The Board of Oil Search Limited has unanimously rejected Woodside’s takeover offer.
Last week Woodside launched the offer for all the shares in Oil Search for a consideration of one Woodside share for every four Oil Search shares held.
According to Oil Search, following a detailed evaluation of the proposal, the Board has concluded that the proposal is “highly opportunistic and grossly undervalues the company”.
Oil Search said: “The overwhelming feedback has been that this Proposal has little merit.”
The proposal would significantly alter the fundamental characteristic of an investment in the company and dilute the present growth profile available to its shareholders, the company added.
Oil Search has a material equity position in the world class PNG LNG Project and in LNG growth opportunities. These include the expansion of the PNG LNG Project through debottlenecking, the construction of a third LNG train and the development of the proposed Papua LNG Project.
This, combined with the company’s low cost oil production and an extensive exploration portfolio, provides substantial scope for capital growth, with the potential for production to double from current levels by the early 2020s, the company explained. Oil Search added that, with exposure to oil prices, through both its oil sales and LNG contracts, it is in a strong position to capitalise from a recovery in the oil price.
Commenting on the Proposal, the company’s Chairman, Rick Lee, said: “The Board of Oil Search believes our Company is in a very strong position, both operationally and financially. We have a low cost, high quality, production base which is generating stro ng cash flows and excellent growth opportun ities, with the proposed PNG LNG Train 3 and Papua LNG among the most competitive new developments in the world. Oil Search provides its shareholders with a pure exposure to PNG and is fully commit ted to PNG.
“Our focus is on continuing to build and create shareholder value through the Company’s strong future growth prospects.”
As a response to Oil Search’s rejection of the offer, Woodside said it is “surprised and disappointed that the Board of Oil Search has rejected the proposal without meeting with Woodside to understand the benefits of the opportunity or to negotiate the terms of a possible merger”.
Under the proposal, Oil Search shareholders would receive all scrip consideration of 0.25 Woodside shares for every Oil Search share and represent a 31.7% shareholding in the combined entity. Woodside says that this compares favourably to Oil Search’s relative contribution to the merged group on a range of measures including production, reserves and free cashflow.
Furthermore, Woodside says it 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.