Australia's Woodside offers to buy Oil Search for $8 bn
08 September 2015
Woodside Petroleum Ltd, Australia's biggest independent oil and gas producer, has offered to acquire smaller rival Oil Search Ltd in an $8 billion all-share deal, which Oil Search said on Tuesday it was evaluating.
A takeover of Oil Search would give Woodside a 29 per cent stake in a Papua New Guinea Liquefied Natural Gas project, which started producing last year and is considered one of the lowest cost, expandable LNG projects in the world.
Woodside would also gain a 23 per cent holding in PNG's biggest undeveloped gas prospect, the Elk and Antelope fields.
Oil Search said it has received a non-binding indicative proposal from Woodside under which Woodside would acquire all of the shares in Oil Search for a consideration of one Woodside share for every four Oil Search shares held. The proposal is subject to satisfactory completion by Woodside due diligence on Oil Search and execution of a mutually acceptable confidentiality agreement,
Oil Search should grant Woodside an agreed period of exclusivity on the company obtaining support from key stakeholders and shareholders and Woodside being satisfied that the transaction is likely to be supported by the PNG Government on acceptable terms.
The proposal would also be conditional on the parties entering into a binding implementation agreement.
If the above conditions are satisfied and the proposal does proceed, the transaction would itself be subject to further conditions precedent, including Oil Search shareholder, court and Papua New Guinea regulatory approvals.
Oil Search board plans to review the proposal and update shareholders and the market in due course. But said there was no guarantee that a binding proposal can be agreed between the parties.
''While Oil Search will consider the Proposal, it should be noted that Oil Search has a material equity position in the world class PNG LNG Project and attractive, low-cost, LNG development opportunities, including the PNG LNG Train 3 expansion and the Papua LNG Project. This, combined with the company's low operating cost producing assets, reserves upside, significant discovered resources and extensive and high quality exploration acreage position provide substantive scope for capital growth and position the company to capitalise from a recovery in the oil price. Clearly, Oil Search shareholders are entitled to an offer which adequately reflects this value potential.''
Oil Search has appointed Morgan Stanley as its financial adviser and Allens as its legal adviser.
Oil Search shares jumped 13 per cent to A$7.60 after the offer was announced, trading above the implied value of the offer as Woodside's shares fell 4 percent, suggesting investors expect Woodside will have to raise its bid.
Oil Search's biggest shareholder is the PNG government, with a 12.9 per cent stake. Woodside has already talked to the PNG government, the spokesman said.