PNG Industry News reported on Friday that talks between the two sides had collapsed, sending InterOil's New York-listed stock down about 12%. The stock recovered to close down only 3.24% on the day at $71.70 after InterOil issued a statement saying the talks were still on.

The news service, citing an unidentified source, characterised the talks as "dead", saying ExxonMobil's exclusive period for negotiations had ended.

InterOil said it was responding to a trading alert from the NYSE "regarding unusual trading activity". InterOil said it was the company policy "not to comment on market rumours or speculation" and "not to comment on ongoing negotiations".

It added: "Negotiations with ExxonMobil Papua New Guinea Ltd regarding an agreement to monetize the Elk and Antelope fields are ongoing."

ExxonMobil spokesman Patrick McGinn declined to comment.

The talks between the two companies revolve around ExxonMobil potentially acquiring an equity stake in Block PRL-15, which contains the Elk-Antelope gas discoveries operated by InterOil.

ExxonMobil is interested in the gas for its $19 billion Papua New Guinea LNG project.

The US supermajor says “major terms have already been agreed" and once the deal is finalised ExxonMobil plans to use the gas to underpin the construction of an additional train at the PNG LNG project site.

Shell is also rumoured to be interested in a stake in the fields. InterOil has said the talks with ExxonMobil are "exclusive".

The Elk-Antelope fields could contain contingent resources of some 9.45 trillion cubic feet of wet gas.