The rumored rival bid from ExxonMobil Corp. to Oil Search Ltd.’s takeover offer for fellow Papua New Guinea player InterOil Corp. has been confirmed.
InterOil said it had received what the board has determined constitutes a superior proposal to the one that Oil Search offered 2 months ago. InterOil said this week that it intends to make a change in its recommendation and enter into an arrangement agreement with ExxonMobil.
The new bid is essentially the same as that proposed by Oil Search—only higher. ExxonMobil’s proposal comprises a fixed price of $45/share of InterOil paid in ExxonMobil shares and a contingent resource payment (CRP) of $0.90/mcfe of the Elk-Antelope 2C resource in excess of 6.2 tcfe, subject to a cap of 10 tcfe. The CRP will be payable in cash at resource certification and will not be transferrable or listed on an exchange.
Oil Search said in a statement on July 18 that, under the agreement between it and InterOil dated May 20, InterOil must provide Oil Search with a minimum of 3 days to submit a revised bid before it can enter into an agreement with ExxonMobil.
Oil Search added that its Elk-Antelope joint venture partner, Total SA, with which Oil Search has a memorandum of understanding regarding InterOil assets, is aware of the new developments and Oil Search’s right to submit a revised offer.
In the carefully worded statement Oil Search added that “the parties are in active dialogue and have the flexibility to submit a revised offer either during the 3-day notice period—i.e. till 21 July—or after InterOil enters into an agreement with ExxonMobil.”
Oil Search went on to say that its board and management will act in the best interest of shareholders and are considering their position. The company added that ExxonMobil’s proposal endorses its view of the quality of the Elk-Antelope gas fields in the PNG Eastern Highlands and the value of the Papua LNG project.
“Given [Oil Search’s] existing material interests in both the PNG-LNG project [operated by ExxonMobil] and the Papua LNG [operated by Total], Oil Search is well placed to participate in the potentially very significant benefits that are expected to arise from cooperation between, and/or integration of, the projects.”
Oil Search added that if its agreement with InterOil is terminated following a change in recommendation from InterOil’s board, Oil Search is entitled to a payment of $60 million break fee, of which Total would receive 20%, to cover the costs of its offer.
Oil Search’s original offer involved 8.05 Oil Search shares plus a Contingent Value Right (CVR) for each InterOil share.
The implied transaction value of the share component was $40.25/InterOil share.
In addition, the CVR entitled holders to a contingent cash payment linked to the volume of 2C gas resources in the Elk-Antelope fields. Each CVR would deliver about $6.05/InterOil share for each trillion cubic foot above 6.2 tcf gross 2C gas resources to be paid in cash upon completion of the gas certification process.
In a side deal an MOU was signed between Oil Search and Total for Oil Search to sell down 60% of the interest acquired from InterOil in PNG retention lease PRL 15 that contains the Elk-Antelope gas field and 62% of InterOil’s exploration assets to Total, subject to closing the InterOil acquisition.
On that basis Oil Search would have had 29% of the Papua LNG project and Total 48% once the PNG government has taken up its equity.
