Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

Woodside bids for oil search in Asia’s biggest energy offer

Woodside Petroleum news
Woodside Petroleum news

Woodside Petroleum Ltd. offered A$11.65 billion ($8.1 billion) in stock for Oil Search Ltd. as it aims to take advantage of a collapse in oil prices in what would be the biggest energy deal between non-related companies in the Asia-Pacific region.

Woodside offered one share for every four Oil Search shares, which amounts to a premium of about 14 percent based on Oil Search’s closing price on Monday. Oil Search rose 16 percent to A$7.835 and Woodside slid 2.9 percent to A$29.68 as of 1:12 p.m. Sydney time. Oil Search was one of the few oil and gas companies to report a jump in profit in the first half, driven by its Papua New Guinea liquefied natural gas project.

“The market is sending a pretty clear signal that Woodside’s offer is undervaluing the Oil Search stake in the PNG LNG project, which is really one of the most competitive LNG investments in the whole Asia Pacific region,” Angus Nicholson, a market analyst at IG Markets Ltd. in Melbourne, said by phone. “Not to mention Woodside will need PNG government support, so that could be tricky.”

Papua New Guinea’s government holds a 9.8 percent stake in Oil Search, according to data compiled by Bloomberg. Woodside Chief Executive Officer Peter Coleman identified the nation as a prospective target area in May last year after he pulled out of a planned investment in Israel. Oil Search has a 29 percent interest in the PNG project, which is operated by Exxon Mobil Corp.

“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,” the company said in a statement. “Oil Search shareholders are entitled to an offer which adequately reflects this value potential.”

The implied premium of 13.6 percent compares with the average 13.7 percent premium of three similar-sized global oil exploration and production acquisitions in the past year, according to Bloomberg data.

Companies have announced $172 billion of oil and gas acquisitions this year, up from $123 billion a year earlier, data compiled by Bloomberg show. Brent crude, the benchmark for half the world’s oil, has tumbled more than 50 percent in the last year.

The proposal sparked a rally in the shares of other Australian energy companies, with Santos Ltd. rising as much as 13 percent in Sydney trading and Origin Energy Ltd. surging as much as 6.6 percent.

‘Bidding War’

Oil Search appointed Morgan Stanley and Allens as advisers. Woodside is being advised by Bank of America Corp., Gresham Advisory Partners Ltd. and Herbert Smith Freehills LLP.

Oil Search “is not in a hurry with a manageable balance sheet and some of the lowest-cost LNG in the region,” Cristobal Garcia, a Hong Kong-based analyst at Sanford C. Bernstein & Co., wrote in a report, adding that he sees potential for a 27 percent premium. “This could turn into a bidding war” with Total SA and Exxon Mobil involved, he wrote.

The premium offered by Woodside is probably too low, and the bid faces a number of hurdles, Nik Burns, a Melbourne-based analyst at UBS Group AG, wrote in a research note. Oil Search’s LNG expansion projects rank in the top two or three undeveloped conventional developments globally, according to UBS.

“The transaction makes sense for Woodside,” implying an oil price of about $68.30 a barrel, Burns wrote. “We don’t see Oil Search accepting an offer at this level.”


Oil Search Managing Director Peter Botten last month identified oil and gas companies as targets, saying in an interview with Bloomberg that the plunge in share prices following oil’s collapse meant that it’s now probably cheaper to buy a company than an asset. Botten and Chief Financial Officer Stephen Gardiner didn’t immediately return calls, while a spokeswoman for Perth-based Woodside didn’t immediately reply to a voicemail.

Among proposed LNG projects in the Asia-Pacific region, developments in Papua New Guinea are in the best position to go ahead, Credit Suisse Group AG analysts said earlier this year.

Oil Search’s production in the first half of 2015 almost tripled to 14.3 million barrels of oil equivalent, while sales rose to $864 million in the period, fueled by the LNG project with Exxon. The $19 billion PNG LNG project is considering an expansion, while Oil Search is also in a venture with Paris- based Total SA and InterOil Corp. that’s planning a second LNG development in the Pacific country.

Woodside’s biggest acquisition so far was the $2.75 billion purchase of Apache Corp.’s stakes in Australian and Canadian liquefied natural gas projects.

Recommended for you

More from Energy Voice

Latest Posts