Oil Search to acquire InterOil for $2.2bn

Papua New Guinea-based Oil Search has signed an agreement to acquire InterOil in a transaction valued at $2.2bn.

The combination of these two companies will create an independent PNG oil and gas company and is expected to facilitate cooperation of the Papua LNG Project and the PNG LNG Project.

Following the acquisition, the shareholders of InterOil will own an interest in Oil Search’s asset base and dividend stream, including the PNG LNG project in addition to its existing stake in PRL 15.

Oil Search has individually signed a memorandum of understanding (MoU) with Total to sell 60% of the interest acquired from InterOil in PRL 15 and 62% of its exploration assets upon completion of the InterOil acquisition.

Following the sell-down, Oil Search expects to have an equity interest of up to 37.4% in PRL 15, while Total will own up to 62.1%.

Oil Search chairman Rick Lee said: "Oil Search believes that the acquisition of InterOil represents an excellent outcome for InterOil and Oil Search shareholders, and enables both companies to benefit from the value created through the commercialisation of the gas resources in PRL 15.

"We look forward to welcoming InterOil shareholders onto our register and, together, continuing to grow in PNG."

InterOil chairman Chris Finlayson said: "The InterOil board has thoroughly considered this transaction and we believe it delivers significant value to all InterOil shareholders through the opportunity to benefit from ownership of shares in the combined entity at a significant implied premium to the current InterOil share price, while maintaining exposure to the value upside from the certification of Elk-Antelope.

"In addition, the transaction will enable InterOil shareholders to continue to benefit from the value created through the commercialisation of gas resources along with exposure to Oil Search’s portfolio of high-quality assets."

The agreements will enable Oil Search to commercialise its Highlands and Gulf gas resources.

The combination is also set to increase Oil Search’s exposure to the Papua LNG project and strengthen its exploration portfolio in the Gulf province of PNG.