Oil Search has agreed to acquire 100% of InterOil Corporation, the Company’s joint venture partner in the large Elk/Antelope discovery which underpins the proposed Papua LNG Project.
Managing Director Peter Botten in a statement said announcement of the acquisition will place the company in an even better position to advance the Company’s PNG growth opportunities.
He said Oil Search has also today executed a Memorandum of Understanding (MoU) with Total, for a back-to-back farmout of some of the InterOil interest acquired, strengthening the Company’s existing partnership with Total and ensuring the Company’s efforts on the Papua LNG Project remain aligned.
The deals will consolidate the Company’s position as PNG’s premier oil and gas company, with a high-quality, low-cost production base, strong balance sheet, excellent growth opportunities and leading in-country relationships.
Importantly, the acquisition also delivers on two of Oil Search’s key strategic objectives: to commercialise the Company’s Highlands and Gulf gas resources and to pursue high-value acquisition opportunities in PNG, particularly in the highly-prospective Gulf Province.
Oil Search believes that Oil Search and InterOil are highly complementary companies.
The transaction, which is conditional on InterOil shareholder approval, offers InterOil shareholders:
- Oil Search shares or a cash alternative, plus
- A “contingent value right” - a supplementary cash payment for each trillion cubic feet of gas equivalent in Elk/Antelope beyond 6.2 tcfe, which will be determined once the field’s resource certification is completed, expected to be in 2017.
The agreement has been unanimously recommended by the boards of Oil Search and InterOil, with both believing that the combined entity will deliver excellent outcomes for each company’s set of shareholders.
In the Company’s MoU with Total, subject to completion of the InterOil acquisition, Oil Search agrees to:
- Sell down 60% of the PRL 15 interest acquired and
- Sell down 62% of InterOil’s exploration assets to Total.
The MoU demonstrates Total’s recognition of the value of the Papua LNG Project, enhances Oil Search’s liquidity and commits both parties to maximising the value of the Papua LNG Project; including cooperation and potential integration of the Papua LNG Project with PNG LNG Project expansion, which would deliver substantial value to all stakeholders, including landowners and the PNG Government.
Oil Search’s position as the only common party besides Government to both the PNG LNG Project and proposed Papua LNG will be further strengthened by these deals, with the Company’s post-transaction interest in the Papua LNG Project increasing from 17.7% to 29%, post-sell down to Total and after government back-in. Oil Search will also have increased influence on how these two projects can work together to deliver PNG LNG Train 3 and a timely development of Papua LNG.
If the acquisition is successful, which is conditional on InterOil shareholder approval and is expected to take approximately three months to conclude, Oil Search will have also acquired significant interests in InterOil’s exploration licences, which gives us an expanded acreage to explore and significant work programme commitments.
These announcements are clear indicators that Oil Search remains on track to deliver a potential third PNG LNG train and the timely development of Papua LNG.
The InterOil acquisition represents a bright future for Oil Search employees, being part of a larger, more influential PNG oil and gas exploration and production company with excellent growth prospects.