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.
"Woodside is currently engaging with Oil Search in relation to the proposal. There is no certainty that these discussions will result in a transaction," the company said in a press release, adding that "the proposal is consistent with Woodside’s strategy of delivering superior shareholder returns by maximizing the value of our core assets, leveraging our capabilities and growing our portfolio."
The proposed $8.1 billion (AUD 11.65 billion) merger, if successful, will be the largest Australian takeover deal since 2011, the Sydney Morning Herald reported Tuesday.
Oil Search shareholders would receive one Woodside share for every four Oil Search shares and become shareholders in the combined entity under the Woodside merger proposal.
In a separate press announcement, Oil Search indicated that its Board intends to review Woodside's proposal and will update shareholders and the market in due course.
"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 (liquefied natural gas) development opportunities, including the PNG LNG Train 3 expansion and the Papua LNG Project. This, combined with the Company’s low operating cost producing assets, reserves upside, significant discovered resources and extensive and high quality exploration acreage position provide substantive scope for capital growth and position the Company to capitalize from a recovery in the oil price. Clearly, Oil Search shareholders are entitled to an offer which adequately reflects this value potential," the PNG-focused company said.
According to the Sydney Morning Herald, Oil Search has a market value of $7.1 billion (AUD 10.3 billion), implying that the Woodside offer is at a 13 percent premium. Oil Search share prices have fallen by 30 percent in the past year due to the slump in global oil prices that has battered the industry, especially oil and gas producers.
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