Oil Search to acquire InterOil

InterOil Corporation (InterOil) and Oil Search Limited (Oil Search) have announced that they have signed a definitive agreement under which Oil Search will acquire all of the outstanding shares of InterOil.

Oil Search proposes to acquire 100% of InterOil (the InterOil Transaction), the InterOil board unanimously recommends InterOil shareholders approve the InterOil Transaction.

The consideration for InterOil shareholders comprises 8.05 Oil Search shares plus a Contingent Value Right (CVR) for each InterOil share:

• The implied transaction value of the Oil Search share component of the consideration is US$40.25 per InterOil share, for a total transaction value of approximately US$2.2 billion, which represents a significant premium to InterOil's recent trading prices.
• In addition, the CVR entitles holders to a contingent cash payment that is linked to the volume of 2C hydrocarbon gas resource certified to be contained in the Elk-Antelope fields. Each CVR will deliver approximately US$6.05 per InterOil share for each trillion ft³ above 6.2 trillion ft³ gross certified 2C resource in the Elk-Antelope fields, and will be paid in cash upon completion of the certification process. The CVR provides InterOil shareholders with an uncapped additional payment, depending on the size of the certified 2C resources in the Elk-Antelope fields.
• Oil Search will also provide InterOil shareholders with a cash alternative for the share component, up to a total of US$770 million, with any cash not taken up by InterOil shareholders to be applied to an Oil Search share buyback following completion of the InterOil Transaction in order to reduce dilution for Oil Search shareholders.

The InterOil Transaction offers InterOil shareholders the option to receive shares in Oil Search at a significant implied premium to the current InterOil share price, or a cash alternative of up to a total of US$770 million (subject to a pro rata scaleback). In addition, under either scenario, the consideration includes a CVR, which entitles holders to a contingent cash payment that is linked to the volume of 2C hydrocarbon gas resource certified to be contained in the Elk-Antelope fields. The CVR will deliver additional cash of approximately US$6.05 per InterOil share for each trillion ft³ of gross certified gas resources above 6.2 trillion ft³ within the Elk-Antelope fields.

The transaction will result in the combination of two highly complementary companies, offering compelling financial and strategic upside potential for InterOil and Oil Search shareholders.

The combination will create a major independent PNG oil and gas champion and is expected to facilitate cooperation and/or integration of the Papua LNG Project and the PNG LNG Project, unlocking significant value for all stakeholders.

The aggregate consideration for InterOil shareholders, comprising the share consideration and the CVR, implies a significant premium to the InterOil share price, with potentially uncapped upside through the CVR depending on the certified size of the Elk-Antelope resource.

Furthermore, InterOil shareholders will hold an interest in Oil Search's asset base and dividend stream, including the world class PNG LNG Project and Oil Search's existing stake in PRL 15, and the significant potential benefits that are expected from cooperation and/or integration of, the PNG LNG Project and the Papua LNG Project.

"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."

Adapted from press release by Francesca Brindle

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/20052016/oil-search-to-acquire-interoil-3362/