Oil Search in bid to take over InterOil. Pens MoU with Total

Australia’s Oil Search has tabled a bid to acquire a 100 percent of InterOil, a company with assets in Papua New Guinea.

The combination of the companies will increase Oil Search’s exposure to the “world-class” Papua LNG Project, which, the company says, is expected to be the next major LNG development in PNG, as well as strengthening Oil Search’s exploration portfolio in the Gulf Province of PNG, which is highly prospective for gas and complements its existing PNG acreage position. The value of the transaction is estimated at $2.2 billion.

In a separate agreement, Oil Search has executed a Memorandum of Understanding with the French oil major Total, under which Oil Search will sell to Total, for cash, 60% of the interest acquired from InterOil in Petroleum Retention Licence (PRL) 15 and 62% of InterOil’s exploration assets.

This will, Oil Search said, de-risk its acquisition of InterOil.

Following completion of the InterOil transaction and the Total MoU, Oil Search’s interest in the Papua LNG Project will increase to 29% and Total’s stake will increase to 48.1% (assuming the PNG government exercises its back-in rights of 22.5%)

This is not the first time Oil Search and Total are teaming up in Papua New Guinea. Back in 2012 the two companies signed five Sale and Purchase Agreements for licences in the onshore and offshore Gulf of Papua region in PNG with the aim to jointly explore and appraise the area. That transaction marked the first entry of TOTAL Exploration & Production into PNG.

Worth noting, Oil Search’s decision to acquire InterOil comes only months after the company fended off a takeover bid from Woodside, deeming it “highly opportunistic and grossly undervalues the company”. The offer was estimated at around $8.1 billion.

The InterOil transaction is expected to close in the third quarter of 2016, subject to InterOil shareholder approval and court approval.

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