Once again Oil Search creating interest as a takeover target.
This is an article from The Australian today Thursday December 13, 2018 for Shareholders information.
GLTA.
PERRY WILLIAMS (Journalist)
Conditions favour renewed interest in Oil Search
Oil Search has re-emerged as a takeover target for previously foiled suitor Woodside Petroleum and Chinese buyers and French energy giant Total may also target the Papua New Guinea-focused producer, Credit Suisse says.The exit of the PNG government as a shareholder last year, the need for joint venture alignment before the PNG LNG expansion moves to a final investment decision and longstanding questions about the appointment of a successor to longtime chief executive Peter Botten all point to a possible takeover attempt in the next few years.“We believe Oil Search’s primary takeover defence in the past has been the government stake, and management’s good job of selling a share price premium to make an acquisition difficult to justify for any acquirer,” Credit Suisse analyst Saul Kavonic says in a note to clients. “But the cash windfall in the exploration and production sector in 2018 — the industry has had higher cash margins this year than during the oil price peak year of 2012 — has left bigger industry players with plenty of ammunition looking for a target. Botten’s eventual handover could be to a new owner rather than the new CEO.”It says any “material softening” in Oil Search’s share price could see an acquirer pounce.Oil Search shares have fallen 21 per cent to $7.30 since the beginning of October, reflecting a 30 per cent fall in the price of crude to about $US60 a barrel.“We can’t rule out Woodside having another (hopefully better orchestrated) go, or various China buyers entering the fray. We see Total as the natural owner and while we remain unsure if it would initiate a bid, we expect it would seriously consider entering the fray if an outside bid emerged.”Woodside ended a $11.6 billion takeover play for the company in late 2015 after the Oil Search board rejected its approach.Oil Search, owner of a 29 per cent stake in PNG LNG and a 22 per cent share of the Papua LNG venture, has been driving its much larger project partners, ExxonMobil and Total, to pursue cost-effective, co-operative and rapid development of fields.The companies plan to double LNG production from PNG. Three new export processing trains are to be added to the existing Exxon, Oil Search and Santos-owned PNG LNG plant near Port Moresby to produce an extra eight million tonnes a year.Total says engineering studies will most likely start in the second quarter of 2019, followed by a final investment decision by the end of 2020 and production in late 2024.However, Mr Kavonic notes that Exxon has not indicated a firm PNG expansion schedule yet and Total is also not under pressure to sanction a development, given competing projects elsewhere. Exxon said this month the ventures needed to move ahead but did not give a timeline.“We see the timeline as outside Oil Search’s control, and mostly up to Exxon, which has not indicated a firm PNG expansion schedule, despite doing so for its other projects (Golden Pass/ Mozambique),” Mr Kavonic said.“Exxon has a patient methodical decision gate process for its plethora of pre-final investment decision LNG opportunities, of which PNG LNG expansion is but one. We don’t see Total as under great pressure to rush the PNG LNG time frame either, as Total has several competing pre-FID LNG opportunities in the hopper that it needs to sequence.”
