Oil Search Ltd. is finally on its way to *Papua New Guinea for executing collaboration with natural gas development, in an era of natural gas glut. A treaty signed for acquiring InterOil Corp. – a midsize energy company – yields worth US$2.2 billion in cost.
(*region benefits from its proximity to large gas markets in China, Japan and South Korea)
FRIDAY: The board members of both the companies have given their sole consent over the cost offer – estimating US$ 40.25/share for InterOil; i.e. a 27% premium to its last closing trade.
As per deal regulations, InterOil shareholders would receive 8.05 Oil Search shares for each of their own shares or a cash alternative worth US$ 770 million.
The deal could likely boost Oil Search’s exposure to what is expected to be the next major gas-export project planned in the region. The partnership also sees this developed project beside an existing liquefied natural gas venture (wherein Oil Search already holds a stake).
UPDATE: This contract would enhance Oil Search’s stake to 29% from 23%, and that of Total’s position from 40% to 48%.
On a related note, Total-led Papua LNG project could open its collaborations with Oil Search’s other major asset – its 29% stake in a liquefied natural gas project that can produce 6.9 million metric tons over annual scale.
By linking two of the major projects in the region, executive authorities of Oil Search hinted an opportunity to reduce costs while accelerating the development of the newer gas finds.
INSIGHT: InterOil shareholders gain an interest of 14%-21% in the enlarged company.
With a separate agreement that will see Oil Search sell on some of InterOil’s interests in the promising natural-gas discovery in the region to partner Total for about US$1.2 billion, the acquisition will also strengthen the French energy giant’s stakes in the proposed Total-led project centered on the Elk and Antelope gas fields
