BG Group has reached an agreement with APA Group to sell its wholly-owned subsidiary QCLNG Pipeline Pty Ltd for approximately US$5 billion.
QCLNG Pipeline Pty Ltd owns a 543 km, large-diameter underground pipeline network that links BG Group's natural gas fields in southern Queensland to a two-train LNG export facility at Gladstone on Australia's east coast.
The pipeline, which was constructed between 2011 and 2014, has a current book value of US$1.6 billion. The pipeline tariff is expected to deliver to APA Group EBITDA of approximately US$390 million for the year ended 31 December 2016.
The sale is conditional on partner consent and the start of commercial LNG deliveries (post commissioning) from the Queensland Curtis LNG (QCLNG) export facility at Gladstone. BG Group and its partners have firm capacity rights in the pipeline for 20 years, with options to extend.
The sale, which is expected to be completed in the fist half of 2015, should result in a post-tax profit of approximately US$2.7 billion. The profit on disposal will be partly offset by a post-tax impairment of BG Group's remaining QCLNG assets, expected to be around US$2 billion, following categorisation of QCLNG Pipeline Pty Ltd as held for sale in the fourth quarter of 2014.
BG Group expects to use the sale proceeds to reduce net debt and to fund future growth investment.
Andrew Gould, interim Executive Chairman of BG Group, said: "We are pleased to have entered into an agreement for the sale of this high-quality infrastructure with a bidder the calibre of APA Group.
"The sale of the QCLNG pipeline is in line with our strategy to focus on BG Group's core areas of oil and gas exploration and production and LNG. The timing reflects QCLNG's advanced stage of development; we are now on the verge of delivering the world's first large-scale project using natural gas from coal seams as a feedstock for LNG."
In a statement, BG Group also said that it is reviewing its reference conditions, long-term price assumptions and business plans in light of recent movements in commodity prices, particularly oil. Any impact of changes to these assumptions on the carrying value of assets within the Group's portfolio will be reflected in the 2014 fourth quarter results.
Adapted from press release by Callum O'Reilly
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