Woodside's search for PNG crown jewels

[Tree]

Woodside's search for PNG crown jewels

NaN o

• Aug 28 2015

With oil prices falling this week to a fresh six year low below $US40 a barrel, bankers are running the ruler over both asset sales and potential corporate deals as the sector wilts under financial pressure.

While much of the talk has focused on the decision by Santos to test the market for asset sales, investors and analysts have not forgotten about Woodside Petroleum's renewed interest in striking a transformative deal.

Chief executive Peter Coleman has declared he wants to wait for distressed companies to put their "crown jewels" on the market which could mean a pause until year-end before it makes any decisive move.

However, sources reckon the Perth-based giant have signalled it could be open to a long rumoured move on Papua New Guinea focused player Oil Search in a possible cash and scrip bid.

When talk first emerged about Woodside's interest in Oil Search just over a year ago, the $14 billion price tag looked an expensive proposition. With its value now under $10 billion there's talk of a renewed push to test appetite for a deal if Woodside wants to win a foothold in a substantial gas resource.

Woodside has used both Credit Suisse and Gresham in the past. It's also close to Citi. UBS has a strong relationship with Oil Search.

Peter Coleman, Woodside boss, previously oversaw ExxonMobil's operations in PNG and is thought to be open to testing the waters. That view was strengthened after the chairmen of the two companies are understood to have held informal talks last year about a merger.

But several obstacles remain.

Probably the largest is the PNG government itself. It holds a coveted 10 per cent stake in Oil Search and is not thought to be open to selling.

Senior figures within Woodside's management team are also thought to favour acquiring oil assets rather than adding more liquefied natural gas capacity to its already considerable volumes.

That issue aside, one alternative which remains in the mix could see Woodside take up part ofInterOil's stake in Elk-Antelope, alongside existing partners French oil major Total and Oil Search.

A stake in Interoil itself also lingers as an option given the savage 20 per cent sell-off in the share price after Kiwi billionaire Richard Chandler sold a hefty stake in July.

[Palm]

May be time to buy some Woodside stock. Wouldn't at all be surprised to see them in the mix for IOC. makes good sense.

[Stavros]

I've been on my soap box for a long time that IOC should sell down their 36.5% share of E/A for the same deal they will get from TOTAL.

End result should be IOC in the Papua LNG project for 10% NET ... which means selling down from 36.5% to 12.9% GROSS.

[jft310]

It's Oil  Search that has issues not Interoil . Oil Search because of the drop in oil and thus LNG prices has issues funding the balance to be paid PACLNG , funding the 3rd train with Exxon and funding their interest in Papua LNG . I expect some type deal with Oil Search assets to lighten their future cash flow needs . Woodside says they looking to buy . Woodside could buy Santos interest in PACLNG and Oil Search's interest in Papua LNG and have an interest in both projects ?????one possibility .

Stavros - the price that could be realized by Oil Search selling their interest in Papua would help Interoil's value because the asset size is proven to be substantially larger today and Total is committed to the project when they took over as operator . Analysts and investors would mark up Interoil's value based on the T count used in an Oil Search sale .

[Getitrt2]

Good points, jft. Everything has its price, but I feel sure IOC should and will not sell much if any of its stake, certainly not for the previous Total price.