Last month Oil Search reported a first half profit jump of 49% on the back of production and sales from PNG LNG in which Oil Search has a 29% interest.
Advertisement
Under the agreement, Woodside would acquire all shares in Oil Search for a consideration of one Woodside share for every four Oil Search shares held.
Woodside being satisfied that the transaction is likely to be supported by the PNG Government on acceptable terms.
Any deal would also need to be vetted by regulators in Papua New Guinea, where the government owns a 9.8% stake in Oil Search, the country’s largest oil producer.
Woodside has been on the hunt for growth options since bowing out of the Leviathan development a year ago. In addition to the coveted PNG LNG project, it would gain a 23 percent holding in PNG’s biggest undeveloped gas prospect, the Elk and Antelope fields.
‘Clearly, Oil Search shareholders are entitled to an offer which adequately reflects this value potential’. Including debt, it would be the second biggest after the reorganization of South Korea’s SK Group this year.
Many analysts are already commenting that a new mergers and acquisitions season could be starting within the world’s oil and gas industry due to the crash in global oil prices. The benchmark eased 0.2 percent on day.
As Australian investors monitored wild swings on Chinese stock exchanges, the index has fallen 8 percent in the past month with moves of more than 1 percent in 9 of the past 16 sessions.
Oil Search has appointed Morgan Stanley as its financial adviser and Allens as its legal adviser.
ExxonMobil Corp, operator of PNG LNG, France’s Total SA and Asian state oil companies like Malaysia’s Petronas could emerge with rival bids, although Woodside had already started talks with key shareholders, analysts said. Oil Search’s LNG expansion projects rank in the top two or three undeveloped conventional developments globally, according to UBS. “Overall, the timing is good and it seems to make reasonable sense”. “We don’t see Oil Search accepting an offer at this level”.
Advertisement
Woodside’s decision to pursue Oil Search after selling out earlier follows the failure of a bid to buy into a gas export project in Israel as well as the slide in the oil price which has undermined the economics of some of its prospective gas projects off Western Australia.
