JOHANNESBURG (miningweekly.com) – Following ASX-listed oil and gas major Oil Search’s successful acquisition of Papua New Guinea-focused InterOil Corporation for $2.2-billion, or $40.25 a share, Oil Search reported on Friday that it had signed a memorandum of understanding (MoU) with multinational integrated oil and gas major Total SA to sell down 60% of InterOil’s assets in the petroleum retention licence (PRL) 15, as well as 62% of InterOil’s interests in its other exploration assets to Total.

Oil Search explained that the MoU was expected to deliver significant value for all Oil Search, InterOil and Total shareholders, as it derisked Oil Search’s acquisition of InterOil through the sell-down process, delivering certainty and incremental liquidity for Oil Search and InterOil shareholders.

The MoU also established an aligned partnership between Total and Oil Search, with material interests in the Papua LNG project, while also providing the possibility of bringing in new partners, including LNG buyers.

Further, it provided a commitment from Oil Search and Total to maximise the value of the Papua LNG project through cost minimisation, schedule acceleration and optimal resource use through cooperation and/or integration with the project.

Oil Search revealed that the terms of the sell down would be consistent with the value implied under its InterOil transaction.

“Following our entry into PRL 15 in 2014, this agreement between Total and Oil Search demonstrates Total’s strong commitment to the development of Papua New Guinea’s gas resources,” said Total chairperson and CEO Patrick Pouyanné.

He added that Total would increase its operated interest to a more material level, to drive the future development of the Papua LNG project, a low-cost onshore project close to Asian markets.

THE INTEROIL TRANSACTION
Prior to signing the MoU with Total, Oil Search inked a definitive agreement under which Oil Search would acquire all of InterOil’s outstanding shares.

This transaction, dubbed the InterOil Transaction, offered InterOil shareholders the option to receive shares in Oil Search at a significant implied premium to the current InterOil share price. Alternatively, InterOil shareholders were offered a cash alternative of up to a total of $770-million, and would hold an interest in Oil Search’s asset base and dividend stream.

Oil Search’s acquisition would combine Oil Search and InterOil to create a major independent Papua New Guinea oil and gas champion that would facilitate the cooperation and/or integration of the Papua LNG project and the Papua New Guinea LNG project, unlocking significant value for all stakeholders.

“The InterOil board has thoroughly considered this transaction and we believe it delivers significant value to all InterOil shareholders through the opportunity to benefit from ownership of shares in the combined entity,” said InterOil chairperson Chris Finlayson.

Oil Search chairperson Rick Lee said the company looked forward to welcoming InterOil shareholders onto its register.

“Oil Search believes that the acquisition of InterOil represents an excellent outcome for InterOil and Oil Search shareholders and enables both companies to benefit from the value created through the commercialisation of the gas resources in PRL 15,” he said.

Oil Search MD Peter Botten added that both the MoU and the proposed acquisition of InterOil were a step forward to optimising cooperation between Papua New Guinea’s two LNG projects.

“This has the potential to deliver capital-efficient, high-returning investments, which is especially important in periods of low oil and gas prices,” said Botten.