ExxonMobil Corp has come in over Oil Search (OSH) and made a counter bid that tops the latter’s $US2.2 billion (A3 billion) offer for InterOil Corp.
Exxon’s deal has won the support of InterOil and Oil Search now has until Thursday to top the new deal. But regardless of what it decides, Oil Search is a win-win situation.
ExxonMobil’s move pits it against French giant Total SA, which is backing Oil Search’s offer with an agreement to buy part of InterOil’s stake in the potentially lucrative Elk-Antelope gas field in PNG
Oil Search says it has at least until July 21 to submit a revised offer and said it was talking to Total about making a higher bid.
“Total, with which Oil Search has a memorandum of understanding regarding the InterOil assets, is aware of these developments and Oil Search’s right to submit a revised offer,” Oil Search said yesterday.
“The parties are in active dialogue and have the flexibility to submit a revised offer either during the three day notice period or after InterOil enters into an Arrangement Agreement with ExxonMobil,” Oil Search said in a statement to the ASX.
ExxonMobil has offered $US45 worth of its own shares for each InterOil share plus a payment of 90 US cents per million cubic feet equivalent (mcfe) for resources of more than 6.2 trillion cubic feet at the Elk-Antelope gas field. That offer is worth more than $US2.5 billion.
That compares with Oil Search’s offer of 8.05 of its own shares for every InterOil share, valuing InterOil’s shares at $US42.66 on Friday’s close, plus $0.77 per mcfe for resources of more than 6.2 tcfe at Elk-Antelope.
So will Oil Search add more to its bid?
That’s hard to see as it stands to benefit from an Exxon takeover of InterOil because that increases the chances of the two new fields being developed and linked to the existing PNG LNG project where it owns a 29% stake.
Exxon is the project leader and will have a vested interest in expanding the operation. Exxon and Oil search together control PNG’s only LNG export facility, which means both can share control of the country’s LNG sector for a while longer. The other way involved bring Total into the deal directly.
Oil Search CEO Peter Botten seemed to acknowledge that point of view with this comment in yesterday’s statement:
"Oil Search’s Board and management are committed to acting in the best interests of shareholders at all times and are presently considering their position. The proposal from ExxonMobil endorses Oil Search’s view on the quality of the Elk-Antelope gas fields and the value of the Papua LNG Project.
"Given its existing material interests in both the PNG LNG Project and in the Papua LNG Project, Oil Search is well placed to participate in the potentially very significant benefits that are expected to arise from cooperation between, and/or integration of, the projects,” he said yesterday.
Oil Search will also receive a net break fee of $US48 million after paying 20% of the original $US60 million fee with Inter Oil to Total.
Investors reckon Oil Search would be mad to launch a new, higher offer.
Oil Search shares jumped yesterday after the announcement as investors showed relief at the possible end to what would be an expensive bidding war for InterOil. The shares rose 3.8% to $7.25 on the ASX yesterday.
