Oil Search has abandoned its bid for InterOil, as many in the markets had expected after ExxonMobil came in over the top with a higher-priced counter offer at the start of this week.
Oil Search had until yesterday to announce if it would try and top the ExxonMobil offer, but decided not to, as had been tipped.
Many analysts said Oil search did not have to overbid ExxonMobile because it would win from the higher offer as it would see the US giant move to bring the Elk-Antelope gas field in PNG into the PNG LNG production system (which is 29% controlled by Oil Search). The news saw Oil Search shares rise 1.1% to $7.45 yesterday.
In May Oil Search revealed a $US2.2 billion for InterOil, its partner in the Elk-Antelope project in Papua New Guinea with French oil giant Total helping with the funding of the offer.
But InterOil said in late June it had been approached by a third party, which earlier this week was confirmed to be ExxonMobil.
Oil Search said in its statement to the ASX that it had been advised the target’s board considered ExxonMobil’s a “superior proposal” of $US45 per InterOil share.
But Oil Search pointed out in the statement that given it already works with ExxonMobil in PNG, it sees increased opportunities for co-operation between the three companies. ExxonMobil and Oil Search are partners in the PNG LNG project which began operating last year.
The ExxonMobil offer means it and Oil Search will continue to dominate the LNG industry in Papua New Guinea as they control the country’s only LNG facility.
Oil Search said yesterday in its statement that “should ExxonMobil be successful in its proposed bid for InterOil, its entry into Papua LNG would significantly enhance the likelihood of material project cooperation”.
“Opportunities to add value include possible project acceleration, capital and operating cost savings, resource utilisation optimisation and various operating, financing and marketing synergies.
“Considerable work remains to be done by all stakeholders to realise these opportunities, but the entry of ExxonMobil into Papua LNG would be a material step forward.
“We are pleased to have created a catalyst for potential LNG project cooperation in PNG and look forward to continued strong working relationships with Total SA, ExxonMobil and the other PNG LNG stakeholders, as well as with the PNG Government, with a focus on progressing a potential expansion of the PNG LNG Project and the development of Papua LNG in the earliest practicable timeframe,” Oil Search said.
And earlier, Total issued its own statement revealing that the the support for an Oil Search offer for InterOil was off.
Total said in its statement that it was analysing ExxonMobil’s competing offer. Total said it was the operator of Petroleum Retention Licence 15 (PRL 15), the joint venture developing the Elk-Antelope gas field in Papua New Guinea. It said it would remain the largest shareholder with 31.1% interest while InterOil and Oil Search hold 28.3% and 17.7%, respectively.
"Total considers that the initial offer by Oil Search for InterOil represented a fair value,” the company said in its statement.
Analysts say that both ExxonMobil and Total both have wanted to simplify the ownership of the Elk-Antelope gas field by taking out InterOil’s 36.5% stake. This would clear the way for the majors to tie together their rival gas export projects, PNG LNG and Papua LNG.
Following Oil Search’s announcement, that will now happen.
