Exxon Trumps Oil Search Bid for InterOil -- 2nd Update

By Lynn Cook, Robb M. Stewart and David Winning 

Exxon Mobil Corp. has made a higher bid for InterOil Corp., a U.S.-listed company with natural gas assets in Papua New Guinea that Oil Search Ltd. has been trying to buy.

Exxon's all-stock proposal of $2.5 billion is roughly 10% higher than Oil Search's $2.2 billion proposal for the company. Oil Search has until Thursday to meet or beat Exxon's bid.

"Exxon Mobil has submitted an offer to acquire InterOil Corporation, which we believe represents a superior proposal," said Exxon spokesman Alan Jeffers on Monday.

In addition to Exxon's stock offer, InterOil said the company has also proposed making a cash payment to its shareholders if further drilling and assessment of wells reveal that its Elk-Antelope fields contain more than 6.2 trillion cubic feet of natural gas.

The corporate tussle over InterOil pits two business partners against one another. Exxon and Oil Search, which is based in Port Moresby, the capital of Papua New Guinea, jointly own the country's only natural gas export plant. InterOil controls different gas reserves and has proposed a second liquefied natural gas facility there, which would compete for customers with the $19 billion Exxon-Oil Search PNG LNG plant.

Oil Search, with financial backing from French oil company Total SA, set its sights on InterOil's gas assets so it could find ways to generate savings. But analysts say that even if Oil Search loses InterOil to Exxon, the company will benefit. If Exxon buys InterOil it would likely invest in expanding the existing LNG infrastructure it co-owned with Oil Search, so that natural gas produced in Papua New Guinea could funnel through one cost-effective project rather than a competing plant, experts say.

If Exxon succeeds in buying InterOil, it will be the first company the Irving, Texas-based oil giant has purchased in several years.

Exxon's last large acquisition was the $31 billion takeover of XTO Energy Inc. in 2009, which gave the big oil company massive new oil-and-gas reserves in U.S. shale fields. In 2013, Exxon paid $2.6 billion for Celtic Exploration Ltd., based in Calgary, bulking up the company's shale holdings in Canada.

For the last few years, Exxon has largely shunned corporate deals in favor of land acquisitions. Much of the oil-and-gas acreage that Exxon has purchased is in the Permian Basin of west Texas, which is considered one of the most prolific American basins with some of the lowest costs to produce in the U.S.

Papua New Guinea is a relatively new energy frontier. The small Pacific nation only recently joined the ranks of global energy exporters, in competition for a cluster of large untapped gas deposits that could be developed to feed Asia's demand for cleaner fuels.

If Oil Search walks away from its bid for InterOil this week it is entitled to a $60 million breakup fee, 20% of which would go to French oil major Total SA, which partially backed Oil Search's offer.

Write to Lynn Cook at [e-mail], Robb M. Stewart at [e-mail] and David Winning at [e-mail]

(END) Dow Jones Newswires

July 18, 2016 12:00 ET (16:00 GMT)

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