MELBOURNE, Australia—Exxon Mobil Corp. has trumped Oil Search Ltd.'s offer to buy U.S.-listed InterOil Corp., 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 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.

InterOil, for its part, said it had received Exxon Mobil's bid and determined it a superior offer.

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 Papua New Guinea capital Port Moresby, though it is listed in Australia, said in May 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 Robb M. Stewart at robb.stewart@wsj.com and David Winning at david.winning@wsj.com

 

(END) Dow Jones Newswires

July 18, 2016 11:25 ET (15:25 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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