EXXONMOBIL has offered US$2.5bn for Papua New Guinea-focussed company InterOil, which the InterOil board says “constitutes a superior” proposal to an existing offer from Oil Search.
InterOil is one of the joint venture partners developing the Papua LNG project, along with Total, Oil Search and the Papua New Guinea government. The development will be fed by the Elk-Antelope field in the Eastern Papuan Basin where InterOil has several exploration licences. InterOil has so far made five field discoveries in the Eastern Papuan Basin – Elk, Antelope, Triceratops, Raptor and Bobcat – making it an attractive takeover target.
On 20 May, the Oil Search and InterOil boards unanimously agreed a takeover price of US$40.25/share, a total of US$2.2bn. InterOil shareholders would receive 8.05 Oil Search shares and a contingent value right which gives shareholders the right to a cash payment linked to to the volume of gas in the Elk-Antelope fields, in this case, US$6.05/share for every TCFE (trillion cubic feet equivalent) of C2 gas found over and above 6.2 TCFE.
ExxonMobil’s offer, while slightly below InterOil’s closing share price on Friday, nevertheless trumps Oil Search’s offer as it is offering a higher cash component, with a payment of US$7.07 for each TCFE of gas found in the Elk-Antelope fields above 6.2 TCFE.
Under the prior agreement, Oil Search has three days, until 21 July, to review its options and submit a revised bid. At present, InterOil says that it continues to recommend the Oil Search transaction to its shareholders, and says that there can be “no assurance” that the offer from ExxonMobil will lead to the termination of the agreement with Oil Search, or a new agreement with ExxonMobil.
Connected to the original deal, but separate to it, on completion of the transaction, Oil Search agreed to sell a 60% interest in an InterOil petroleum retention licence, PRL 15, to Total. InterOil named the French oil major as operator of the licence, which is in the Gulf Province of Papua New Guinea, in July 2015. A PRL allows a company exclusive rights over non-commercial discoveries until they become commercial. Oil Search says that it is now in “active dialogue” with Total and InterOil.
If InterOil does come to an alternative arrangement with ExxonMobil, it must pay a US$60m break fee to Oil Search, of which 20% will go to Total.
Oil Search says it will update its shareholders and the market “in due course”, and has delayed its forthcoming activities report until after 21 July.
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