Oil Search Ltd. has signed a deal to acquire a 22.835% stake in retention licence PRL15 containing the Elk and Antelope fields in the eastern Highlands of Papua New Guinea for $900 million.
The deal involves the acquisition of 100% of Pac LNG Group (formerly Pacific LNG), which is affiliated with the privately owned Swiss banking firm Clarion Finanz AG. The transaction is unconditional and expected to settle within 2 weeks.
Pac LNG holds the 22.835% interest in PRL15 as well as being a major shareholder of InterOil Corp., which in turn currently holds a 75.6114% stake in the Elk-Antelope permit.
InterOil brought France’s Total SA into the PRL15 permit last December for a 61.3% stake in a deal worth $3.6 billion. That deal is due for completion by the end of this year’s first quarter.
Oil Search will fund its Pac LNG acquisition with the placement of 149.39 million fully paid ordinary shares to the PNG Government at $8.20 (Aus.)/share.
Oil Search says this deal will facilitate the ongoing strategic relationship between the company and the Papua New Guinea government.
The government in its turn has entered into arrangements with international financial services company UBS to fund the placement. This includes UBS establishing a hedge position in Oil Search of $700 million (Aus.) at $8.20/share. Priority in any allocation under the hedge will be given to eligible existing Oil Search shareholders.
The government has been a major investor in Oil Search since its merger with Orogen Minerals in 2002. The placement enables the government to continue that interest which was approaching a crossroad at the end of March.
That date marks the maturity of an exchangeable bond deal transacted in 2008 whereby Papua New Guinea used its 14.64% stake in Oil Search to raise $1.681 billion (Aus.) from Abu Dhabi company International Petroleum Investment Co. (IPIC) to fund the government’s stake in the ExxonMobil Corp.-led PNG-LNG project.
The government’s present shareholding in Oil Search will now pass to IPIC. IPIC has a reputation for being a long-term investor in overseas energy assets.
Oil Search’s Elk-Antelope acquisition is in line with the company’s strategy to aggregate gas resources to underpin LNG expansion opportunities in Papua New Guinea. The purchase also diversifies the company’s portfolio and is complementary to its existing assets in the country, including its stake in the PNG-LNG project.
The present estimates for contingent resources in Elk-Antelope are 5.3 tcf of raw gas including 75 million bbl of associated liquids.
Up to three appraisal wells, including the planned Antelope-4 well, are scheduled for drilling in PRL15 during the next 18 months to prove up sufficient gas resources to support a new LNG development.
Oil Search’s costs in this program for 2014 as an equity partner within PRL15 are estimated to be $30 million. The program is operated by Total.
In a separate deal Oil Search has entered a heads of agreement with Pac LNG to potentially acquire an interest in four other PNG permits, including the Triceratops gas discovery in PRL 39.