By Kevin Allison CHICAGO, July 18 (Reuters Breakingviews) - Exxon Mobil's
sojourn to New Guinea is stirring the oil M&A waters. The U.S. petroleum giant's $2.3 billion unsolicited offer for Papua-focused gas explorer InterOil topped an earlier bid from rival energy group Oil Search (OSH). Though it's Exxon's biggest swoop since crude prices crashed, it looks more like opportunism than a catalyst for an impending deal wave. On the surface, it's an odd time to bet on natural gas. Spot prices for Asian liquefied natural gas imports have plunged by nearly two-thirds since 2014 amid a global petroleum glut, leading the likes of Chevron
and Royal Dutch Shell to nix or delay ambitious LNG projects in Australia and British Columbia, respectively. Large deposits and a strategic position close to key export markets have kept Papua New Guinea on the energy industry's radar, however. Exxon, which already operates a 6.9 million tonne per year LNG facility in New Guinea, can afford to think long term. The $390 billion enterprise expects natural gas to meet some 40 percent of all global energy demand growth through 2040 – the most of any energy source. Exxon may be able to exploit InterOil's deposits relatively cheaply by adding extra production lines to its existing project, rather than building a new liquefaction facility from scratch.
An earlier $40.25 per share deal for InterOil agreed in May with Oil Search - Exxon's partner in the existing LNG facility - followed a similar strategic logic. InterOil on Monday declared Exxon's $45 per share bid superior, giving Oil Search until July 21 to improve its offer.
Energy bankers hoping the bidding war marks the start of a thaw in M&A activity in the sector may be disappointed. Only 18 deals have been struck worth $1 billion or more worldwide so far in 2016, according to Thomson Reuters data. There were 39 such transactions struck by the same point in 2014. At $51 billion, the combined value of deals year-to-date is around half the average of the previous five years. That Exxon has dipped a toe back in the water is notable, but InterOil's unique appeal means it's unlikely to create a big ripple.
On Twitter http//twitter.com/KevinAllison
CONTEXT NEWS - Exxon Mobil on July 17 launched a bidding war over InterOil, a Papua New Guinea-focused gas explorer. InterOil said Exxon had offered $45 per InterOil share, or around $2.3 billion, for the company, plus a cash bonus if InterOil's Elk-Antelope gas field is found to contain more than 6.2 trillion cubic feet of gas. InterOil in May agreed to be acquired by Oil Search for roughly $40.25 per share plus a smaller cash bonus tied to the size of the Elk-Antelope reserves.
- InterOil on July 18 deemed the Exxon proposal superior to the earlier bid from rival Oil Search. Oil Search has until July 21 to submit a counter-offer.
- InterOil press release http://bit.ly/2a4XTK5 - Reuter ExxonMobil launches bidding war for InterOil in PNG gas push
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- For previous columns by the author, Reuters customers can click on [ALLISON/]
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