about the expensive nature and quality in the stage and development of Origin’s coal seam gas resources.

 

                        As I’ve said, the entire resource base goes into the joint venture and it’s

25                    current status is around 10,100 PJ at the 3P level, contingent of about 15,800 including the longer term and prospective resources in the Galilee Basin. As I said, the transaction includes all of the related production facilities. It almost seems inconsequential to say our conventional interest in the Denison Trough totalling of margin 44 PJe, but nonetheless, it’s very important to get that

30                    detail in there, and all of our existing CSG sales contracts which, of course, are with third parties and directly with Origin. Those contracts will go into the joint venture on their current contractual firms. Those with third parties will be obviously continuing that direct relationship between the third parties and the joint venture and mostly Origin, between Origin and a joint venture on the

35                    basis to affirm existing pricing arrangements that were put in place quite some time ago.

 

                        As has been discussed many times, some of Origin’s CSG reserves are subject to reversionary rights and all of that information that has been made

40                    available to all the bidders in the process and obviously including ConocoPhillips. So you should be comfortable that the conclusion ConocoPhillips has come to in bidding for these assets has been on a fully informed basis. So, I don’t think there can be any doubt now about the quality of Origin’s CSG reserves and resources.

45

                        We’ve included this chart on benchmarks, and I would like to talk to this for a little while because I find it’s one of the most frequently asked questions. Straight away, people like to go to benchmarks and you’ll know that in the past, we said one needs to do so with caution because benchmarks really depend on many things, including the size and quality of the resources available, the state of development, etc., etc.

 

                        I can say that when we decided to undertake that CSG monetization process,

5                      clearly it was our objective to maximize value for our shareholders and we determined that they’re willing to offer up to 50% of our resource, operatorship, particularly in the LNG and LNG Marketing, with a pretty good part of that process. We knew that the scale of resource we are offering put an avenue support and you’ll recall it’s been at least a 6-million-tonne project

10                    and an avenue greater, but nonetheless, we put to you that we have a scarce of resource and the resource developed to the extent that we could see it supporting at least a 6-million-tonne project.

 

                        Now on that basis and on the basis of the payments that we’ve described to

15                    you previously, you can see the way those various benchmarks might stack up and perhaps the one I would draw most attention to is the 6-million-tonne what we might think over the 2-train project. You should note by the way that it was the intention to actually see if there was a 2-train project, actually about 7 million tonnes because we had 2 x 3.5 million-tonne trains. The reason I

20                    think that’s an appropriate place to look is that’s probably the most comparable with the recent Santos/Petronas transaction, and as it turns out, at an 83-cent exchange rate which is entirely coincidental, the benchmark is almost exactly the same.

 

25                    Now, I would contend to you that’s just two things, we now do have a good idea of what our value of large scale well-developed high quality coals and gas resources. Not all coals and gas resources are the same, not all coals and gas resources attract the same price and the same benchmark, but I think we’re now beginning to see where the true value is of the better coals

30                    and gas resources.

 

                        Secondly, I’ve contend that in the context of ConocoPhillips is irrelevant, what’s in the 1P, 2P and 3P category I would say, because I don’t think there’s any company in the world better placed to actually do and review the

35                    technical work as ConocoPhillips has done and formed their own view about the nature of the resource independently of any advisory or anybody else might have given them.

 

                        So, I think the benchmarks are clearly benchmarks made by very informed

40                    and knowledgeable buyer, and I think recognizing the truth essentially the resource no matter what category of reserves today. In the long run, should the project develop through and has settled the intention of joint venture that does develop through in the four Trains then, clearly you can get a higher benchmark, but I would put to you that a high benchmark really reflects

45                    ConocoPhillips knowledge of the resource and believe that the scale of the resource is fair. So we think this transaction has two things, it confirms what the high quality CSG access to work, and secondly, it’s consistent with our view of what they were worth. Much has been said about what’s the value of Origin, I can tell you that the value of Origin is consistent with the view withheld for a long time and the greatest thing that we’re taking out of these transaction is confirmation of those news was withheld by someone like ConocoPhillips. So now our view is a very sensible number and reflective of the true value of the assets. But nonetheless, for those who like benchmarks,

5                      there they are and you should be able to work with them with great joy and enthusiasm.

 

                        Precisely, how will the joint venture work? If we thought about the LNG value Train and we think about the upstream phase, the LNG plant, marketing

10                    including shipping and then also a little bit of domestic gas marketing, I’m not going to say if I work from the right hand side, a little bit of domestic gas marketing, around 2,200 PJ is the volume of that so committed to existing domestic contracts in Origin’s business and to third party customers previously supplied by Origin. Origin will continue to, if you like to think of an

15                    upgrade, that part of the business. Now having said that quite clearly, our focus is now on developing reserves and resources in the LNG project that has clearly tasked here to manage those existing contracts, many of them are quite long term, up to 20 years, into those existing customer bases.

 

20                    Origin will also provide what we think of as ramp-up services to the joint venture, to the extent that the joint venture will manage the ramp up the CSG production through infield opportunities. It is likely that there would be additional ramp-up gas and Origin will effectively also take that ramp-up gas and move it to into the market, as well, thereby, facilitating the development

25                    of the resource and making sure that it comes on at a timely fashion and is able to support the commission of the Trains as they are completed.

 

                        We then go back to the upstream phase, Origin will remain operator of the upstream phase and that effectively as all of the CSG fields and pipelines

30                    route to the inlet of the plant, ConocoPhillips will develop and operate obviously the LNG facilities and the joint venture will be responsible for the marketing. Conoco will provide us with a project director for the entire project and based on Conoco’s track record in project management, why would be doing anything else other than that. Contact will also provide us with

35                    someone to lead the marketing there to the joint venture given that Conoco also has very deep marketing relationships with customers in the Asia Pacific Region.

 

                        What this creates is a fully aligned joint venture and it seems to us, as we’ve

40                    learned more about LNG that to those who’d invest in LNG, that’s quite a desirable feature. Many projects have been talked about in Australia, a little on around the world and very few make them through to completion often because of the multiplicity of interests, often at times conflicting interests that exist in these joint ventures.

45

                        I can tell you that in our work with ConocoPhillips to date, there is no conflict and we expect no conflict. This will be an extraordinarily aligned and harmonious this joint venture certainly from Origin’s perspective.

 

                        I think we’ve covered most of the elements in there. As far as bringing about the joint venture is concerned, there are some other contractual arrangements that has stood out in documents attached to media release. There’s an exclusivity agreement there, the details not surprisingly on break

5                      fees, etc, which I’m sure  will be of interest to some and then therefore you’ve to look up. Again, as I mentioned in relation to the previous slide, I mean, really two conditions precedent; first is approval and whatever is necessary in relation to the currently existing PG offer. So that in a nutshell is what’s being created through this joint venture.

10

                        In terms of timeframe, as I say, we will, upon completion, move as quickly as we can into fund and engineering design work. The top of that list is site selection. Origin has already commenced some work but the extent to which the process would run through was progressing. It wasn’t sensible of course

15                    to complete that process until we knew who the successful bidder was. Some may have sites, some may not. We have identified a number of sites and we’re now working very closely with ConocoPhillips to accelerate that site selection process.

 

20                    We will move into on completion, a budget or a process through FID and you can tell if you look at the map so when we say that there’s a 1.15 billion carry through to FID that’s 50%/ That very quickly tells you that there’s something like $2 billion of expenditure through the end of 2010. The bulk of that expenditure is actually on proving up reserves to late existing contracts,

25                    because, as I said, have a large portfolio of existing contracts to meet, but also driving reserves down into that IP and 2P category as quickly as we can to support the final FID decision which we’re hopeful to be in a decision to make at the end of 2010.

 

30                    I’ll say no more than reference John’s commentary, but I doubt if there’s an organization in the world that can meet ConocoPhillips’s record for developing projects on time and on budget. We, therefore, think that the progress from FID, through to first shipment, will be a very effective and expeditious process and target in 2014. In our view, it’s a very realistic

35                    proposition for us in this joint venture.

 

                        So that’s basically the program through the next few years. Trains, I think our preference is to make a Train 1-2 decision at FID and they will come on fairly quickly. Trains 3 and 4 would progress thereafter. That really sets up a

40                    schedule of development that really runs over the next decade and really builds a truly, truly world-scale LNG project. For reasons, that perhaps John might touch, the view is that the train sizes will in fact be 3.5 million tonnes each, so a 2-train project will end up bringing around 7 million tonnes and each additional train accordingly.

45

                        Just to summarize just part of the transaction. We were very committed to running a process that would demonstrate the value of Origin’s CSG resources and we therefore, are committed to whether effectively bid the best overall package including considerations as a key part of that decision. But as it turns out, the best outcome has arisen. The proposition by Conoco to assist clearly, financially, the best proposition put to us and can I stress there that all of the proposals received were excellent and compelling proposals, but there is a winner and quite concluded that winner is being ConocoPhillips, but there

5                      is another winner and that’s Origin and Origin shareholders, because there is not a company that is placed in the world to help us deliver on this proposition. Once I read laboriously through all of those points, but when you line up the capabilities of the two companies, then I think you’d agree that we do have an extraordinary combination, an extraordinary capability that has

10                    come together in this joint venture.

 

                        So to those of you that might be tempted to wonder about that half of our business that hasn’t been paid for in cash, it’s worth just as much if not more. Just for the removal of any doubt, okay, it will deliver some exceptional value

15                    for our shareholders.

 

                        So, if we then think about how do we translate this values through the shareholders, we’d just make a couple of observations. Firstly, as to its immediate impact on Origin’s financial position and if we think about it in

20                    terms of balance sheet and P&L, Origin will clearly have no net interest bearing debt. Now that long and convoluted flat rate, reflects the fact that we wont’ necessarily retire all of our debts because some of our debt facilities are long-term facilities and are sensible to keep in place. But if you like to think about it as no net interest-bearing debt and a substantial cash position that’s

25                    what arises as the result of this transaction. Clearly that will have a substantial impact on the company’s financial statements as well. We have run up a slight amount of debt over the last few years as we deal projects, and once we are very comfortable with our dealing, it’s clearly now going to be all that debt in a net sense is eliminated as a result of this transaction.

30                    That will have a substantial impact on our P&L and whilst I’m sure all of you would very quickly do the math just to help you along the way, if we took current consensus for this coming year, I think about $507 million is the current consensus. On the assumptions these transactions completed in November, you’d find out unit per share would be up about 35%. If you look

35                    at this as a run rate…. let’s assume this transaction happened at the beginning of the year, our units per share would be up about 50%, or nearly 55%, that’s just simply on the interest effect alone.

 

                        So quite clearly, it transforms Origin in terms of its financial capacity, it’s

40                    balance sheet and its earnings trajectory and quite extraordinary flexibility for us to continue, to consider both other investments and particularly what we might do in the very immediate term in terms of our various capital management alternatives.

 

45                    What the board is determined to do following completion of the transaction is to commit $1.5 million immediately to those initiatives and the first of those steps would be to pay an additional dividend as soon as we can up the completion of 25 cents a share. The aim of that dividend is to say very clearly to you, our shareholders, that based on the EPS impact or the earnings impact of this transaction, our dividend is rebate. If we add that 25 cents for the results for the full year which resulted also in a 25-cent dividend, we’d encourage you now to think that 50 cents is a good price to start from now in terms of dividends from Origin. We expect that to continue to grow as Origin’s

5                      profits will grow, but also given the strength of the company’s financial position, the board is also determined that we’ll now target the payout ratio of at least 60% going forward. So, historically we’d target around about 40% payout ratio going forward, dividend payout around 60% or at least 60%. Let’s start that from the 50 cents a share base, another 25 cents a share base

10                    because it’s where we were at the end of the year. So whilst there’ll be an initial additional dividend to reflect that. I’d like to make very clear that’s a starting point, a new starting point and a new trajectory for Origin dividends going forward. We will commit the  balance $1.275 billion to an unmarket buyback and at this stage, there’s no… there’s no further terms with that buy

15                    back for me to see where things settle but at the end of the day, 1 ratio performed we’d like to get that money back out in the market and that of course will occur following completion in a fairly orderly manner but at this state it’s not possible to specify, obviously anything like pricing or duration for that proposal, but basically, $1.3 billion committed to that unmarket buy back.

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                        Now, what we would do having made that decision is think very carefully as we would normally do about our options going forward. There are potentially a number of investment opportunities here, some of them, perhaps, struggling more than others, particularly in New South Wales, but we’d like to see what

25                    plays up, in terms of some of those opportunities and clearly, we’d like to see how the transactions settles that we would also think there’s substantial capacity for the company to consider fairly capital management initiatives in the coming financial year that is not this, but the next financial year and whether or not that manifest is perhaps enough market buy back that

30                    something that will come in play at that point in time.

 

                        So we said we wanted to make that very immediate decision to get that money back into shareholder’s hands and summarize share perform but also sit back in a more considered manner and think about our medium term

35                    future and the opportunities we see and then look at whether there are further opportunities, or additional returns to shareholders over the next twelve months or so.

 

                        Now, what I’d like to do is to hand back to our Chairman, Kevin McCann. As

40                    you know, the board commissioned a report from Grant Samuel & Associates and I’m sure Kevin would like to make a few comments on that report.

 

            ORG    Thanks, Grant. Well, the directors had always intended, when the monetization process was completed, that we would obtain an independent

45                    experts valuation of the company, its shares, and also provide the shareholders with a report on the value of the company compared with the offer before them from Beijing. In terms of the timing of the valuation, it was always sensible to do that when the monetization process was completed. That in ideal was quite demonstrably clear. So we’ve now completed the process, we have the result and attached to the media material is a short form letter from Grant Samuel which spells out the conclusion of the termination.

 

5                      We will be providing the shareholders with a full form valuation and we have promised that that will be provided prior to the closing date of BG’s offer, but we felt that it would be helpful and appropriate that we provide the summary and that’s there before the shareholders now.

 

10                    What Independent Expert has determined is Origin’s shares are valued from a low of $28.55 to $30.71.What the slide demonstrates is that the value which the Expert has placed on our coal seam business exceeds the entire value of the BG bid. That demonstrates, I think, conclusively, the value of Origin’s coal seam assets as Grant has pointed out by absolutely outstanding and world

15                    class. So we’ve got that table, as I said shows that we have a valuation demonstrating that the BG also is demonstrably inadequate. The directors maintain and reiterate the unanimous recommendation that the Origin shareholders reject BG’s demonstrably inadequate taker of our offer of $15.37 a share. That is $15.50 minus the dividend which we will be paying to

20                    shareholders next month…. early next month. So I think that the Independent Experts of valuation is a very important element in this transaction, very important document for the shareholders, and very important document for the market.

 

25                    Now, it’s my pleasure to ask John Lowe if he can take the stand and John is going to tell you something about ConocoPhillips generally and this proposal in particular.

 

      CP             Thank you Kevin and thank you Grant, as well. On behalf of ConocoPhillips,

30                    I’m very pleased to be here and I can assure you that everyone at ConocoPhillips today is very excited about this opportunity. As Grant mentioned, that on Sewell, we did look at the Netherland-Sewell report. We have a lot of experience with Netherland-Sewell, a very, very credible organization and we have a lot of respect for them, but having said that, we

35                    did our own due diligence to make this type of investment and I think we have people who are as qualified as anyone else in the world to evaluate this resource. I think the word that I would use to describe by technical people response to this was that they were giddy. I don’t know if that translates in Australia. So very excited about the resource opportunity, and that really

40                    matches ConocoPhillips skills. We have as Grant mentioned…. we have extensive coal seam gas skills, we also have LNG expertise both in the technology side and the development side also LNG marketing, and we extensive project management experience. So we really felt this  was right up ConocoPhillips strengths that we would have to offer and it’s just a very

45                    unique opportunity that we have….this type of resource in a location such as Australia, so we are very excited.

 

                        I don’t know if I’m doing that or not, but…

 

                        Just to tell you a little bit about ConocoPhillips, I know not all of you are familiar with ConocoPhillips, but we’re a large integrated oil and gas company, international, we have operations in around 40 countries around the world. We really have four main product lines. So we have, our largest, is

5                      exploration and production; the second big element that we have is refining and marketing. You know, we have large joint ventures in chemicals which we do globally, with Chevron 50-50 and on North America midstream business, gas gathering, processing, transportation we do with a company called Spectra 50-50. We also have a couple of those unique ventures. One

10                    we own 20% of a large Russian company LUKOIL, we also have a large joint venture with LUKOIL. A couple of years ago, we entered into a 50-50 joint venture with the Canadian company, EnCana, which I think is very similar to what we’re dealing here, 50-50 joint venture they had a very huge resource in the oil sands in Canada. We’re participating with them there, I really see a lot

15                    of analogies here, and of course that’s part of the real appeal for us as we have a lot of oil exposure and now we have exposure to a very large gas resource.

 

                        I think, ConocoPhillips is uniquely qualified to help Origin in the development

20                    of this coal seam gas in the LNG. This slide talks about our experience over the last 25 years in developing coal seam gas. We have a very large position particularly the San Juan Basin in the US where we produce about 1.2 bcfed a day,  about the equivalent of 200,000 BOE a day. We’ve been drilling there for a long time. We have about 13,000 wells, 10,000 operated wells. Each

25                    year we have a very deliberate program, we drill 350 wells bringing them on stream and we have identified at least an additional ten years of….we have  the exact location that we’re going to drill for the next 10 years. So, obviously through that, you get not only the economies of scale, a lot of learning and you know, so we have developed into a very low cost model, we’re the low

30                    cost operator in that basin. I see so many analogies between what we’re looking at here in Queensland today versus what they’re looking at in San Juan twenty years ago.

 

                        Also mentioned the LNG experience we have, the picture is of our Kenai

35                    facility and that facility has been….. never met the shipments from 1969 until today, delivering to Tokyo Electric, Tokyo Japan. In Japan, the gas feed actually in the cook inlet is almost identical to what the gas feed would be here from the Queensland, so very similar gas feed stock, so we a facility that’s been running since 1969, so we feel very good about that. We’ve…

40                    jointly with Bechtel who we worked with in collaboration on developing the LNG facilities,  we developed eight facilities over the last twelve years. Every one of those facilities has been delivered on time, on budget and has exceeded design capacity. So we have a lot of confidence in our ability to deliver on the LNG side of the business.

45

                        I might mention QG3 is another project, this is Qatar Gas. We’re actually the project manager for QG3, QG4. These are huge projects, 7.8-metric-tonne-per-annum facilities, two of those going up at the same time in Qatar so we are….. we have the capability and we’re very used to delivering on very large, very complex projects.

 

                        ConocoPhillips has actually been in Australia for forty years. We are of

5                      course…..the main assets that we have here is the Bayu-Undan fields which delivers liquids and gas, liquids is a little over 100,000 barrels a day gross, the gas goes into the Darwin facility. But we also have other acreage…. exploration acres in the Browse. We have an interest in Sunrise, we have an interest in Caldita/Barossa and we are just thrilled to have the opportunity to

10                    invest more in Australia. I think this is the last slide I have, the Darwin facility which…. we’re very proud of this facility. It’s one of only 2 facilities in Australia that has been a success in every way you would want to look at categorizing it, you see, we run about 650 million cubic feet a day into that facility today and of course, we continually look to update and improve our technology but

15                    certainly this facility is a good go buy for the 3.5 nominal metric term per year facility that we would look at putting in for this development. I think that’s all I have. Grant, right over to you.

 

            ORG    Thanks, John. I certainly can and I trust you can tell it from John’s

20                    presentation why we’re absolutely delighted to be working with ConocoPhillips, extraordinary capabilities, extraordinary company, and those of course, are going to make an extraordinary project for us in our LNG joint venture.

 

25                    I’d just like to make few comments looking forward because clearly, the future is a bright one. Essentially, I’d like to try and capture that in just two slides. Today’s discussion and today’s release has been very much around our partnership with ConocoPhillips in LNG…our CSG and LNG project in Queensland, but of course, that’s not just the story of Origin because some

30                    might say we’ll that’s quite some time away, there’s a quite a while between now and that project is delivering. Of course,  this project sits in the context of the company that’s already got a tremendous amount happening within it. The purpose of this chart is to simply communicate to….that between now and the next thirteen years, we have a very substantial pipeline of

35                    development projects. As we’ve discussed today, our full year results Otway will make its first full year contribution this year. Uranquinty and Quarantine power stations will be commissioned this year. Kupe Gas project will come online next financial year. We have a number of wind development object and projects, that obviously including Cullerin being the first one. Expansion last

40                    year with the Darling Downs power station will come online around 2010, early 2010 and so for almost all the way through to 2012/13,and then of course, in 2014 we’d be expecting to see the first of these LNG Trains come on line.

 

45                    I cannot say that each of those bars does not, in thickness, represent the contribution to earnings. We haven’t quite figured out how to do a chart like that yet. But can I say the scale gets bigger and bigger and quite clearly, when those LNG Trains come online, they will be an extraordinary significant contribution to the earnings and growth of Origin.

 

                        So ladies and gentlemen, you don’t have to wait for 5 or 6 years, Origin will continue to grow and will grow very strongly between now and when these projects begin to deliver. What’s important for us from this transaction is the

5                      two things, it says to you the delivery of a large multi-train CSG to LNG project is real and will happen with Origin and ConocoPhillips. Between now and then, the contribution that ConocoPhillips has made will see us fund those other projects that are from clearly existing cash flows and balance sheet. You will not have to put your hands in your pockets for a cent for

10                    many, many years to come as we drive the continued growth of Origin and so we think that the company is really….we’ll we’ve always been at the beginning, we’re always seem to be delivering a tremendous pipeline of growth. That’s what we’ll continue to do to shareholders of Origin.

 

15                    In summary, today we are here to talk about what we think is a fabulous transactions for both parties, the ConocoPhillips and for Origin. The case as far as we believe it, Ken and I, I haven’t heard the expression from John before “giddy”, I didn’t realize that was a technical term that we use in the coals and gas industry, but I’ll quote that in the future. I think that’s a

20                    tremendous vote of recognition as the quality to CSG resource position, and if we deliver those four trains, yes, Origin may receive up to face value $9.6 billion to what Conoco and Origin shareholders will receive is an enormous 30-40 year legacy projects and opportunities that will drive the growth of both companies. Mind you, they’re just a little bit bigger than us, so we’re not quite

25                    the same percentage contribution are on, but I can show you it will for Origin.

 

                        Yet clearly the company is transformed by this transaction. In the balance sheet and earnings perspective, it is a truly transforming transaction. One, let’s be careful how one uses that term but I think on this occasion we’ll throw

30                    an adjective in and use it generously.

 

                        Kevin has talked to the Independent Experts work, I suspect there might have been a view that a 15-50 or something like that, or somewhere near the mark, it’s not. It’s very simple answer, it’s not, it’s a long way away.

35

                        You can see from John’s presentation and half of the comments that we have made today that it sometimes happens in life that right after  there’s been the truth, we foresee an extraordinary proposal from ConocoPhillips not just in its consideration but in its capability and it’s  an extraordinary outcome for Origin

40                    I’m sure, and hopefully also for John for ConocoPhillips. Completion of this transaction and can I say to see to you that it’s in your hands actually. Completion of this transaction does transform Origin. It sets Origin up for  a decade of growth and as I say, you don’t need to put your hands in your pockets at all for that to occur, but we do need to get there. We do need to

45                    clear the decks, and it our intention to spend time with you talking through the benefits that we see of this transaction with the view that if we proceed in this form and complete the transaction then Origin continues its journey. I think it’s delivering exceptional value for shareholder.

 

                        So, ladies and gentlemen, thanks very much for listening to the formal part of presentation and we’d be delighted to take questions many of which I’ll refer to my colleagues, and hopefully,  we can answer in a reasonable period of time most of your questions. As is normal, we’ll take a few in the room first

5                      and then give those on the phone a chance to ask a few questions as well. So, Lawrence?

 

            Q         Thank you. Lawrence (Gregg) from Macquarie Funds. Good day, first of all. But secondly, I’d like to ask a question about …..there are a number of

10                    credible LNG proposals to be built within Queensland and I’m just wondering if you can talk about the competition aspect, the  competition to get people to actually physically build the installations, and also the competition in the market place for what would probably be a low calorific value LNG to be sold into, I suppose, the Asia Pacific region if not broader. Can you comment on

15                    those two?

 

            ORG    I think, Lawrence, I said I’d throw a lot of questions to my colleagues but I think John in respect to both marketing LNG and John made reference to projects they’re building in Qatar, I think he said there was a hundred

20                    thousand people inside who are working in that area, but I think John, safe to say, perhaps to comment on some of those, John, if you wouldn’t mind?

 

            CP       Sure, I think there is a great (inaudible) (00:41:46) for LNG. So we really don’t have let’s say any issues being able to market the LNG. As I mentioned in the

25                    presentation, the Kenai gas that we’ve been delivering to Japan for now thirty nine going on forty years is almost the same exact BTU content as the Queensland gas here so it actually is not a concern in the least. There’s actually some attractive attributes to it.

 

30        Q         I think we’ve seen in Western Australia with big iron ore developments and other developments and of course wood-side activities there, there’s been huge demand for skills, labour, a component tree, long lead items and things like that. If there are a number of competing LNG schemes going head in virtually the same location in Queensland, I’m wondering if you are

35                    anticipating problems there?

 

            ORG    I think certainly we have an advantage and that we have already built the facility here in Australia. The technology we know works. We have other facilities that are very similar elsewhere around the world, so I think we have

40                    an advantage over others and that we’ve got a big running head start, but certainly there are going to be challenges ahead to make sure we get the qualified people, but I can tell you our project management people are already very excited about the opportunity that become….moved to Brisbane and feathered the other opportunities that they offered than the

45                    ConocoPhillips’ portfolio. I can list some of those if you’d like.

 

            Q         I won’t mention Forex. Thank you.

 

            Q         Hi there. Matt Spence from Merrill’s. Tax implications from all of these, you’re obviously receiving a huge sum.

 

            ORG    Thanks, I’ve been waiting for this question. So, I have been practicing this

5                      answer too, Matt.

 

            ORG    So, just to make it clear how the consideration flows through Origin which may then enable people to get clarity around tax implication, you’re at 5 billion would be by way of subscription per share in the CSG limited entity, and then

10                    that funds will flow back to Origin in two forms, by return of capital and secondly, by way of loan. The return of capital will be taxable, the loan will be repayable at the time of construction of the Trains 1 & 2, they’re not for a  large number of years given the carry through to FID and then the contributions of carry at the time of announcement. It would be best to say

15                    that the return of capital is just under 50% of that consideration, and therefore you can work out the tax implications from there.

 

            Q         Thanks, and it wasn’t exactly clear in the present, will it have to go to vote of Origin shareholders?

20

            ORG    No, it’s not clear in the present.

 

            Q         And that’s because of an omission on your behalf.

 

25        ORG    No. Look, this thing got quite a bit of interest last week, but if you actually got back to the target statement, we made quite clear in the target statement in relation to BG’s big conditions that the issue here is how one thinks about to take out the panel’s guidelines on frustrating action and contrary to the opinion put forward by others. Shareholder meaning is not the only way that

30                    condition can be satisfied. So we will determine at the time the most appropriate way to satisfy that condition. I think of now main part of this depends on how BG responds as well. There may be no need to go to shareholders at all, that’s in other’s hand as well as our own. So we’ll make the right decision at the time but I will stress here as we always said,

35                    shareholders now have a choice, quite how that choice is manifested is yet to be determined but shareholders have a choice.

 

            Q         Ok thanks, and maybe just one last one for John. John, has ConocoPhillips looked at other CSM transactions in Southeast Queensland prior to this

40                    opportunity coming in?

 

            CP       Yes, we actively participated in the Santos process and that really gave us a lot of learning because we’re able to really, for the first time, get a team of technical people in here to look at the resource. Obviously, the Origin

45                    opportunity is in order magnitude larger, you know, much more attractive too.

 

            Q         Okay, thanks.

 

            ORG    Question at the back, I’ll just take a couple more in the room and then give people on the phone a bit of a chance.

 

            Q         Graham Cartwright, Independent Asset Management. A couple of weeks ago

5                      you spoke in your chart about how you have enough gas sort of defined at the 2P level for two trains and you foreshadowed the fourth Train development now. Can you or Conoco sort of talk through the optionality in your portfolio as to where those extra couple of trains are likely to come from?

 

10        ORG    In terms of reserves and resource?

 

            Q         Correct.

 

            ORG    John, I’ll make some comments but if you want to add to it, feel free to do so.

15                    If you look at what we call our 3P reserves or what Netherland-Sewell reported or certified as 3P reserves and contingent resource, that totals nearly 26,000 PJ or near enough to 26 this year. Clearly, Conoco has formed its own view but the view they would have formed is about the rated conversion of those reserves and contingent resources in the reserves and of

20                    course the migration down in the current category, and so, that four-train project sits within that proven and contingent reserves and resources. Now that I know that Conoco has been giddy about them maybe after conservative estimate, I have no idea that estimate may include to be considered. So, I think that’s the first part of the answer. The second part of the answer is that

25                    both speakers I think (inaudible) (00:48:10) project loss and while I say one would look back in 30 years time and say the same many, many, many thousands of wells drilled, it’s now process of continue to drilling to convert those resources into reserves but over a 30-year period, and not over 3-year period or 5-year period. I think the confidence in the resource is high. It’s just

30                    the rate at which you convert it into reserves and into production. John, do you want to add anything to that?

 

            CP       No. We view that there are definitely adequate resources to develop four trains. We think that there’s a lot of upside to that as well. So there’s just a

35                    tremendous gas resource available, there’s no question that there’s enough gas to develop several trains.

 

            Q         I guess when you’re looking at that and you’re looking at Queensland in total, do you see an opportunity in given that we still got four main LNG facilities

40                    announced or three at least that some aggregation is possible or optimal from here?

 

            CP       Take that one, Grant, or do you want me to do it?

 

45        ORG    Yes. My view is, and let me just perhaps do a slightly longer answer. I like that question. We said six months ago  after our consistent work with others that seemed to me the most effective way to develop resources but for the reasons we’ve also discussed previously, we initiated this process and you can see the outcome here today. In my view, the project that we’ve announced today is now the outstanding project in the region both in terms of resource and capability. Now having said that, there is much to be gained by development….common field development, sharing of infrastructure pipelines and I’ll be most disappointed if both conversations  didn’t occur with other

5                      participants. As to whether there’s some other form of aggregation either projects or in some form of consolidation, CSG it’s not a matter of discussion with ConocoPhillips, and the only observation I make use is it’s a natural tension between the simplicity of a 50-50 JV that says puts its head down and gets on with the job. This is perhaps some potential benefit so working with

10                    others but also the obvious intricacies of that brings to it as well. So I have to say we have an independent future. That’s for joint venture, but it’s equally….we’re still trying to cooperate whenever possible to optimize the development of resources. So don’t you feel happy with that answer.

 

15        Q         Yes, thank you.

 

            ORG    Just take on what you said that the nice thing here is that we have the resource and the expertise to simply just march on on our own and deliver this projects, but where it make sense, as Grant said, to have a shared

20                    infrastructure and potentially there are other ways that we can enhance everyone’s return by working together with others. Certainly we’re open to that but we definitely don’t want it to slow us down and delivering on what we believe we can achieve ourselves.

 

25                    So thanks, there’s another question in here. If none at the moment, are there any questions on the telephone?

 

      Moderator  Yes. A number of questions is lined up.

 

30  Operator    Your first question on the telephone comes from Mark Greenwood from JP Morgan. Please ask your question, Mark.

 

            Q         Okay, question for Grant, I’m wondering whether you can expand a little more on what the potential site locations are for the liquefaction plant? Is Curtis

35                    Island a frontrunner?

 

            ORG    The Queensland government had said Curtis Island site is a precinct, if you’d like to use that term, and there are a number of sites already allocated on that island. There are a number of sites that are available. There are other sites in

40                    Gladstone, not in Curtis Island, and there other potential sites, north and more so north, not far north of that area  north of Curtis Island, for example. That site selection process will now accelerate and to some extend it’s a little bit independent with the style of project as well. Our largest coal project may see some location independent of the Curtis Island location, but, yeah, I

45                    suspect that area is still the primary focus for sale.

 

            Q         Okay, and given that the FID decision of your project toward the end of 2010, that’s a little later than the FID decision of your competing projects, do you see an issue of skilled labour shortages that could delay your project if you don’t rectify the decision and I guess put your footprint on the resources before the two other major competing projects?

 

            ORG    I think John talked to that, I think a similar question was asked a little while

5                      ago and John talked about a little bit on that one. I think ConocoPhillips has built nine, I think, LNG projects and had do the same, you know, right in the middle of building two very large projects in Qatar. So I think ConocoPhillips is very friendly, plugged into the global supply chain on these projects. John, do you want to add anything to that?

10

            CP       No, I think that’s right. We do feel a sense of urgency though, and we are anxious to get moving on.

 

            Q         Yes, I guess I was talking less about the global supply channel and more

15                    about the local supply, and I guess just the skilled labour, which seems to be the most acute shortage.

 

            CP       I think that that’s a real challenge that we have to deal with. We deal with that all around the world. Obviously there are not skilled labours in a lot of the

20                    different areas where we develop large-scale projects and we developed a plan to deal with that and we build very large projects everywhere around the world, and hopefully, we can take advantage of the talented people here in Australia, but one way or another, I’d firmly believe that we’ll figure out how to develop these projects.

25

            ORG    John, I have an understanding that I think most of this slept through the development of diamond LNG as it happened extraordinarily quickly and easily and one would notice a diamond was  a city that was designed to support the construction of a huge LNG project. So I think that evidences

30                    what site would have been gone historically and that should be a basis for confidence as well, I think, in Australian context.

 

            Q         I just want a follow-up question if I could, just on the Independent Expert valuation, is that for four train development similar to what you’ve proposed

35                    here today?

 

            ORG    The Independent Expert and you’ll see in their report has that part of the valuation that relates to CSG. It’s based on ConocoPhillips’ proposal which is a four-train proposal.

40

            Q         Okay. Thank you.

 

      Operator    Your next question comes from John Hirjee from Deutsche Bank. Please ask your question, John.

45

            Q         Good morning. Grant, well done. I have a question if I may, but again these reversionary rights, a question there, does that allow potentially Tristar to come into this CSG Joint Venture at some point or do you expect them to revert?

 

            ORG    Well, Origin respects its view on the reversionary rights and they may revert under certain circumstances, and I’d invite John to make any comment if he wants, but from our perspective all of the information on those rights were

5                      made available to Conoco, all of which (inaudible) (00:55:35) or why they just changed the ownership and I would have thought if LNG provides the half… they’re used to that resource and that’s where it will go. John, do you want to add anything to that?

 

10        CP       No, I think, as Grant says, the fundamental item here is there is ample gas resource to develop multiple LNG trains. We think certainly four or more LNG trains and the gas resource is there. The reversionary rights, as Grant said, don’t impact the fact that the gas was there but certainly there is ample gas there to develop all these trains.

15

            Q         Sure. I guess I’m not questioning the fact that there is ample gas, I’m more questioning, does the joint venture vehicle you set up allow for another party to come into that?

 

20        ORG    Let’s try and break that question in two parts. We have not envisaged another party becoming a party in the joint venture in the way Conoco and Origin has. With the joint venture to buy gas from another party, I’m sure we would if in terms there are.

 

25        Q         Alright, and the question on the marketing aspect to the LNG, Grant, is this your intention to market the gas jointly with Conoco but have the right to separately sell your gas elsewhere if you so choose?

 

            ORG    The marketing of LNG is a responsibility of the joint venture and Conoco will

30                    provide a person to lead that function. At the moment our anticipation is that we jointly market it.

 

            Q         Okay, and the final question is, I guess, Grant, you looked at Origin previously….investment proposition for Origin has been an integrated

35                    domestic utility, how should Origin now be regarded going forward now that the predominant feature of its business would be LNG, which is much more exposed and obviously has a higher bid than your domestic business.

 

            ORG    That is far too sophisticated a question for me, John. You know, Origin is

40                    going to be continually growing company with a strong balance sheet and a fabulous future.

 

            Q         Okay, Grant, well done again. Thank you.

 

45        ORG    Thanks, John.

 

      Operator    Your next question comes from Gordon Ramsey from UBS. Please ask your question, Gordon.

 

            Q         Thank you. A question for ConocoPhillips, I’d just be interested in where you stand in terms of benchmarking, in terms of CAPEX for LNG projects, liquefaction, cost per tonne of capacity. Can you give any feel for that?

 

5          CP       We’ve got Darren Jones here who leads our Global Gas. Darren, benchmarks?

 

            ORG    Darren, we’ll just give you a speaker and then…

 

10        CP       I think as most people know we’re in a very challenging capital escalation environment, and whereas a few years ago I think most people would quote $300 to $500 per tonne, capital cost, things are well over a thousand most people think. We have experience in Australia, our project in Darwin was quite competitive in that $300 to $500 range, and so we think there’ll be some

15                    escalation from there, but we haven’t gone public with any specific estimate of the cost for the particular plan. So I think you can just guess at, you know, things are probably doubled at least, doubled or tripled in cost.

 

            Q         And just further question on customers for the LNG because of the lower

20                    calorific value and I know you have the experience from tonight, where do you envisage the LNG ending up?

 

            ORG    I think we’ll look at all opportunities. It’s secure, stable supply of LNG from Australia is going to be viewed extremely attractive by any number of large

25                    potential buyers. I think we’ll get a lot of calls here this week.

 

            Q         Thank you very much.

 

      Operator    Your next question comes from Derek Francis from UBS. Please ask your

30                    question, Derek.

 

            Q         Now, I have got a couple of questions. I guess my first is the current Origin share price of 70 and 80 and obviously this transaction (inaudible) (00:59:55) may even be a benchmark for at least the CSM (inaudible) (00:59:58) doing

35                    so, Grant, I guess you can have a lot of value here by buying back as many shares as you can while share price remains per share. I’m just wondering, what’ s the maximum that you could deploy to the buy back if the share price remained around this level.

 

40        ORG    Well, we have committed at this stage the 1.275 billion to that on market buy back. We can’t do that until the completion of the offer and that completion is in turn dependent on how the next week plays out in relation to the current BG proposal, but suffice to say that I think the board, and I guess I’ll venture an opinion on behalf of the board, but with the independent experts report,

45                    where it is is inconsistent with our views at the sorts of values that are possible. Non-market buyback is value acquitted to shareholders. It has quite significantly higher prices in this today. Having said that, clearly we’d prefer to apply those funds as wisely and effectively as we can.

 

            Q         But sir, why don’t you apply the whole US$5 billion to it if it is $18 or whatever? I mean, it adds a lot of value.

 

            ORG    We still have a fairly significant private capital program on our own. I’m not

5                      saying, you know, without beating around the bush when we said, look that was the decision we felt comfortable and make immediately in relation to $1.5 billion. We would look at alternatives but quite clearly there is additional capacity there and you’re right on your observation, but we’re not quite ready to commit to that expert employment until we clearly consider our options for

10                    the medium term.

 

            Q         But you have got capacity to do significantly more than the $1.1 or $2?

 

            ORG    We certainly could if there was no other immediate acquisition opportunities

15                    in particular. We wouldn’t want to necessarily go and buyback shares and then find a significant acquisition opportunity and right equity again for that given a short period of time. So we’d like to just consider our options, but you’re right to say there is probably significant additional capability.

 

20        Q         Okay. Look, my second question in this is a little bit less obvious on those acquisition opportunities. (inaudible) (01:02:05) Sunshine Gas at something to the effect of about $0.70/PJ decreasing to about $0.50 once the reserve upgrade comes. I mean, you’re just next door to them. It would seem to add a lot of value if you jovially added Sunshine Gas, so it might be sort of $0.80 or

25                    something a share.

 

            ORG    We haven’t quite worked up the courage to ask ConocoPhillips to put some more money in yet. I’ll have that conversation with John before he leaves, but I think something that needs to be appreciated, and bear in mind Conoco

30                    participated in a bidding process in which we’ve only come together in the last week or so. We’ve always spoke the upside in our own reserves, our own acreage was available, much more cheaper than acquiring additional reserves, and that’s something we’d want in our share very closely with Conoco. They can look at that before we jump to any other conclusion. Not all

35                    cost in gas is the same, not all cost in gas is worth the same amount of money. So, just adding reserves for the cycle.. it is not in itself necessarily the best answer, but I mentioned as we bid down the joint venture, those are  things we looked at very closely.

 

40        Q         Okay, and there’s one quick question to John as well. I guess, within the context on this transaction, just trying to shore it up potentially against the hostile BG bid and I’m thinking here of another $15.50 bid, but let’s say they raised it to like hypothetically (inaudible) (01:03:23), is there anything to prevent Conoco going on market and buying up the 20% of Origin shares as

45                    well which, I mean let’s say at $18 or $19 would add a lot of value given the CSM alone has been (inaudible) (01:03:36)?

 

            CP       Is that a question? No. Conoco Corp. was participating in the process that Origin outlined and we’re very… Origin ran a very professional process and we’re very pleased with the outcome, and that’s where our interest lies.

 

5          Q         I guess I’ll just rephrase my question. (Inaudible) (01:04:07) would you consider a bid for the whole of the company if that bid looked like it had some chance to success?

 

            CP       No. We participated in the process. This is the outcome that ConocoPhillips

10                    deserves.

 

            Q         Okay, thanks.

 

      Operator    Your next question comes from Sandra McCullough from Credit Suisse.

15                    Please ask your question, Sandra.

 

            Q         Good morning. Two questions, Grant. Can you just give me some further details on this tax, exactly what the dollar amount is and how this loan would work?

20

            ORG    Frank is looking very pained.

 

            Q         Sorry, Frank.

 

25        ORG    But it is not that complicated, if you could work out reversion the fact that it wasn’t an ARA, you should be able to kill the tax.

 

            Q         Can you give me a little bit more detail, though, on the structuring, the loan, and when it’s payable and how and what sort of mechanisms on the loan

30                    part?

 

            ORG    Sandra, Frank here. (Inaudible) (01:05:08) the joint venture through subscription of shares and then there would be a return of capital for just under 50% of that, then you could work out 30% on that and that would be

35                    payable in December 2009 if it occurred in the 2008-2009 financial year. For loan, it will be an interest-free loan that is actually advanced to Origin and repayable on requirements for capital expenditure when we’re in the construction phase.

 

40        Q         Okay, so when you’re in construction.

 

            ORG    That’s right, it’s enough for a number of years.

 

            Q         Okay, second one, since you mentioned reversion, Grant, I missed a bit of

45                    the earlier question on reversion, but in this transaction, have you calculated the impact on reversion now whether reversion by occur and when, and will that information be in the Independent Expert’s report?

 

            ORG    The transaction itself doesn’t have any impact on reversion but is a transaction itself. Not surprisingly, we’ve got our view of what the future looks like. ConocoPhillips has got their view and we’ve not shared that view. We’ve only just entered into a transaction with them so I couldn’t contend to know

5                      what know what their analysis looks like. All I can say is that we’ve provided every piece of information we have on it to ConocoPhillips, and we remain as confident and comfortable with our own assumptions as we always had. Other point that was made, I think, by both John and myself is that, as you well know, reversion doesn’t make the gas go away, it’s still there and so the

10                    underlying resource is underlying resource is undisturbed whatever that outcome might be at some point well in the future.

 

            Q         Will the independent experts report cover reversions that would likely impact on it?

15

            ORG    They have access to everything they’ve needed to form their view at full stop.

 

            Q         So will there be something in the report on them?

 

20        ORG    No more than you’ve already got. Look, I’ haven’t seen the final report. They’re finalizing their final full-written report but they have finished all their work obviously because that basis of the letter to us; but I don’t know what they will put in their report but bear in mind that a lot of information is commercially centred. You wouldn’t expect me to pin an expert to payable a

25                    whole bunch of contracts in their report. Yes, but doesn’t mean I haven’t seen all the information I need to see their point of view.

 

            Q         Can I ask John then your views on whether the development plan you have now for LNG projects will trigger reversion and when that might occur?

30

            ORG    Well, as I said, a number of different assumptions that you have to make and whatever you choose on the assumption you choose your oil price, you choose what percentage of oil that we’re going to get for the LNG, choose your cost, choose your timing, and all of those are going to impact when the

35                    reversion would occur. So we’re really just focused on the project and mission at hand which is let’s build this LNG facility.

 

            Q         Okay, thanks guys.

 

40  Operator    Your next question comes from Simon Oaten from Austock. Please go ahead, Simon.

 

            Q         Grant, good morning. I understand that Origin retained the LPG business in Australia?

45

            ORG    Correct. Yes.

 

            Q         Okay. Can you give us an indication of, first of all, asset values in Australia versus asset values in the United States, and do you think potentially that Australia was actually -- what’s the right way of putting -- selling the farm are relatively cheaper in the long term?

 

            ORG    We thought it was a fair deal, and yes, I think. The third coal seam gas was

5                      been a remarkable story, I mean, six months ago none of this will having these discussions and none of us will be talking about this valuation, but it is driven by the ability to convert that gas into LNG and sell it to an export market, so as John said in the previous answer, it depends what you assume about oil parity and our own treated oil parity and all of those things but at the

10                    end of the day the value of the resource, it’s really being valued by that global market now. I wouldn’t say it’s being sold cheaper or expensive. I’m sure Conoco has done their own calculations about its value in the market and netted it at that. John, do you want to add anything to that?

 

15        CP       Certainly if you’re limited to domestic market and sold the coal seam gas, you’d come up with a different value and you’re right. In North America you have local markets and you have gas available there, and so we certainly are impacted and influenced by the access to the Asia Pacific LNG markets, and that certainly is the basis for how we came up with evaluation in the

20                    foundation of our proposal. Not all molecules are the same, those that have access to Asia LNG markets are more valuable that those who don’t.

 

            Q         Finally, is there any contingent payments for the management of ramp up gas? Please.

25

            ORG    There’s an arrangement envisaged in the contract but they’re not material in any way to the valuation and I don’t think…. probably a bit of Origin or two of the joint venture. Their proficiency, I think, is the best way to put it. There will be ramp-up volumes and the context of the project are not that material. We

30                    think a fair amount of ramp-up will be managed infield and therefore within the joint venture, but it’s important that the joint venture had access to Origin’s ability to place that gas in the market through additional gas volumes we generated through that ramp-up phase. Yes, there are arrangements but they’re not material I think for either Origin on its own or the joint venture.

35

            Q         And, finally, is there anything within the Joint Venture for the managements of any potential CO2 liability should that happen in Australia?

 

            ORG    The joint venture itself, it’s 50-50 at its stake down the middle, and so the

40                    benefits and liabilities arise and accrued of highly, accordingly, differential stream with anything. It’s absolutely 50-50 down the middle. Yes, there’s a broader question about potentially CO2 risk and (inaudible) (01:11:43) much universally is that the resource itself (inaudible) (01:11:46). I mean, the risk therefore relates mainly to CO2 arising through the production process, so

45                    there’s no differential arrangements, nothing between Origin and Conoco; the three, that issue differential. But again, John, if you want  to like make any comments on CO2.

 

            CP       As I mentioned before, though, we have... Part of the attractiveness of this opportunity for us was the fact that it is natural gas and it is very low CO2, and so I think going forward, the world is going to need hydrocarbon and clean, natural gas, I believe, is going to be an advantaged hydrocarbon in the

5                      decades to come.

 

            ORG    Okay, I think there’s another question if you’re right, is there anymore question in the room here?  If none at the moment, is there any more -- just a couple more on the telephones, so we just take those and we’ll probably need

10                    to wrap up in two minutes. So, another two questions from the telephone.

 

      Operator    Your next question on the phone comes from (Inaudible) (01:12:53) from Goldman Sachs JBWere. Please ask your question, (Inaudible) (01:12:55)

 

15        Q         Hello, it’s (Inaudible) (01:12:57). I just want to talk through the cash flow, Conoco fills up this tiny US$5 billion so 50% in the CSG entity, and I assume you guys have the other 50% that effectively values the whole CSG business at US$10 billion, what then happens with the additional payment because there is some carry in it? Can you just explain that please?

20

            ORG    Your first comments were correct other than when you talk of the values, so the initial payment spark within US and, yes, if you want to double that, you can say that’s our view. That’s our component off the value that you might imply. The Carry we trust the remainder A$1.15 billion is a Carry through

25                    expenditure, and as I said. you could take the order of magnitude we’d be expecting through now to 2010. Yes, it’s 50% but we expect to spend something like $2 billion, and Conoco with Carry Origin through half of that expenditure. So, I’m looking at my Conoco colleagues and I’m pulling off their chairs so that’s the same. So that’s by way with Carry payment, and then

30                    there’s additional payments per train FID decision, and they would most likely be made as a Carry but that decision could be made at the time if the train is approved.

 

            Q         I just going back to the fifth point, the $5 billion for the 50%, what does that

35                    mean for the total CSM business?

 

            ORG    Well, I think if you’re running to add numbers I’d be adding the US$5 billion and the AU$1.15 billion, because if you like to think of it they may have a term payments. There’s a payment committed to no matter what in relation to any

40                    train FID decision, and so if you were doubling anything, you’d probably double the sum of those two numbers.

 

            Q         So, they are paying you $5 billion for 50% and you’re going to retaining the other 50%?

45

            ORG    Yes. Plus a Carry through the next $2 billion of expenditure for the FID. A 50% of that Carry worth A$1.15 billion.

 

            Q         Okay, and just a question for John, if you could just talk through what assumptions Conoco used for values (inaudible) (01:15:16) return on capital, it could be net back, it could be oil price, it could be gas price. I’m not fussy.

 

5          CP       I would say it’s fair to say that we used a variety of it, and we definitely, maybe just stating the obvious, but you can see based upon the structure of this arrangement, and based upon the large upfront cash and the commitment to Carry that ConocoPhillips has a high degree of certainty that this is going to be successful and we are going to move forward very quickly

10                    with the development of these trains.

 

            ORG    Okay, thanks. Just one more question. We need to finish up. Just one more.

 

      Operator    Your next question comes from Stuart Baker from Morgan Stanley. Please

15                    ask your question, Stuart.

 

            Q         Good morning, gentlemen. Just got a question for you on the resource position, contingent resources and prospective resources which from the slide looked like about another 32 TCF, and I guess we know that the (inaudible)

20                    (01:16:21) reasonably well, but I’m just conscious that there are other parts of the portfolio where you got large acreage position like the Galilee. I’m just kind of interested if you can give any guidance where you see the split of potential in all that unimproved acreage and whether you got large expectation for the Galilee for example.

25

            ORG    I m obviously going to answer the question I know nothing about but that’s never stopped me before. Look, we feel very comfortable about that acreage where the reserves and contingent resources is a Carry. Now you have these various qualities of, you know, if you think about it on a permanent basis

30                    there’s various qualities of resources and each of the permits, but I think you can tell from the ConocoPhillips on commentary that we would think that high the reserves and contingent is, you know, I think large you’re going to turn the reserve and get produce in to a project. We’ve already said publicly that the Galilee from an urgent perspective is relatively under explored. We

35                    understand that technically, if I could use that term, that has been very few wells drilled in the Galilee. Nothing in the gas contents perspective, it’s quite reasonable that we don’t know not enough about the Galilee to form any view yet.

 

40        Q         Okay, thanks very much.

 

            ORG    Thanks, Stuart. You’ve been very generous with your time, ladies and gentlemen, and we have some other commitments today as you can appreciate. If there are other questions, you know how to call us and there

45                    are couple more sessions today and certainly later this afternoon for others who might want to ask questions. So we appreciate the time you taken. I think you got loads of material later to look at and work through, and clearly we have next two days happy to answer any questions if you might have. So again, thanks very much ladies and gentlemen. Thanks very much again to John in particular and your colleagues at ConocoPhililips and Kevin for joining us on this presentation. It has been an interesting few weeks for us, and I like to say at the end of the day, I think a great day for Origin shareholders, so thanks very much. Thank you.

 

PRESENTATION CONCLUDED

 

 

 

 

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