Woodside Petroleum Ltd disappointed in Oil Search's rejection on takeover proposal

WOODSIDE Petroleum Ltd says it is disappointed in Oil Search’s rejection of its proposal.

The Australian oil and gas major last week offered a non-binding conditional indicative proposal to acquire all the shares in Oil Search for a consideration of one Woodside share for every four Oil Search shares held.

According to Oil Search board, the offer was turned down as it was “opportunistic and grossly undervalues the company”.

Oil Search said since receiving the proposal, the company had engaged with shareholders and the feedback from shareholders was that Woodside’s offer had little value.

The company said it has clear growth opportunities, a very strong cash position and an excellent track record of delivery. 

Oil Search owns 29 per cent of PNG LNG project and 22.8 per cent of the Papua LNG project. 

“Oil Search has a strong commitment to PNG society in all of its operations … Oil Search is in a very robust financial position, with current liquidity of US$1.6 billion (K4.4 billion), comprising US$850 million (K2.4 billion) in cash and US$750 million (K2 billion) in undrawn corporate credit facilities. The company is well placed to fund the development of its growth projects,” the company said in a statement yesterday.

However, Woodside said they were surprised that the Oil Search board had rejected the offer without any discussions. The company last week said they had offered A$11 billion (K30.6 billion). 

“Woodside 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,” Woodside said in a statement.

“The proposal implies a material premium to all relevant trading periods prior to initial media speculation of a potential approach by Woodside to Oil Search on Aug 27, 2015 and compares favourably on a range of measures relative to other recent transactions in the sector.

“Woodside is surprised and disappointed that the board of Oil Search had rejected the proposal without meeting with Woodside to understand the benefits of the opportunity or to negotiate the terms of a possible merger.”