Woodside, Oil Search in Merger Talks

Woodside on Tuesday announced it provided Oil Search a $8 billion all share takeover proposal.

Under the proposal, Woodside would acquire all of the shares in Oil Search for a consideration of one Woodside share for every four Oil Search shares held.

Oil Search in a separate statement said its Board intends to review the proposal.

“While Oil Search will consider the proposal, it should be noted that Oil Search has a material equity position in the world class PNG LNG Project and attractive, low cost, LNG development opportunities, including the PNG LNG Train 3 expansion and the Papua LNG Project. This, combined with the company’s low operating cost producing assets, reserves upside, significant discovered resources and extensive and high quality exploration acreage position provide substantive scope for capital growth and position the company to capitalise from a recovery in the oil price,” Oil Search said. “Clearly, Oil Search shareholders are entitled to an offer which adequately reflects this value potential.”

Last month Oil Search announced PNG LNG project performed ahead of expectations during the first half, producing LNG at an annualised rate of approximately 7.1 MTPA, above the nameplate capacity of 6.9 MTPA. Oil Search has a 29 percent interest in the PNG LNG Project.

Woodside said that the proposal is consistent with company’s strategy of delivering superior shareholder returns by maximising the value of our core assets, leveraging our capabilities and growing our portfolio.

The PNG LNG project is an integrated development that includes gas production and processing facilities in the Southern Highlands, Hela, Western, Gulf and Central provinces of Papua New Guinea. The project is expected to produce more than 9 trillion cubic feet of gas over the estimated 30 years of operations. It will provide a long-term supply of LNG to four major customers in the Asia region including China Petroleum and Chemical Corp. (Sinopec), Tokyo Electric Power Co. Inc. (TEPCO), Osaka Gas Co. Ltd., and CPC Corp. Taiwan.