Woodside launches non-binding bid for Oil Search as Papua New Guinea gas attracts attention


Australia’s Woodside Petroleum has launched an A$11.65 billion (K22.83 billion) offer for one of Papua New Guinea’s largest companies, Oil Search Ltd. It’s the latest in series of moves that has seen several PNG gas-related assets change hands in the past year.

 Oil Search's Peter Botten

Oil Search’s Peter Botten

In the last 10 months, Papua New Guinea’s liquefied natural gas sector has welcomed two new global LNG players, with Spain’s Repsol taking over Talisman Energy and France’s Total becoming the lead operator in the second LNG plant.

Now, a further changing of the guard looks possible in the sector, with POMSoX- and ASX-listed Oil Search the subject of a takeover bid, while Santos moves to sell assets to protect its share price.

Woodside, Oil Search and Santos have all had their share prices affected by this year’s downturn in oil prices.

Oil Search bid

Australia’s Woodside Petroleum has launched an A$11.65 billion (K22.83 billion) offer for Oil Search, a 13 per cent premium on its current market valuation of A$10.3 billion (K20.18 billion). Woodside itself is valued at A$25.2 billion (K49.4 billion).

‘The Oil Search board intends to review the proposal and will update shareholders and the market in due course,’ Oil Search Managing Director, Peter Botten, said in a statement to the ASX today.

‘The company wishes to emphasise that there is no guarantee that a binding proposal can be agreed between the parties.’

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Woodside's CEO, Peter Coleman. Credit: Woodside

Woodside’s CEO, Peter Coleman. Credit: Woodside

Woodside agrees that ‘there is no certainty that these discussions will result in a transaction’.

Oil Search said its development opportunities, combined with low-cost operating assets, significant discovered reserves and extensive exploration acreages, put the company in a good position to capitalise from a recovery in the oil price.

‘Clearly Oil Search shareholders are entitled to an offer which adequately reflects this value potential.’

Botten believes gas projects in Papua New Guinea are extremely viable, despite the downturn in oil and gas prices, but also told last month’s PNG Advantage Investment Summit in Brisbane that Oil Search is reducing its capital costs and putting pressure on suppliers to reduce their costs, as well reviewing its operation to find more efficient ways of getting the barrels of oil and gas out of the ground.

Last week, the company announced it would close its Brisbane office, relocating some of its 60 staff to Sydney. Some jobs are also being reduced in PNG, while other support functions are being shifted from field operations to the Port Moresby office.

Oil Search’s share price has dropped nearly 30 per cent over the past 12 months.

The Woodside proposal is subject to regulatory approval from the PNG Government and satisfactory due diligence.

The PNG Government holds a 10 per cent stake in Oil Search.

Santos selling assets

Santos' Peter Coates. Credit: Santos

Santos’ Peter Coates. Credit: Santos

As Business Advantage PNG reported last week, Santos Executive Chairman, Peter Coates, is heading a review of the company’s assets, which includes a 13.5% stake in the ExxonMobil-run PNG LNG project.

Santos may sell up to A$1 billion (K1.96 billion) in assets as a way of protecting its share price, which has fallen 72 per cent in the last year.

Its share price rose eight per cent immediately following the Woodside announcement.

Observers say an announcement on asset sales may be made by the end of September.

New entrants

Should Woodside take over Oil Search and Santos sell its PNG assets, that will make five major changes to the ownership of oil and gas assets in PNG in the past year or so.

In May, Spain’s Repsol bought Canada’s Talisman Energy which had a 40% stake in the US$300 million (K837 million) Stanley project.

Total took a 40 per cent stake in PNG’s second LNG plant, Papua LNG, when it became lead operator in March this year. Meanwhile, Puma Energy acquired the midstream and downstream assets of InterOil in July 2014.

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