CANBERRA: The Australian energy producer may need to dig deeper into its pockets to fulfill those ambitions. Woodside has offered one share for every four shares held in Oil Search, implying a premium of around 14 per cent based on the companies’ closing prices on Monday.
The can be valued at round $eight.1 billion and comes at a time when most power corporations are spending much less to preserve capital within the weak oil financial system.
Oil Search shares jumped 13 percent to A$7.60 after the offer was announced, trading above the implied value of the offer as Woodside’s shares fell 4 percent, suggesting investors expect Woodside will have to raise its bid.
Investors and analysts considered it a low-ball bid and predicted Oil Search’s top shareholder, the PNG government, would press for more, as it bought into Oil Search previous year at A$8.20 a share, well above the value of the proposal.
In a statement Tuesday, Woodside said it was “currently engaging with Oil Search” in relation to the merger proposal, and added there was no certainty the discussions would result in a transaction.
Oil Search last month reported a record half-year profit, boosted by increased production from the PNG LNG project.
Australian oil and gas exploration and development company Woodside Petroleum Ltd. confirmed Tuesday that it provided Oil Search Ltd. a confidential and non-binding proposal to merge through a scheme of arrangement under the Papua New Guinea (PNG) Companies Act. Including debt, it would be the second biggest after the reorganization of South Korea’s SK Group this year. Still, Woodside may not be able to justify a higher offer, and the number of rival bidders may be limited, he said.
Woodside has already started talking to the PNG government, analysts said. “It would have to be a pretty big company”. Sanford C Bernstein’s Cristobal Garcia reckons a bidding war could break out that would pull in Total and Exxon Mobil.
Woodside’s bid for Oil Search is the largest seen in the local energy sector and it follows Shell Oil’s £47 billion purchase of British Gas earlier in the year. Still, with commodity prices still volatile, and key players such as the major Chinese oil companies seemingly averse to acquisitions overseas now, deal-making has been relatively light so far.
