Papua New Guinea-based Oil Search has rejected Woodside’s US$8.1 billion all stock proposal the Australian company made last week.
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Woodside CEO Peter Coleman. Image from Woodside. |
Oil Search announced today that its board unanimously rejected the non-binding conditional indicative proposal that would see Woodside acquire all the shares in Oil Search for a consideration of one Woodside share for every four held.
“Following a detailed evaluation of the proposal, the board has concluded that the proposal is highly opportunistic and grossly undervalues the company,” Oil Search said in a statement.
The company, through shareholder engagement, has come to the conclusion that the proposal has little merit, and would significantly alter the fundamental characteristic of an investment in the company and dilute the present growth profile available to its shareholders.
“Woodside is surprised and disappointed that that the board of Oil Search has rejected the proposal without meeting with Woodside to understand the benefits of the opportunity or to negotiate the terms of a possible merger,” Woodside said.
Woodside also said that it believes the proposal would create the regional oil and gas champion for both Papua New Guinea and Australia with a global portfolio of world-class assets and development opportunities which would deliver significant benefits to both companies’ shareholders.
According to Oil Search, the company is in a strong financial position with its operating cash flows from its producing assets, even at current low oil prices, and current liquidity of US$1.6 billion, comprising $850 million in cash and $750 million in undrawn corporate credit facilities.
“The board of Oil Search believes our company is in a very strong position, both operationally and financially. We have a low cost, high quality, production base which is generating strong cash flows and excellent growth opportunities, with the proposed PNG LNG Train 3 and Papua LNG among the most competitive new developments in the world. Oil Search provides its shareholders with a pure exposure to PNG and is fully committed to PNG. Our focus is on continuing to build and create shareholder value through the company’s strong future growth prospects If any proposals are tabled in the future that reflect compelling value for Oil Search shareholders, we will engage on them. Clearly this proposal falls well short of that test,” said Rick Lee, Oil Search chairman.
The company has material equity in the PNG LNG project and in LNG growth opportunities, including the expansion of the PNG LNG project through debottlenecking, the construction of a third LNG train and the development of the proposed Papua LNG project. Oil Search is expecting the potential for production to double from current levels by the early 2020s, and believes it is well placed to fund the development of its growth projects.
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