Australia's Origin Energy is planning to sell its 50 per cent stake in the offshore Kupe gasfield to Contact Energy, at a time when development costs have soared to $800 million.
The Dominion Post reported today that the sale is part of a proposed merger between the pair, announced lastweek.
But the catch is that the Kupe field, off the Taranaki coast, is unlikely to be of much use to Contact, because most of the gas is destined for Contact's competitor, state-owned power company, Genesis Energy.
Genesis owns 31 per cent of Kupe and is contracted to buy most of the gas in the field, including Origin's share.
The Kupe stake is one of several assets oil and gas explorer Origin wants to sell to Contact in the merger deal, which analysts have said undervalues Contact.
Other assets Origin wants to sell to Contact as part of a "restructuring" include its exploration permits in New Zealand which cover 27,000 square kilometres offshore in Northland, Taranaki and South Canterbury, and its liquefied petroleum gas distribution business, Rockgas.
Shares in Contact closed on Friday at $7.15, down 15c after a strong run up on the back of last week's merger news.
The merger is viewed by many in the market as a thinly veiled takeover, with Contact shareholders getting the raw end of the deal, owning just over 24 per cent of the merged unit.
