SINGAPORE and PORT MORESBY, Papua New Guinea, May 20, 2016 /PRNewswire/ --
- Oil Search and InterOil are pleased to announce that Oil
Search proposes to acquire 100% of InterOil (the InterOil
Transaction). The InterOil Transaction, which combines two highly
complementary companies and offers compelling financial and
strategic upside potential for both InterOil and Oil Search
shareholders, has been unanimously approved by both boards. The
InterOil board unanimously recommends InterOil shareholders approve
the InterOil Transaction
- The consideration for InterOil shareholders comprises
8.05 Oil Search shares plus a Contingent Value Right (CVR)[1] for
each InterOil share:
- The implied transaction value of the Oil Search share
component of the consideration is US$40.25[2] per InterOil share, for a total
transaction value of approximately US$2.2[3] billion, which represents a significant
premium to InterOil's recent trading prices
- In addition, the CVR entitles holders to a contingent cash
payment that is linked to the volume of 2C hydrocarbon gas
resource certified to be contained in the Elk-Antelope fields. Each
CVR will deliver approximately US$6.05 per InterOil share for each tcfe above
6.2 tcfe gross certified 2C resource in the Elk-Antelope fields,
and will be paid in cash upon completion of the certification
process. The CVR provides InterOil shareholders with an uncapped
additional payment, depending on the size of the certified 2C
resources in the Elk-Antelope fields
- Oil Search will also provide InterOil shareholders with a
cash alternative for the share component, up to a total of
US$770 million, with any cash not
taken up by InterOil shareholders to be applied to an Oil Search
share buyback following completion of the InterOil Transaction in
order to reduce dilution for Oil Search shareholders
- In a separate agreement, Oil Search and Total have executed
a Memorandum of Understanding (the Total MoU), under which Oil
Search will sell to Total, for cash, 60% of the interest acquired
from InterOil in Petroleum Retention Licence (PRL) 15 and 62% of
InterOil's exploration assets, subject to closing of the InterOil
Transaction and entry into definitive documentation with Total,
thereby de-risking the acquisition of InterOil
- Following completion of the InterOil Transaction and the
Total MoU (the Agreements), Oil Search's interest in the Papua LNG
Project will increase to 29.0% and Total's stake will increase to
48.1% (assuming the PNG government exercises its back-in rights of
22.5%)
- The strategically important Agreements will position the
enlarged Oil Search to deliver immediate and material long term
value and financial benefits for the shareholders of both Oil
Search and InterOil:
- In addition to the significant upfront premium, InterOil
shareholders will gain access to the world-class PNG LNG Project,
Oil Search's existing stake in the Papua LNG Project, and the
potential benefits that are expected from cooperation and/or
integration between these two projects
- Oil Search achieves alignment through complementary
significant interests in two world-class LNG Projects
- Oil Search's shareholders gain an increased interest in the
Papua LNG Project providing the potential to double production by
2022-2023 and growth upside from surrounding exploration acreage
while maintaining a strong and flexible balance sheet
- The Agreements provide a pathway to optimise cooperation
and/or integration between the Papua LNG Project and the PNG LNG
Project driving capital efficiency, superior returns and NAV per
share accretion for Oil Search shareholders
- The Agreements provide additional scale to Oil Search,
leveraging its high quality, low cost production base, balance
sheet strength, excellent growth opportunities and leading
in-country relationships
- The InterOil Transaction is expected to close in the third
quarter of 2016, subject to InterOil shareholder and court
approvals and other customary closing conditions
InterOil Corporation (NYSE: IOC, POMSoX: IOC) (InterOil) and Oil
Search Limited (ASX:OSH, POMSoX: OSH) (Oil Search) today announced
that they have signed a definitive agreement under which Oil Search
will acquire all of the outstanding shares of InterOil.
The InterOil Transaction offers InterOil shareholders the option
to receive shares in Oil Search at a significant implied premium to
the current InterOil share price, or a cash alternative of up to a
total of US$770 million (subject to a
pro rata scaleback). In addition, under either scenario, the
consideration includes a CVR, which entitles holders to a
contingent cash payment that is linked to the volume of 2C
hydrocarbon gas resource certified to be contained in the
Elk-Antelope fields. The CVR will deliver additional cash of
approximately US$6.05 per InterOil
share for each tcfe of gross certified gas resources above 6.2 tcfe
within the Elk-Antelope fields.
The transaction will result in the combination of two highly
complementary companies, offering compelling financial and
strategic upside potential for InterOil and Oil Search
shareholders.
The combination will create a major independent PNG oil and gas
champion and is expected to facilitate cooperation and/or
integration of the Papua LNG Project and the PNG LNG Project,
unlocking significant value for all stakeholders.
The aggregate consideration for InterOil shareholders,
comprising the share consideration and the CVR, implies a
significant premium to the InterOil share price, with potentially
uncapped upside through the CVR depending on the certified size of
the Elk-Antelope resource.
Further, InterOil shareholders will hold an interest in Oil
Search's asset base and dividend stream, including the world-class
PNG LNG Project and Oil Search's existing stake in PRL 15, and the
significant potential benefits that are expected from cooperation
and/or integration of, the PNG LNG Project and the Papua LNG
Project.
As announced separately, Oil Search has signed a MoU with Total
SA (Total) to sell down 60% of the interest acquired from InterOil
in PRL 15 and 62% of InterOil's exploration assets (including PRL
39 and four exploration licences). The terms of the sell down will
be consistent with the terms of the InterOil Transaction and
reflect each party's ownership interest.
Commenting on the Agreements, Oil Search Chairman Rick Lee said:
"Oil Search believes that the acquisition of InterOil represents
an excellent outcome for InterOil and Oil Search shareholders and
enables both companies to benefit from the value created through
the commercialisation of the gas resources in PRL 15. We look
forward to welcoming InterOil shareholders onto our register and,
together, continuing to grow in PNG."
InterOil Chairman Chris Finlayson
said:
"The InterOil board has thoroughly considered this transaction
and we believe it delivers significant value to all InterOil
shareholders through the opportunity to benefit from ownership of
shares in the combined entity at a significant implied premium to
the current InterOil share price, while maintaining exposure to the
value upside from the certification of Elk-Antelope. In
addition, the transaction will enable InterOil shareholders to
continue to benefit from the value created through the
commercialisation of gas resources along with exposure to Oil
Search's portfolio of high quality assets."
Compelling strategic rationale for combined entity
Oil Search and InterOil believe that a combination of the companies
will deliver significant benefits to the combined shareholder
base.
The Agreements deliver on Oil Search's key strategic objective
of commercialising its Highlands and Gulf gas resources, where Oil
Search has a major competitive advantage based on its long history
of operating in PNG.
The combination of the companies will increase Oil Search's
exposure to the world-class Papua LNG Project, which is expected to
be the next major LNG development in PNG, as well as strengthening
Oil Search's exploration portfolio in the Gulf Province of PNG,
which is highly prospective for gas and complements its existing
PNG acreage position.
The Agreements are expected to deliver significant value for
InterOil, Oil Search and Total shareholders by establishing an
aligned partnership. The combined entity and Total expect to focus
on development of the Papua LNG Project and to pursue cooperation
and/or integration opportunities with the PNG LNG Project,
including the possibility of bringing in new partners. Oil Search
and InterOil believe the use of existing infrastructure and
co-location of plant sites will potentially drive material capex
and operating cost savings plus anticipated schedule acceleration,
maximising returns for all stakeholders, including the PNG
Government, landowners and co-venturers.
Generating maximum shared value through working together is
particularly important with extended low oil and gas prices and a
challenging near term LNG supply environment.
Oil Search's pro-forma net debt following completion of the
Agreements will decrease to approximately US$3.0bn, or approximately US$300m lower than prior to the InterOil
Transaction, with liquidity increasing by the same amount[4]. This
is more than sufficient to support all anticipated expenditure
commitments.
Commenting on the strategic rationale, Oil Search Managing
Director Peter Botten said:
"These transactions have strong strategic logic and are
consistent with Oil Search's objective to create and deliver value
for shareholders. They further our strategy of pursuing and
developing LNG opportunities in PNG and cement our position as the
premier exploration and production company in PNG.
The InterOil Transaction and the Total MoU together are value
accretive and enhance our long-term growth outlook. As Oil Search
has an equity interest in both PNG LNG and Papua LNG, we are well
placed to work with the PNG Government and the operators of PNG LNG
and Papua LNG, ExxonMobil and Total, respectively, to promote the
most capital efficient development of PNG's world class gas
resources. We note that regardless of whether integration of Papua
LNG and PNG LNG is achieved, the standalone development of Papua
LNG remains extremely robust."
InterOil Chief Executive Dr. Michael
Hession said:
"This transaction provides InterOil shareholders with a
significant value premium, it allows them to access the potential
uncapped resource upside of Elk-Antelope, and it gives them
exposure to a combined company with enhanced scale and balance
sheet strength that is set to become a true champion of
Papua New Guinea."
Overview of key terms
Under the InterOil Transaction, InterOil shareholders will
receive:
- 8.05 ordinary shares of Oil Search for each InterOil share (the
Share Consideration); or
- InterOil shareholders may elect to receive a cash alternative,
up to a total of US$770 million
(subject to a pro rata scaleback) (the Cash Alternative); and
- All InterOil shareholders will also receive a CVR which will
deliver an additional cash payment of approximately US$6.05 per share for each tcfe gross resource
certification of the Elk-Antelope fields above 6.2 tcfe.
(Collectively, the Transaction Consideration)
The implied value of the Share Consideration is US$40.25 per InterOil share based on Oil Search's
10-day volume weighted average price to 19 May 2016.[5]
The CVR entitles InterOil shareholders to receive an uncapped
cash payment on the terms set forth above following certification
of the 2C resources in the Elk-Antelope fields (currently expected
to be completed before the middle of 2017). Subject to ASX
confirmation, it is intended that the CVR will be listed as a debt
instrument on ASX.
- The cash amount payable on each CVR will be equal to
US$0.77 per mcfe on an interest of
40.127529%[6] of any certified 2C resource in the Elk-Antelope
fields in excess of 6.2 tcfe
The CVR means that InterOil shareholders will benefit directly
from the contingent resource certification payments that would have
otherwise been received by InterOil from Total.
Together the Share Consideration and CVR represent a material
premium to InterOil's recent trading prices based on a range of
Elk-Antelope resource estimates (see below):
US$6.05 per InterOil Share for
each Incremental tcfe above 6.2 tcfe
tcfe
|
6.2
|
6.5
|
7.0
|
7.5
|
8.0
|
|
(Base
Volume)
|
|
|
|
|
Share Consideration
value[7]
|
$ 40.25
|
$ 40.25
|
$ 40.25
|
$ 40.25
|
$ 40.25
|
CVR – Potential
Value[8]
|
$ 0.00
|
$ 1.81
|
$ 4.84
|
$ 7.86
|
$ 10.88
|
Aggregate
Consideration p.s.
|
$ 40.25
|
$ 42.06
|
$ 45.09
|
$ 48.11
|
$ 51.13
|
Premium to last
close[9]
|
27.2 %
|
32.9 %
|
42.5 %
|
52.0 %
|
61.6 %
|
Premium to 1-month
VWAP[10]
|
26.3 %
|
31.9 %
|
41.4 %
|
50.9 %
|
60.4 %
|
Premium to 3-month
VWAP[11]
|
32.5 %
|
38.5 %
|
48.4 %
|
58.4 %
|
68.4 %
|
A certification subcommittee will be established to oversee the
resource certification for the purpose of the CVR. The subcommittee
will comprise two Oil Search directors, two InterOil directors (one
of whom will join the Oil Search board (see below)) and an
independent chairperson. Under the MoU, both Oil Search and Total
have committed to ensuring an accurate resource certification. Oil
Search and Total are committed to ensuring the interim resource
certification process is transparent and focused on accurately
assessing the potential resource in the Elk-Antelope gas fields for
the purposes of the CVR calculation and for guiding development
plans for the Papua LNG Project. The CVR will be paid on the
completion of the certification program, which will include the now
formally approved Antelope-7 appraisal well.
InterOil shareholders will gain an interest of 14% – 21% in the
combined company, depending on the level of participation by
InterOil shareholders in the Cash Alternative. Following completion
of the Total MoU, Oil Search plans to conduct an on-market share
buyback up to a maximum value of US$770
million to reduce dilution for Oil Search shareholders, the
final size of which will depend on the level of participation in
the Cash Alternative by InterOil shareholders.
On implementation of the InterOil Transaction, one director of
InterOil will be invited to join the Oil Search board.
The InterOil Transaction has been unanimously approved by the
boards of Oil Search and InterOil, and InterOil directors
unanimously recommend that InterOil shareholders approve the
InterOil Transaction.
Conditions and timetable
The transaction will be
carried out by way of a court-approved plan of arrangement under
the Business Corporation Act (Yukon) and will require the approval of at
least 66 2/3% of the votes cast by InterOil shareholders at a
special meeting expected to take place in July 2016. In connection with the transaction,
the InterOil board has received a fairness opinion from Morgan
Stanley.
In addition to InterOil shareholder and court approvals, the
transaction is also subject to other customary conditions relating
to regulatory approvals and no regulatory actions which prevent
completion of the transaction. Subject to obtaining the
aforementioned approvals, the transaction is expected to close in
the third quarter of 2016.
Further information regarding the transaction will be included
in an information circular, which is expected to be filed and
mailed to InterOil shareholders in June
2016. Copies of the key transaction documents for the
InterOil Transaction (being the arrangement agreement and the
information circular) will be available online at
www.interoil.com and www.sedar.com.
Conference call
The companies will hold conference
calls for their respective shareholders to discuss the InterOil
Transaction as follows.
InterOil will host a conference call on May 19, 2016, at 7:00 p.m.
Eastern Time / May 20, at
7:00 a.m. Singapore Time to discuss
the transaction. Details of the call are as follows:
InterOil
Teleconference Details
|
|
|
US
Dial-in
International
Dial-in
|
(800)
230-1092
+1 (612)
288-0329
|
|
A replay of the call will be available through May 26, 2016. To access the phone replay, please
dial (800) 475-6701 (for US participants) and +1 (320) 365-3844
(for international participants) and enter the access code 394127.
A simultaneous webcast of the call and slides summarising the terms
of the merger may be accessed at www.interoil.com.
Oil Search will hold a conference call at 10:00 am Australian Eastern Standard Time on
May 20, 2016, to discuss the InterOil
Transaction and the Total MoU, the details of which are as
follows:
Oil Search
Teleconference Details:
|
Conference ID
|
1454 5292
|
Participant Dial-in
|
Toll
Free: 1800 123 296
+61 2 8038 5221
(can be used if dialing from International
location)
|
International Dial-in
|
Canada
|
1855 5616 766
|
China
|
4001 203 085
|
Hong Kong
|
800 908 865
|
India
|
1800 3010 6141
|
Japan
|
0120 477 087
|
New Zealand
|
0800 452 782
|
Singapore
|
800 616 2288
|
United
Kingdom
|
0808 234 0757
|
United
States
|
1855 293 1544
|
Advisers
Oil Search has appointed Goldman Sachs and
Macquarie Capital to act as its financial advisers and Allens,
McCarthy Tétrault and Linklaters LLP to act as its legal advisers
in relation to the Agreements.
InterOil has appointed Morgan Stanley & Co. LLC as its lead
financial adviser and to provide a fairness opinion to the board,
and has also appointed Credit Suisse (Australia) Limited and UBS to act as its
financial advisers, and Wachtell, Lipton, Rosen & Katz and Goodmans to act
as its legal advisers in relation to the InterOil Transaction.
About InterOil
InterOil Corporation is an independent
oil and gas business with a sole focus on Papua New Guinea. InterOil's assets include
one of Asia's largest undeveloped
gas fields, Elk-Antelope, in the Gulf Province, and exploration
licenses covering about 16,000km2. Its main offices are in
Singapore and Port Moresby. InterOil is listed on the
New York and Port Moresby stock exchanges.
About Oil Search
Oil Search is an oil and gas
exploration and development company, which was established in
Papua New Guinea (PNG) in 1929.
Oil Search's main asset is its 29% interest in the 6.9 MTPA PNG LNG
Project, a world-scale liquefied natural gas (LNG) development
operated by ExxonMobil PNG Limited. In addition to the PNG LNG
Project, Oil Search has a 22.8% interest in the Papua LNG Project
and interests in, and operates all of, PNG's currently producing
oil fields. Approximately 20% of PNG LNG Project gas is sourced
from the Oil Search-operated oil fields.
InterOil Investor Contacts
Singapore
|
Singapore
|
United
States
|
Michael
Lynn
Senior Vice
President
Investor
Relations
|
David Wu
Vice
President
Investor
Relations
|
Cynthia
Black
Investor
Relations
North
America
|
T: +65 6507
0222
E:
michael.lynn@interoil.com
|
T: +65 6507
0222
E:
david.wu@interoil.com
|
T: +1 212 653
9778
E:
cynthia.black@interoil.com
|
InterOil Media Contacts
Singapore
|
Singapore
|
United
States
|
Robert
Millhouse
|
Ann Lee
Communications
Specialist
|
James Golden/ Aaron
Palash
Joele Frank,
Wilkinson Brimmer Katcher
|
M: +65 8112
5694
E:
rob.millhouse@me.com
|
T: +65 6507
0222
E:
ann.lee@interoil.com
|
T: +1 212 355
4449
E:
ioc-jf@joelefrank.com
|
Oil Search Investor Contacts
Ann
Diamant
|
General Manager,
Investor Relations and Communications
|
T: +61 2 8207
8440
M: +61 407 483
128
|
Oil Search Media Contacts
Oil
Search
|
P&L Corporate
Communications
|
Hill+Knowlton
Strategies
|
Ruth
Waram
|
Ian
Pemberton
|
Jackie Zupsic (US)
/ Rick Harari (Canada)
|
Manager – PNG
Communications
|
Principal
|
|
M: +675 7190
6078
|
T: +61 2 9231
5411
M: +61 402 256
576
|
T: +1 (212) 885 0590
(US)
M: +1 (805) 698 5060
(US)
|
|
|
T: +1 (416) 413 4766
(Can)
M: +1 (416) 209 5755
(Can)
|
Legal Notice
None of the securities anticipated to be
issued pursuant to the Plan of Arrangement have been or will be
registered under the United States Securities Act of 1933, as
amended (the "U.S. Securities Act"), or any state securities laws,
and any securities issued in the Arrangement are anticipated to be
issued in reliance upon available exemptions from such registration
requirements pursuant to Section 3(a)(10) of the U.S. Securities
Act and applicable exemptions under state securities laws. This
press release does not constitute an offer to sell or the
solicitation of an offer to buy any securities.
There can be no assurance that the Arrangement will occur. The
proposed Arrangement is subject to certain approvals and the
fulfilment of certain conditions, and there can be no assurance
that any such approvals will be obtained and/or any such conditions
will be met.
Further details regarding the terms of the transaction are set
out in the Arrangement Agreement and will be provided in a
management information circular which will be available under the
profile of InterOil Corporation at www.sedar.com.
Forward Looking Statements
This release includes
"forward-looking statements". All statements, other than statements
of historical facts, included in this release that are
forward-looking statements. These statements are based on the
current belief of InterOil and Oil Search, as well as assumptions
made by, and information currently available to InterOil and Oil
Search. No assurances can be given however, that these events will
occur. Actual results could differ, and the difference may be
material and adverse to the combined company and its shareholders.
Such statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of the InterOil
and Oil Search, which may cause actual results to differ materially
from those implied or expressed by the forward-looking statements.
These include in particular information and statements relating to
InterOil's agreement with Oil Search and the ability to realize the
anticipated benefits, Oil Search's agreement with Total and the
ability to realize the anticipated benefits, the ability to
complete either of the two transactions, either on the anticipated
timeline or at all, the ability to obtain required regulatory and
court approvals for the two transactions, the combined company's
expected growth profile, the anticipated market capitalization of
the combined company, the need to integrate the two companies and
related costs, business disruptions relating from the transactions,
the outcome of any legal proceeding relating to the transactions,
the combined company becoming a leading exploration and production
champion for Papua New Guinea, the profitability of the
combined company, information or statements relating to resources,
hydrocarbon volumes, well test results, the estimated timing of the
LNG project, the timing and quantum of the certification payment,
the costs and break-even prices and potential revenues of the LNG
project, the estimated drilling times of the exploration or
appraisal wells and estimated 2016 budgets and expenditures, the
absence of an established market for natural gas or gas condensate
in Papua New Guinea and the
ability to extract and sell commercially any natural gas or gas
condensate, oil and gas prices, changes in market demand for oil
and gas, currency fluctuations, drilling results, field
performance, the timing of well work-overs and field development,
reserves depletion, fiscal and other governmental issues and
approvals, and the other risk factors discussed in InterOil's and
Oil Search's publicly available filings, including but not limited
to those in InterOil's annual report for the year ended
December 31, 2015 on Form 40-F and
its Annual Information Form for the year ended December 31, 2015, and in Oil Search's annual
report for the year ended December 31,
2015, as well as the risk that Oil Search and Total do
not enter into definitive agreements relating to the MOU.
InterOil and Oil Search disclaim any intention or obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as
expressly required by applicable laws.
[1]
|
Subject to receiving
confirmation from ASX, the CVR will be structured as a listed debt
instrument on ASX.
|
[2]
|
Based on Oil Search's
10-day VWAP, converted daily to USD using the RBA's reference
AUDUSD rate, up to and including 19 May 2016, of US$5.00 per
share.
|
[3]
|
Based on InterOil's
51.1MM diluted shares outstanding and US$146m in net debt as at 31
March 2016.
|
[4]
|
Pro-forma net debt
based on InterOil and Oil Search net debt at 31 March 2016 and
assumes Cash Alternative fully taken up by InterOil shareholders;
excludes transaction costs and pre any CVR payment.
|
[5]
|
Based on Oil Search's
10-day VWAP, converted daily to USD using the RBA's reference
AUDUSD rate, up to and including 19 May 2016, of US$5.00 per
share.
|
[6]
|
CVR payable based on
US$0.77 per mcfe on 40.127529% of 2C resource above 6.2 tcfe
(gross) to reflect the relevant interest of Total's interim
resource payment to InterOil (26 March 2014 Sale and Purchase
Agreement between InterOil and Total).
|
[7]
|
Based on Oil Search's
10-day VWAP, converted daily to USD using the RBA's reference
AUDUSD rate, up to and including 19 May 2016, of US$5.00 per
share.
|
[8]
|
Represents potential
future payment at given certified resource level; not discounted to
present value.
|
[9]
|
Based on InterOil's
closing price of US$31.65 per share as at 19 May 2016.
|
[10]
|
Based on InterOil's
1-month VWAP up to and including 19 May 2016 of US$31.88 per
share.
|
[11]
|
Based on InterOil's
3-month VWAP up to and including 19 May 2016 of US$30.37 per
share.
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/oil-search-and-interoil-announce-agreements-creating-a-platform-to-optimise-further-lng-development-300272099.html
SOURCE InterOil Corporation