Oil Search Valuation & Target Price, page-492

Definitely, there is Considerable Dilution
1) Total Interoil Shares on Issue(Excluding CEO/MD Bonuses) 50 Million Shares
2) Bonus Shares of Employee/MD/CEO etc could be another 5% at least.(I know just CEO alone Bonus is around 1.2 Million Interoil Shares)
3) Let us Make total Shares Including Bonus around = 55 Million
4) CASH available for Buying Shares in US$770 Million Dollars means only 19 Million Shares will be bought back, still leaving 36 Million InterOil Shares will be converted to Oil Search Shares.
5) That leaves 36 Million Inter Oil Shares == 290 Million Oil Search Shares added to Oil Search Dilution, that is a around 19% Dilution.
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Definitely there is considerable dilution.
... At this moment, Interoil Asset are linked to gas resources and are not earning anything. All Dilution will be passed to Oil Search Shares, hence Diluting the Oil Search EPS considerable.
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.. That's why when ever Oil Search reaches $7/share there is a mad rush to sell.