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STREET TALK
InterOil suitors line up for a $US6bn-plus PNG deal
PUBLISHED: 6 HOURS 52 MINUTES AGO | UPDATE: 6 HOURS 52 MINUTES AGO
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EDITED BY SARAH THOMPSON, ANTHONY MACDONALD AND GRETCHEN FRIEMANN
InterOil is expected to land one of the world’s biggest energy companies as a co-investor in its Papua New Guinea gas project in a deal that could be worth over $US6 billion ($6.4 billion).
Expectations of an imminent transaction on its Elk and Antelope fields in PNG could have major implications for Oil Search, an Australian-listed oil and gas producer.
InterOil’s chief suitor has always been Exxon Mobil, the world’s biggest oil company by market value, and Oil Search’s majority partner in PNG’s $19 billion liquified natural gas project, known as PNG LNG. Santos also has a stake in the venture which is due to come on line within six months. But in order to meet a two-train, or dual-track production target, the PNG LNG stakeholders need fresh gas supplies.
Little wonder then that InterOil is sitting pretty. Its Elk and Antelope fields represent the two largest gas finds in south-east Asia in the past two decades and the company, headed by former Woodside boss Michael Hession, has hinted those finds may be the tip of the iceberg in this hydrocarbon-rich terrain. Hession has been credited with reviving InterOil’s fortunes since he joined in July after the company became bogged down in debt under the previous regime.
But its future rests on the sell-down or monetisation of Elk and Antelope which could top $US6 billion, although the precise amount remains unclear as InterOil intends to retain a significant equity stake.
Exxon is still viewed as the most likely partner for a joint venture despite the lapse of an exclusivity arrangement earlier this year. Even if one of Exxon’s rivals out-bid the Texan giant, the company could launch a takeover for InterOil, prior to the conclusion of its licences from the PNG government.
The PNG LNG project, which is likely to add a third train, is expected to pump cash over the next few years, with analysts anticipating a surge in Oil Search and Santos’ value throughout 2014.
Renewed focus on InterOil’s fields come as Woodside Petroleum faces the possibility of scaling back its 30 per cent slice of Israel’s offshore gas project, Leviathan. If the Australian oil and gas giant fails to snare its $US2.3 billion share of that project, many in the sector believe it will soon turn its attention to fresh growth opportunities. Some argue Oil Search may become a target, although the government’s stake in the company has always been a deterrent.
Elsewhere, Rob Thomson, RBC’s head of equity capital markets, has left the firm alongside Leigh Gardner, who replaced Peter Main as head of equity sales in August.
The Australian Financial Review
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COMPANIES OIL Search Ltd, Woodside Petroleum
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