How entrepreneur Paul Fudge made $660 million in one day

Entrepreneur Paul Fudge is $660 million richer today after utilities giant Origin Energy paid that amount to buy a coal-seam gas exploration permit from Fudge’s company, Pangaea.

Fudge’s ATP 788P exploration permit is located in the Surat Basin in Queensland, where Australia’s major proven coal-seam gas sites are located. Origin hopes the coal-seam gas reserves will help feed a $35 billion liquefied natural gas project it is developing in a joint venture with US energy giant ConocoPhillips.

This is Fudge’s second big deal with Origin. In February 2006, when coal-seam gas was still an unknown quantity, Pagnaea sold a number of assets to Origin Energy for $70 million, although most of this windfall has been reinvested in the business.

Fudge, who is known as being intensely private, released only a short statement after the announcement of the deal.

“Origin has strong credentials and has demonstrated leadership in the development of CSG (coal-seam gas) assets. The transaction builds on our pre-existing relationships with Origin and we look forward to working with them in the future,” the statement said.

Fudge is seen as something of an outsider in the mining world. He was formerly a fabric trader who bought and sold big amounts of expensive fabrics.

He got into the energy industry on the suggestion of a friend and assembled a team of Australian and North American experts to help him build Pangaea and find coal-seam gas assets.

“I could see a dynamic, a real opportunity to participate in a new industry that is changing the face of Queensland, if not the east coast of Australia,” Fudge told The Australian Financial Review a few weeks ago.

Initial estimates of the sale price for the exploration permit (which Fudge sold with the help of investment banks JP Morgan and Investec) were around $400 million, but Origin said it was prepared to pay $660 million to take advantage of a “diminishing set of opportunities to still add CSG assets at a reasonable price”.

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