Oil Search Says Exxon Trumps Its Bid for InterOil
July 17 2016 - 9:28PM
Dow Jones News
By Robb M. Stewart and David Winning
MELBOURNE, Australia--Oil Search Ltd. (OSH.AU) said Monday that
Exxon Mobil Corp. (XOM) has trumped its offer to buy U.S.-listed
InterOil Corp. (IOC), as Papua New Guinea's natural gas riches
continue to attract interest from major energy companies even as
they cut spending elsewhere.
On Monday, Oil Search said Exxon has made an all-scrip offer
worth US$45 per InterOil share, and also intends to make a cash
payment to InterOil shareholders if InterOil's Elk-Antelope
discoveries are found to contain more than 6.2 trillion cubic feet
of natural gas. Oil Search said the value of the additional
component is US$0.90 per million cubic feet of gas, and would be
payable when Elk-Antelope's contingent resources are formally
certified.
The takeover tussle pits the two largest producers of crude oil
and natural gas in Papua New Guinea, a small Pacific nation that
only recently joined the ranks of global energy exporters, in
competition for a cluster of large untapped gas deposits that could
be developed to feed Asia's demand for clean fuels.
Adding further spice to the bid contest: Exxon and Oil Search
are partners in Papua New Guinea's sole operating gas-export
facility, the US$19 billion PNG LNG plant.
Oil Search, which based in Port Moresby, the capital of Papua
New Guinea, though it is listed in Australia, in May said it had
struck a deal with InterOil's board that was at the time worth at
least US$2.2 billion. It offered 8.05 of its own shares for each
InterOil share, or a cash alternative of up to US$770 million in
all, plus a contingent right of A$6.044 a share in cash for each
trillion cubic feet equivalent of gas above the same 6.2 trillion
cubic feet threshold.
A separate agreement would have seen Oil Search sell on some of
InterOil's interests to Total, and increase its stake in the
proposed Papua LNG project that would compete with the PNG LNG
facility for customers.
Oil Search had hoped to leverage that position in the Papua LNG
project as well as a nearly 39% holding in the PNG LNG project to
find ways for both operations to collaborate and generate savings
that would allow both to expand. It has estimated the potential for
up to US$3 billion in capital savings plus US$100 million a year in
cost savings.
On Monday, Oil Search said it has until July 21 to decide
whether to raise its offer before the U.S.-listed company can
formally agree to a deal with Exxon. If Oil Search chooses to walk
away then it would receive a US$60 million breakup fee from
InterOil, of which Total is entitled to 20%.
-Write to David Winning at david.winning@wsj.com
(END) Dow Jones Newswires
July 17, 2016 21:13 ET (01:13 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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