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Oil Search Ltd., which operates in Alaska and Papua New Guinea, has a takeover bid from the independent Australian Santos Ltd. , which valued the combined company at AUD 22 billion ($ 16.11 billion).
The deal would have given Santos a foothold in the Papua New Guinea liquefied natural gas (LNG) scene, which is considered one of the most cost-effective Projects of the world applies. Oil Search is a partner in the ExxonMobil operated PNG LNG project and the Papua LNG development led by TotalEnergies SE, which is expected to make a final investment decision in 2023.
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Santos would also have acquired Oil Search’s stake in the Pikka unit on the northern slopes of Alaska, which contains the massive conventional oil resources of Nanushuk.
Santos announced on Tuesday that its offer had been rejected, and on the same day Oil Search said it had recently received « a confidential, non-binding and indicative proposal for a change of control ». In a notice to the Australian Stock Exchange, Oil Search said it had « carefully examined » the offer with its financial and legal advisers but determined that it was not in the best interests of shareholders on the terms and value proposed.
However, Santos claimed the potential transaction would create an « unrivaled champion in terms of size and size, » which the proposal suggests is larger than Australian heavyweight Woodside Petroleum Ltd.« The combination would provide greater exposure to Papua New Guinea that supports the development of key projects like Papua LNG, creates new jobs and helps support the local economy, « Santos said.
Santos said his offer implied a transaction price of A $ 4.25 per share, which is one Premium of 12.3% compared to the closing price of Oil Search on June 24th. The merger would have given Oil Search shareholders 37% of the pro forma company, with Santos holding 63%.
The news comes as Oil Search navigates a corporate crisis. Managing director Keith Wulff is resigning for « health reasons », the company announced on Monday. Wulff « treats a long-term illness that has recently worsened ».
But it was also said that the move followed an investigation into Wulff’s behavior at work. The board of directors believed that Wulff had « acted in a manner that did not meet the standards expected by the board of directors for his leadership style, » said Oil Search. Oil Search announced on Monday the newly appointed CFO Peter Fredericsen as Deputy CEO while the search is on for a permanent boss.
« This time was marked by extreme challenges, including global lockdowns in connection with the Covid-19 pandemic, a collapse in oil prices, crisis measures for Protecting the company’s financial position and developing a clear strategy to steer a path to a sustainable future through energy. « Transition, » said Chairman Rick Lee.
« It pays tribute to all of our employees that Oil Search is in a solid position now, with record levels of production in PNG, a strengthened balance sheet, and our Alaska development plans reaching milestones. ”
LNG insight
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