Papua New Guinea-based oil and gas producer Oil Search has announced it will takeover rival InterOil for $US2.2 billion.
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The deal has the backing of the PNG government and the InterOil board, Mr Botten said. The companies have signed a definitive agreement under which Oil Search will acquire all outstanding shares of InterOil.
Oil Search projects that the collaboration of the gas projects reduce $3 billion in capital expenditure as well as boost development of Papuan LNG regardless of the record low gas price in Asia.
Oil Search will sell to Total, for a yet to be determined amount of cash, 60% of the interest acquired from InterOil in Petroleum Retention Licence 15 and 62% of InterOil’s exploration assets.
The Papua LNG project is centred on the Elk-Antelope gas fields with the final investment decision due in 2017. The total transaction is worth $2.2 billion.
The deal comes amid expectations that Asian demand for LNG will ramp up in coming years, analysts said.
According to the agreement, Oil Search will pay 8.05 shares for each InterOil share, valued at $40.5 per share, which represents a 27% premium to the company’s closing price on Thursday.
“There is a relatively small pool of opportunities in Papua New Guinea, and the synergies of joint development of Oil Search and InterOil are compelling”. 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 implied value of the share/cash deal is $US40.25 per InterOil share.
Now what: Unless you’re interested in owning Oil Search, InterOil investors are probably best served to move on.
This deal would increase Oil Search’s stake in the project from almost 23 per cent to 29 per cent and raise Total’s stake to just over 48 per cent from the current 40 per cent.
“This agreement between Total and Oil Search demonstrates Total’s strong commitment to the development of PNG’s gas resources”, Total chairman and chief executive Patrick Pouyanne said in a statement.
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The transaction will leave InterOil shareholders with between 14% and 21% of the combined group, depending on the take-up of the cash option.
