Oil Search to Buy InterOil for $2.2 bn

In a move that would create a major regional entity, Papua New Guinea (PNG) based Oil Search announced on Friday it is proposing to buy US listed InterOil for $2.2 billion ($A3.04 billion).

Oil Search said the transaction offers “compelling financial and strategic upside potential for both InterOil and Oil Search shareholders”. The deal has been unanimously approved by both boards.

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, which is being operated by Total.

Oil Search's stake in the Papua LNG project will rise from 23 percent to 29 percent post the deal, as it plans to sell 62 per cent of InterOil's exploration assets to French oil major Total, plus a 60 per cent interest in an InterOil petroleum retention licence. Total's stake in Papua LNg project will rise from 40 percent to little over 48 percent. 

Only last week, Oil Search had said that integration of PNG LNG project and the proposed Papua LNG project would be beneficial for both the projects in current low energy price environment.

Total MoU

In addition to proposing to buy InterOil, Oil Search has signed a memorandum of understanding (MoU) with Total.

The MoU will result in Oil Search selling down 60 percent of InterOil’s interests in PRL 15 and 62 percent of InterOil’s interests in its other exploration assets to Total following the successful completion of Oil Search’s acquisition of InterOil.

Oil Search's InterOil purchase will be approximately 60 percent funded by the sale of assets to Total.