Oil Search rejects $8bn offer from Woodside

Sep 14, 2015, 3:06 PM EDT
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Oil Search rejected Woodside's $8 billion takeover offer on Monday. Woodside last week sought exclusive talks with the Papua New Guinea-focused oil and gas producer on a one-for-four share offer, conditional on support from key stakeholders, including the PNG government, reports Reuters. The rejection is a blow to Woodside, which is chasing low cost liquefied natural gas assets in PNG at a time when the company has little new output due to start this decade and its undeveloped projects face challenges in a world of cheap oil. "The proposal from Woodside from every which way we looked at it grossly undervalued Oil Search," Oil Search Chairman Rick Lee told Reuters.

Oil Search said it was in a strong financial position and highlighted its low-cost operations in PNG, where its output could double in the early 2020s working with giants ExxonMobil Corp (XOM.N) and France's Total SA (TOTF.PA) on two liquefied natural gas projects. Lee said there were unlikely to be any benefits in putting the two companies together, and the board saw Woodside's plan to create a regional LNG champion conflicting with Oil Search's long history as PNG's national energy champion. The company and its partners did not need Woodside's operational or liquefied natural gasmarketing expertise, Lee told analysts on a conference call. Shareholders found Woodside's proposal unattractive, he added. Oil Search is nearly one-fourth owned by the PNG government and Abu Dhabi's International Petroleum Investment Corp.

Oil and gas bankers, however, expect Woodside to make another offer for Oil Search, writes the New York Times. Woodside is searching for high quality oil and gas assets after abandoning plans last year to buy part of a large natural gas discovery offshore from Israel after a year of talks. That Woodside is currently paying out 80 percent of its underlying profit in dividends to shareholders “is a signal that material growth could be some way off,” said Nik Burns, an analyst with UBS in Melbourne.