US ENERGY giant ExxonMobil is expected to officially wade into the race for the Papua New Guinea-focused InterOil next week in a $3 billion-plus move that threatens to end Oil Search’s takeover ambitions for its smaller rival and intensify pressure on French major Total.
As flagged by this column, Oil Search, an Australian-listed, Port Moresby-based company, led by industry veteran Peter Botten, fulfilled a long-considered strategy in May when it launched a $US2.2bn tilt at InterOil.
But it risks losing out to a contest between two super majors if Exxon’s entry draws counter fire from Total. Even if the French titan stays clear, Oil Search’s directors will be wary of locking horns with Exxon, the world’s biggest oil company with a market capitalisation of $US386.1bn.
According to sources the binding offer from the US heavyweight is likely to be pitched at a small premium to Oil Search’s existing bid of $US40.25 per share, with InterOil’s investors again offered a combination of scrip and cash.
Total operates PRL 15 or the Elk-Antelope fields that had been earmarked as reserves for Papua LNG, a second mooted LNG development in Port Moresby. The group was also set to galvanise its grip on PNG’s market with the purchase of a majority stake in InterOil’s assets - a move that enabled Oil Search to reduce the financing burden of its takeover bid.
While the two titans have considered combining the projects, Exxon’s acquisition of InterOil would weaken Total’s negotiating powers and strengthen the chances the Elk-Antelope gas would mainly bolster PNG LNG’s capacity.
InterOil’s removal would also pose existential challenges for Oil Search. The company shrugged off an $11bn tilt from Woodside last year but its position as the key minority stakeholder in both PNG LNG and Papua LNG would increase its chances of becoming takeover fodder for the majors.