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Oil Search rejects Woodside offer

Papua New Guinea-headquartered Oil Search has rejected Woodside’s US$8 billion takeover offer. The Australian explorer said it was “surprised and disappointed” that Oil Search’s board chose to reject the proposal, offered earlier this month, without meeting with Woodside first.
Oil Search rejects Woodside offer

Papua New Guinea-headquartered Oil Search has rejected Woodside’s US$8 billion takeover offer. The Australian explorer said it was “surprised and disappointed” that Oil Search’s board chose to reject the proposal, offered earlier this month, without meeting with Woodside first.

In a statement, Oil Search said on 14 September: “Following a detailed evaluation of the proposal, the board has concluded that the proposal is highly opportunistic and grossly undervalues the company.

“Since receiving the proposal, the company has undertaken substantial shareholder engagement. The overwhelming feedback has been that this proposal has little merit.”

Upon the rejection, Woodside said: “Under the proposal, Oil Search shareholders would receive all scrip consideration of AU$0.25 Woodside shares for every Oil Search share and represent a 31.7% shareholding in the combined entity. This compares favorably to Oil Search’s relative contribution to the merged group on a range of measures including production, reserves and free cashflow. Woodside believes the proposal would create the regional oil and gas champion for both Papua New Guinea and Australia with a global portfolio of world class assets and development opportunities which would deliver significant benefits to both companies’ shareholders.”

However, Oil Search doesn’t appear swayed by Woodside’s defense. Chairman, Rick Lee said: “The Board of Oil Search believes our company is in a very strong position, both operationally and financially. We have a low cost, high quality, production base which is generating strong cash flows and excellent growth opportunities, with the proposed PNG LNG Train 3 and Papua LNG among the most competitive new developments in the world. Oil Search provides its shareholders with a pure exposure to PNG and is fully committed to PNG. Our focus is on continuing to build and create shareholder value through the company’s strong future growth prospects.”

Oil Search touted its “robust” financial position, stating that it has current liquidity of US$1.6 billion, comprising US$850 million in cash and US$750 million in undrawn corporate credit facilities.

Together with its operators, ExxonMobil and Total and other joint venture partners, Oil Search has access to competitively priced project finance for its LNG developments and substantial corporate debt capacity. Oil Search’s main asset is its 29% interest in the 6.9MTPA PNG LNG project, operated by ExxonMobil PNG Ltd.

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