has raised the stakes in the race for Papua New Guinea’s oil and gas assets with a “superior proposal” for that has trumped an offer from Australia’s .
US-listed InterOil said on Monday that Exxon had offered $45 per share paid in Exxon stock, valuing the company at $2.2bn. The offer is slightly less than InterOil’s closing share price of $47.61 on Friday, but Exxon is offering an additional $7.07 in cash per share based on the estimated size of PNG’s Elk-Antelope gasfield.
While the offer at a minimum matches the $2.2bn bid lodged in May by ASX-listed Oil Search, Exxon’s bid is likely to have extra appeal for InterOil shareholders because it is offering US-listed shares and its additional payment is in cash, rather than Oil Search’s offer of a tradable security.
“ExxonMobil has submitted an offer to acquire InterOil Corporation, which we believe represents a superior proposal,” the US oil major said in a statement.
InterOil said in a separate statement on Monday that its board deemed Exxon’s a “superior proposal” and that OilSearch has until July 21 to decide whether to improve its offer. That coincides with the date on which the Australian company is due to provide its second-quarter update.
Exxon’s move could fuel competition among oil majors, with Oil Search’s bid by France’s Total. Deutsche Bank analysts have noted that Exxon and Total “both have appetite for co-operation to realise synergies for both projects”.
The US company had long been seen as a likely bidder because of the potential for combining InterOil’s planned Papua LNG project with its own nearby PNG LNG, which started operations last year and in which Oil Search is its biggest partner. The two projects could share some facilities, holding down the cost of developing Papua LNG.
For Exxon, with a market capitalisation of about $395bn, a $2.2bn bid is a relatively small deal.
Since oil prices began falling two years ago, pulling LNG prices down with them, there has been speculation Exxon would use its financial strength to acquire assets at close to the bottom of the cycle.
However, Rex Tillerson, its chief executive, has argued that oil and gas companies have been generally overvalued, making acquisitions unattractive.
Oil Search and InterOil are partners in the potentially lucrative Elk-Antelope gasfield, which Oil Search and Total plan to develop into the Papua LNG venture.
The French company said in May it would pay Oil Search $1.2bn upon completion of the InterOil acquisition in exchange for a 48 per cent stake in the Papua LNG project they are developing together, assuming the PNG government exercises its right to a 22.5 per cent stake in the development.
Oil Search will receive a $60m break fee if the deal with InterOil does not go ahead. Its shares climbed 3.9 per cent in Sydney on Monday to A$7.25, their highest level since March.
Andrew Lappan, an investment adviser at Shaw and Partners in Sydney, said: “The way the Oil Search share price has reacted today suggests the market is happy its bid for InterOil looks unlikely to succeed.”
