Exxon Tops Oil Search's Bid to Acquire InterOil

(Updates with reaction from Total)

ExxonMobil has trumped Oil Search’s bid to acquire Papua New Guinea focused natural gas player InterOil with a $2.5bn bid.

InterOil stated July 18 that ExxonMobil’s offer constitutes a 'superior proposal,' as defined in InterOil’s arrangement agreement with Oil Search. Without naming ExxonMobil, on June 30, InterOil had announced it received from a third party an unsolicited, conditional and non-binding takeover offer. 

In May, InterOil entered into a binding agreement to be acquired by Oil Search for $2.2bnn, with Oil Search to sell a little 60% to Total for $1.2bn. Under the Arrangement Agreement between Oil Search and InterOil, Oil Search has the opportunity to submit a revised offer before or after any agreement is entered into by Interoil and ExxonMobil.  

Oil Search’s partner Total analyzed the competing offer in line with its demonstrated policy for capital discipline on acquisitions and investments and taking into account the most recent 2C resource certification of Elk Antelope of under 6.5 tcf completed in July 2016.  The French major said July 20 that the bid represented a fair value for the Interoil’s assets and Total was keen to increase its share in the project for such a value. It was also clear to Total that a portion of the acquired interests would have to be offered to certain LNG buyers and also to PNG LNG participants in order to develop synergies between the Papua LNG project and the PNG LNG project.

Oil Search has interests in two PNG based LNG projects: the ExxonMobil operated PNG LNG project, which is due for expansion, and Total operated Papua LNG project, which is based on development of the Elk-Antelope gas fields in PRL 15. InterOil too has a 36.5 percent stake in Papua LNG project.

Under the latest proposal, ExxonMobil has offered $45 worth of its own shares for each InterOil share. Also, Exxon has agreed for an additional cash payment of approximately $7.07 per share for each tcfe gross resource certification of the ElkAntelope field above 6.2 tcfe, up to a maximum of 10 tcfe, InterOil said. This values InterOil at $2.5bn.

Oil Search has a period of three calendar days, which will expire on July 21, 2016, during which it can offer to amend the terms of agreement. Oil Search in a separate statement said it is committed to acting in the best interests of shareholders at all times and is presently considering its position.

In the event that the Oil Search deal not going through a change in recommendation from InterOil’s Board, Oil Search is entitled to be paid a $60 million break fee (of which Total is entitled to 20 percent).