Mitsui's Nexus Break

The Age

Wednesday October 8, 2008

Barry Fitzgerald

OIL has stayed relatively strong in the commodity market meltdown, but not strong enough to stop Japan's mighty Mitsui from walking away from a $350 million deal to acquire a 25% stake in a Browse Basin project from Nexus Energy.

Mitsui's oil exploration and production arm has told Nexus it will not be proceeding with the acquisition of an interest in the Crux liquids project because of "global market conditions". But Mitsui will be proceeding with a $40 million farm-in deal, under which it will acquire a 20% stake from Nexus in the Browse Basin exploration permit AC/P41.

Nexus said it was disappointed the Crux component of the deal was not proceeding, but it was confident it would find a new partner for the development.

Nexus appointed Deutsche Bank to restart the Crux sales process. "Strong participation in the sale process is expected, given the status of the Crux liquids project as a high-quality development of substantial scale and in light of the interest in the project received to date," Nexus said.

The original deal was for Mitsui to pay $350 million in cash for a 25% interest in the Crux liquids project (reducing Nexus to 60%) as well as fund $40 million of Nexus' share of costs for three exploration wells to be drilled in the AC/P41 permit for a 20% interest (reducing Nexus to a 30% interest).

The deal implied a value for the Crux condensate (light oil) project and AC/P41 of $1.57 billion, with Nexus' retained ownership worth $883 million on a similar basis.

A final investment decision on the development of Crux is due by the end of the year. Brokers have estimated the project will generate about $1 billion a year for the first six years of its life.

The exit of Mitsui from the Crux deal was announced after the close of trade. Nexus shares firmed 6 to $1.09 during trade.