Oil Search to buy InterOil Corp in a $2.2-bn deal

Papua New Guinea-focused oil and gas explorer Oil Search Ltd today struck a deal to buy InterOil Corp for at least $2.2 billion and agreed to sell off some assets to French energy giant Total to fund part of the proposed acquisition.

The move comes a year after Oil Search rejected an $8-billion takeover offer from Woodside Petroleum.

Oil Search, based in Port Moresby, the capital of Papua New Guinea, but listed in Australia, has offered to pay $40.25 per share for InterOil, a 27-per cent premium to the last closing price on 19 May.

InterOil shareholders would receive 8.05 Oil Search shares for each of their own shares or a cash alternative up to a total of $770 million.

InterOil shareholders would also receive the right to an additional cash payment of about $6.05 a share for each trillion cubic feet equivalent of gas, above the threshold of 6.2 trillion cubic feet, that is certified for the Elk and Antelope fields, which could see the value of the offer rise to $51.13 a share if the resource has 8 trillion cubic feet of gas, taking the total deal value to $2.2 billion.
In a separate deal, Oil Search will sell some of InterOil's interests in the Total-operated natural-gas Papua LNG Project centered on the Elk and Antelope gas fields in Papua New Guinea to partner Total SA for about $1.2 billion.

This deal would increase Oil Search's stake in the project from nearly 23 per cent to 29 per cent and raise Total's stake to just over 48 per cent from the current 40 per cent.

Oil Search and InterOil in a joint statement said the merger offers compelling financial and strategic benefits for both sides by creating a major independent oil-and-gas champion in the Pacific island nation.

"The combination of the companies will increase Oil Search's exposure to the world-class Papua LNG Project, which is expected to be the next major LNG development in PNG," Oil Search said in a statement.

Oil Search is an oil and gas exploration and development company which was established in Papua New Guinea (PNG) in 1929.

Most of the company's assets are located in Papua New Guinea, where it holds several oil and gas production and exploration licences.

The company's main asset is its current 29 per cent stake in the 6.9MTPA PNG LNG Project, a world-scale liquefied natural gas development operated by ExxonMobil.

In addition to the PNG LNG Project, Oil Search has interests in, and operates all of, PNG's currently producing oil fields. Approximately 20 per cent of PNG LNG Project gas is sourced from the Oil Search-operated oil fields.

The company also has offshore exploration interests in the Middle East and North Africa.