Oil Search backs out of InterOil bid, clears way for ExxonMobil

Oil Search has pulled out of bidding for Papua New Guinea-focused explorer InterOil, allowing U.S.-based energy giant ExxonMobil to proceed without a battle.

ExxonMobil earlier this week made a $2.2 billion offer, challenging an earlier bid from Oil Search, which was backed by the French energy giant Total.

Oil Search said in a statement on Thursday it has informed InterOil that it does not intend to submit a revised offer for the company.

“Following a detailed review of the ExxonMobil proposal, including an analysis of the recent Elk-Antelope resource certification, the value and opportunities offered by cooperation between Papua LNG and PNG LNG and the likelihood of realising this value by having ExxonMobil in the Papua LNG Joint Venture, the Oil Search Board has decided it is not in the best interests of shareholders to submit a revised offer for InterOil,” the statement said.

“The bid by ExxonMobil clearly underscores the merits of our offer for InterOil and highlights both the quality of our LNG assets in PNG and the potential value that would be created by cooperation between PNG’s two world class LNG projects,”  Oil Search’s Managing Director, Peter Botten, said.

According to Botten, Total  and Oil Search have already “signalled their desire” to cooperate with the PNG LNG project, to maximise synergy values for all stakeholders.

“Should ExxonMobil be successful in its proposed bid for InterOil, its entry into Papua LNG would significantly enhance the likelihood of material project cooperation. Opportunities to add value include possible project acceleration, capital and operating cost savings, resource utilisation optimisation and various operating, financing and marketing synergies,” Botten added..

Oil Search and Total have agreed that they will terminate their memorandum of understanding if InterOil terminates the arrangement agreement with Oil Search so that it can enter into a binding agreement with ExxonMobil, the statement said.

In addition, if InterOil terminates the deal, Oil Search will receive a $60 million break fee, of which Total is entitled to 20%, which will “more than cover the costs associated with the offer”.