Origin Energy says it has selected US gas operator, ConocoPhillips as operating partner in its Queensland coal seam gas project.
Origin said ConocoPhillips will pay up to $A9.6 billion for a 50 per cent share in the project.
Origin told the Australian stock exchange on Monday that it would act as the upstream coal seam gas provider to the project, while ConocoPhillips would be the downstream LNG operator, with the joint-venture company to market the LNG.
ConocoPhillips will become a 50 per cent shareholder in the company that owns all of Origin's CSG interests.
"This company will develop these interests into a CSG to LNG project, providing a fully aligned partnership across the LNG value chain," Origin said.
ConocoPhillips will invest up to A$9.6 billion for a 50 per cent share of the CSG-LNG Joint Venture.
This involves an up-front payment of $US5 billion (A$6 billion), additional fixed contribution of $A1.15 billion to carry Origin's share of costs to Final Investment Decision (FID) expected at the end of 2010, and additional payments of $US500 million (A$600 million) at the point that each of the four LNG trains is approved, to partly carry Origins share of costs.
ConocoPhillips is a US-listed company with a market capitalisation of $US125 billion and a world-leader in developing and operating Liquefied Natural Gas (LNG) and Coal Seam Gas (CSG) projects.
Origin's Chairman, Kevin McCann, said Origin was delighted to welcome "one of the world's largest integrated energy companies as its partner in monetising our extensive CSG reserves and resources.
"This outcome represents an outstanding result for Origin shareholders," Mr McCann said.
The transaction is conditional on FIRB approval and any approvals necessary because of the current offer by the UK's BG Group for Origin.
Origin said the deal "will transform Origin's financial position.
"Following completion of the transaction, Origin will have no net interest bearing debt and a significant cash balance," the company said.
"This will result in an immediate and substantial increase in earnings for Origin from the interest benefit.
"Origin estimates the transaction will provide accretion to the average consensus underlying (earnings per share) EPS for the 2009 financial year of over 35 per cent assuming completion on October 31, 2008 ...
"If the earnings impact were to be annualised, the accretion to average consensus underlying EPS is estimated at over 55 per cent.
Origin's strengthened financial position would enable Origin to fund both its future growth and undertake capital management initiatives for the benefit of shareholders, the company said.
"Following completion of the transaction, Origin intends to undertake a A$1.5 billion capital management program, (including) an immediate payment of an additional dividend of 25 cents per share fully franked ... to double the 2008 dividend, providing a new base for future dividends.
"Origin will now target an increased dividend payout ratio of at least 60 per cent of underlying earnings and commence an on-market buy-back of shares of up to A$1.275 billion."