Woodside Petroleum has formally abandoned its attempted takeover of rival energy company Oil Search by withdrawing its $11.6 billion bid.
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Chief executive Peter Coleman had on three occasions held talks with the PNG government over its 10.1 per cent stake in Oil Search but is understood to have been told that only a cash offer would be acceptable, and at a price well above the government’s entry price into Oil Search of $8.20 a share.
Oil prices have plunged to their lowest level in almost seven years, hurting the shares of major oil companies on Wall Street as a global supply glut shows no signs of abating.
Woodside isn’t pursuing any alternative transactions to combine the businesses, the Perth-based company said Tuesday in a statement.
The failure of Oil Search to attract an improved offer from Woodside has obviously added pressure to the stock’s share price and it’s likely a period of weakness in Oil Search’s share price will now continue for some time.
“Given the fall-off in crude pricing, it’s hard to see Woodside raising the offer in this environment”, the Bloomberg quoted Neil Beveridge, a Hong Kong-based analyst at Sanford C. Bernstein & Co., as saying. “I think buyers, like investors, are trying to time the bottom of the market, and the latest data would say there is still another six to 12 months of oversupply to come”, he said.
PNG LNG was built with a capacity of 6.9 million mt/year, but produced at an annualized rate of around 7.4 million mt/year in the third quarter.
Woodside Petroleum announced the withdrawal of the merger plan with Oil Search on the Australian Stock Exchange on Tuesday morning.
“As previously advised, the Oil Search board concluded that the indicative Woodside proposal grossly undervalued the company”, he said. “This signals that Woodside isn’t confident that we’re quite there yet”.
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Oil Search’s main asset is a 29% stake in a US$19 billion liquefied-natural-gas development in Papua New Guinea known as PNG LNG, which is led by Exxon Mobil Corp.
