The oil industry's $US50m man thanks to Oil Search takeover

The oil industry has bred its fair share of outsized wealth – and egos – usually for the lucky few who manage to bring in wildcat drill well success. But for Michael Hession, an engineer, just building on the success of others is set to send his wealth soaring.

Born in Ireland and educated in Wales, he was most recently a senior executive with Woodside Petroleum before being tapped to run InterOil, an oil and gas outfit that has been on the hunt in Papua New Guinea for the past two decades.

And now a $US2.2 billion ($3 billion) plan to buy InterOil is set to line Hession's pockets to the tune of $US50 million in termination payments, largely thanks to shares he has received in the company since he signed up as the chief executive four years ago.

The worth of the shares portion of the payout was originally valued at $US33.98 million, although thanks to the surge in the InterOil share price on news of the deal, this has catapulted their prospective worth.

That is in addition to shares worth $US5.3 million which he received last year, for example, along with his annual salary and other bonuses. And in early July, Hession is to receive $US1.7 million in shares from a 2015 bonus relating to progress with its plans in PNG.

The fine print of Hession's contract also provides for an "exploration bonus" to be paid "if a discovery is made on an exploration licence" held by InterOil within 12 months of his termination.

InterOil has indicated it is optimistic that the drilling results from Antelope 7, which is to be drilled later in the year, could significantly lift its oil and gas reserves, although sources close to the company indicated this prospective bonus would not apply with results from this well.

Founder's view unclear

Hession and InterOil have backed the planned merger – although the stance of the company's founder and former chief executive, Phil Mulacek to the deal is yet to become apparent.

Mulacek recently outlined plans to shake-up the board of directors of InterOil which could result in control moving to interests associated with him, if it succeeds.

In 2013, Mr Mulacek was removed as the chief executive following a prolonged period of dispute and amid claims of "misconduct".

InterOil shareholders are to meet June 14 where they will vote on Mr Mulacek's board push, although much of the meeting may be given over to discussing the merits of the planned Oil Search merger.

Investors pleased

Sharemarket investors have reacted positively to the merger news, marking up InterOil's shares by 37 per cent in offshore trading on Friday, to $US43.57, with part of the gains due to investor optimism that drill results from the Antelope 7 well could lift the value of the takeover offer from Oil Search, rather than reflect the chance of an alternative deal emerging.

"Part of the gain is really a 'call option' on Elk-Antelope exploration success," one source close to Oil Search said Monday.

Securities analysts were broadly supportive of the merger, although analysts with Citi Group told clients Oil Search is over-paying, downgrading its view of Oil Search shares to a "sell" on the merger.

"We think that Oil Search has paid a very full price for InterOil, which on its  own would be destroying shareholder value," its analysts said in a note. "However Oil Search has also raised expensive equity as part of th deal which by being above our prior target price, is value accretive to Oil Search in aggregate."

Read more: http://www.smh.com.au/business/energy/the-oil-industrys-us50m-man-thanks-to-oil-search-takeover-20160523-gp1g8y.html#ixzz49f8E80nk 
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'Stavros' pid='70560' dateline='<a href="tel:1464173 Wrote:PNG Government will NEVER allow their in-country assets to be acquired by a large outside company

I don't understand the comment  OSH isn't PNG and in any event the controlling g ownership would remain TOT  and XOM

'ArtM72' pid='70561' datel Wrote:

'Stavros' pid='70560' dateline='<a href="tel:1464173 Wrote:PNG Government will NEVER allow their in-country assets to be acquired by a large outside company

I don't understand the comment  OSH isn't PNG and in any event the controlling g ownership would remain TOT  and XOM

PNG has stated plamns to develop a fully integrated formidable PNG based  'PNG Petronas'.  Combining IOC/OSH was inevitable when O'Neill forced funding to buy 10% OSH which enabled OSH to buy PacLNG stake and make a move on all PRL15 by booting TOT via arbitration.  New OSH will be 'PNG Petronas' and will have first dibs on all subsequent PNG projects and in essence will control licensing and development planning.  Expect less cutting up of PNG with pipelines and facilities and massive integrated projects, like QatarGas, where SM's and off-takers partner in the JV's.

This is why XOM will not enter bidding war for IOC, they already have an inside track to E/A gas and economies by working with Papua LNG JV via OSH/PNG Gov't to be in control of PRL15 and all IOC licenses.  Expect an on-sell to XOM or Asian of-takers just like the on-sell to Total.  Botten is smart, he has managed to enter PRL 15 buying out PacLNG and now on his way to take over IOC all while not taking debt or dilluting equity.

Our upside is much higher in OSH family.

'Palm' pid='70570' datel Wrote:$50 million is outrageous for how he has done things.

Agree.  Grossly under compensated  Sigh.....

'Tree' pid='70563' datel Wrote:

'ArtM72' pid='70561' datel Wrote:

'Stavros' pid='70560' dateline='<a href="tel:1464173 Wrote:PNG Government will NEVER allow their in-country assets to be acquired by a large outside company

I don't understand the comment  OSH isn't PNG and in any event the controlling g ownership would remain TOT  and XOM

PNG has stated plamns to develop a fully integrated formidable PNG based  'PNG Petronas'.  Combining IOC/OSH was inevitable when O'Neill forced funding to buy 10% OSH which enabled OSH to buy PacLNG stake and make a move on all PRL15 by booting TOT via arbitration.  New OSH will be 'PNG Petronas' and will have first dibs on all subsequent PNG projects and in essence will control licensing and development planning.  Expect less cutting up of PNG with pipelines and facilities and massive integrated projects, like QatarGas, where SM's and off-takers partner in the JV's.

This is why XOM will not enter bidding war for IOC, they already have an inside track to E/A gas and economies by working with Papua LNG JV via OSH/PNG Gov't to be in control of PRL15 and all IOC licenses.  Expect an on-sell to XOM or Asian of-takers just like the on-sell to Total.  Botten is smart, he has managed to enter PRL 15 buying out PacLNG and now on his way to take over IOC all while not taking debt or dilluting equity.

Our upside is much higher in OSH family.

Sounds like gobledegook to me.  XOM has inside track on E/A gas?  Did I miss a couple of pressers?  The ones dealing with OSH buying out Kumul and Total leaving the country?

No doubt Botten is Hession's superior, but then Botten will be leaving and Hession ends up with $50 million.  Just how does this deal help us again?