* Oil Search has been in talks to buy into InterOil fields
* May have to pay up to $1 bln for stake - Citi
* Oil Search delays full year results release
By Sonali Paul
MELBOURNE, Feb 25 Oil Search said on
Tuesday it was close to sealing a significant acquisition,
sparking speculation it had reached a deal to buy into rival
InterOil's gas fields in Papua New Guinea.
Oil Search, Papua New Guinea's biggest oil firm, has said
previously that it was in talks to buy into the Elk and Antelope
fields, which French oil giant Total SA acquired a
stake in last December in a deal worth up to $3.6 billion.
Oil Search had been due to release its full-year results on
Tuesday but postponed that for at least two days due to the
pending deal. It declined to comment on the transaction it was
"As soon as we have something finalised, we'll release our
results and information about the transaction," Oil Search's
Investor Relations Manager Ann Diamant said.
Total bought a 61 percent interest in InterOil's license
holding the Elk and Antelope fields in December and said it may
sell down a 19 percent stake in a deal that would need
A spokesman for InterOil declined to comment on whether a
transaction was in the works.
Citi analysts estimated if Oil Search picked up a 19 percent
stake on the same terms as Total, it would need to pay up to $1
billion in three stages, after the fields were appraised and a
final decision was made to develop them.
Oil Search would need to tap equity markets or take on debt
to help fund a deal, which would involve an initial payment of
around $193 million in the first quarter of 2014, Citi said in a
Oil Search is set for strong growth beginning in the third
quarter of 2014, when the $19 billion PNG liquefied natural gas
project, 29 percent owned by Oil Search and operated by
ExxonMobil, is to start exporting.
Analysts expect Oil Search's annual profit to quadruple to
more than A$800 million over the next two years on the back of
PNG LNG exports.
The Elk and Antelope fields are seen as potential source of
gas for an expansion of the PNG LNG project or for a proposed
rival plant, called the Gulf LNG project.
Oil Search is seen as a potential takeover target for bigger
oil companies, like Woodside Petroleum and Royal Dutch
Shell looking to get a foot into LNG expansion
opportunities in Papua New Guinea, which would help them avoid
the hefty costs of building new LNG projects from scratch.
Oil Search is 15 percent held by Abu Dhabi's International
Petroleum Investment Co (IPIC) - a stake which the PNG
government wants to buy back when a five-year A$1.68 billion
($1.5 billion) exchangeable bond it issued to IPIC expires on
PNG has lined up funding through UBS to redeem the bond but
as the government arranged the funding only this month, it won't
be able to meet the March 5 deadline to complete all the
paperwork and is pressing Abu Dhabi for more time, two people
familiar with the process said.
The sources declined to be named due to the sensitivity of
the negotiations with IPIC.
Oil Search's pending acquisition may further complicate the
bond redemption, depending on the impact of the deal on Oil
Search valuations and any potential dilution from an equity
The bond was tied to an Oil Search share price of A$8.55.
Oil Search shares last traded at A$8.57, valuing the company at