Exxon Mobil has trumped Oil Search's $3 billion PNG play

The US-based multinational oil and gas giant Exxon Mobil has got between local player Oil Search and its dreams of a massive independent oil and gas group in Papua New Guinea.

Oil Search in May announced it was buying rival InterOil Corp for $US2.2 billion ($A3 billion). At the same time, Oil Search took some of the risk out of the deal by signing an exclusive memorandum of understanding with French group Total to take equity positions in the InterOil assets.

However, today Oil Search says it’s been notified by InterOil that it has received a better offer from Exxon Mobil, Oil Search’s co-venturer in the PNG LNG Project.

The proposal from ExxonMobil is a fixed price of $US45 per InterOil share paid in ExxonMobil shares. The value of the Oil Search share/cash deal is $US40.25 per InterOil share.

A short time ago, Oil Search shares were up 2.6% to $7.165.

Oil Search, which says it is now considering its position, has three days to submit a revised offer.

“The proposal from ExxonMobil endorses Oil Search’s view on the quality of the Elk-Antelope gas fields and the value of the Papua LNG Project,” Oil Search said.

Oil Search is entitled to be paid a $US60 million break fee if its agreement with InterOil is terminated.