The payment is worth $7.07/share for each trillion cfe of certified gross resource from the Elk-Antelope field above 6.2T cfe and up to a maximum of 11T cfe, raising the total potential consideration to ~$78.94/share from $71.87 earlier.
The all-stock deal, valued at more than $2.5B when announced in July, would give XOM access to a gas field to expand exports from Papua New Guinea and better position it to meet Asian demand for liquefied natural gas.
InterOil (IOC +3.6%) recoups much of its Friday losses after seeking to reassure investors that its deal to be acquired by ExxonMobil (XOM +2.1%) is still alive and well despite a Canadian court's ruling that the deal was unfair to shareholders.
IOC says XOM has advised that it remains fully supportive of the deal as the companies work through issues raised by the court's decision that overturned a previous ruling by the Yukon's Supreme Court to allow the deal to proceed.
IOC says it is in discussions with XOM "with respect to extending the outside date," and also is "considering options to file for leave to appeal to the Supreme Court of Canada."
BP (BP +0.3%) signs a 20-year deal with the Eni-operated (E -0.5%) Area 4 concession partners to purchase liquefied natural gas from the planned Coral South floating liquefied natural gas project offshore Mozambique.
By guaranteeing a customer for the entire output of the big new field in the Indian Ocean, the BP contract clears the way for Eni to make its final investment decision on the multibillion-dollar project.
The deal also could add impetus to Eni's efforts to sell a stake in its Mozambique assets, with ExxonMobil (XOM -1%) considered the most likely buyer.
Eni holds a 50% stake in the Area 4 block involved in the contract, with the other half owned by China's CNPC (NYSE:PTR), Portugal's Galp Energia (OTC:GLPEF), South Korea's Kogas and Mozambique’s national oil company.
InterOil (NYSE:IOC) founder and ex-CEO Phil Mulacek concedes that most of the company’s shareholders will vote in favor of ExxonMobil’s (NYSE:XOM) acquisition tomorrow.
Mulacek objected to XOM’s bid when it was announced in July, saying IOC directors should have pressed for a better deal, and says that during the final months of his time as CEO, negotiations were underway with XOM over an offer that was 3x higher than the current deal.
Under the July deal, XOM agreed to pay $45-$71.87/share, depending on how much gas in IOC's Elk-Antelope field, which prompted Mulacek to rip into IOC directors as “incompetents” who “ripped off shareholders.”
Qatar Petroleum is in talks with XOM and Eni on some kind of involvement in Mozambique which could involve a joint investment with the U.S. company, although not a classic joint venture structure, according to the report.
Reuters reported last month that XOM had reached a deal that could give it an operating stake in the onshore liquefied natural gas export plant while leaving Eni in control of the Area 4 gas fields feeding it; Area 4 is one of the biggest discoveries of recent years, holding ~85T cf of gas.
ExxonMobil (NYSE:XOM) and Oil Search (OTCPK:OISHY), partners in a gas-export venture in Papua New Guinea, each agree to acquire 40% interests in two exploration licenses from a company controlled by China’s Cnooc (NYSE:CEO) for an undisclosed sum.
The licenses cover nearly 25K combined sq. km in water depths of as much as 2,500 meters.
Oil Search says a comprehensive study of exploration opportunities in 2015 and 2016 had identified the offshore Gulf of Papua as a area of significant natural gas potential.
The deal will take Woodside’s net share of the Scarborough assets to ~2.6T cf of gas out of a total resource of 8.7T cf.
Woodside says it will pay $250M to BHP when the deal is completed, which it expects by year-end, and another $150M if the companies decide to develop the Scarborough field, although Bernstein's Neal Beveridge says the structure of the deal suggests plenty of uncertainty over whether the project will move forward.
The main Scarborough field, which boasts a proved and probable contingent resource of 6.9T cf, will continue to be operated by BHP partner ExxonMobil (XOM +0.6%).
Former InterOil (NYSE:IOC) chairman/CEO Phil Mulacek - as well as the company's third-largest investor, with a 5.35% stake - says ExxonMobil’s (NYSE:XOM) takeover offer is “vastly inadequate” and urges XOM to sweeten the offer.
Mulacek claims the bonus XOM plans to pay out based on how much gas the Elk-Antelope discovery holds will force IOC shareholders to “forego billions of dollars of value," and believes XOM should modify the way it will calculate the contingent resource payments.
XOM struck a deal last week to pay from $45 to $71.87/share, depending on how rich the Elk-Antelope field is in gas: XOM’s base price is $45 of its own stock for each IOC share, and XOM will pay CRPs as high as $26.87/share for every 1T cf of gas reserves above 6.2T cf that Elk-Antelope holds.
Oil Search and Total (NYSE:TOT) had jointly offered to buy IOC in May in a deal that valued the company at $2.2B; XOM topped the bid earlier this week with an all-stock offer Oil Search says totaled $2.5B.
IOC owns a 36.5% stake in Papua New Guinea's Elk-Antelope natural gas field (TOT is the operator) and had proposed building a second gas project in the country to compete with the existing XOM-led PNG LNG facility.
Oil Search and TOT say that allowing XOM to take over IOC could help speed up development of Elk-Antelope and that cooperation between the two projects could save ~$2B.
"This scenario would be the lowest cost viable supply in the Pacific Basin," Wood Mackenzie analyst Saul Kavonic tells Reuters. "Those are the negotiations that will have to take place in order for that joint development to occur."
Total (TOT -0.7%) says it is analyzing Exxon Mobil's (XOM -0.3%) competing offer for InterOil (IOC -0.4%), its partner in developing natural gas in Papua New Guinea, by Oil Search (OTCPK:OISHF), but analysts say TOT is unlikely to challenge XOM in a bidding war.
Analysts say it makes sense for TOT to let XOM have IOC, as using the Elk-Antelope gas field to feed an expansion of XOM's existing PNG LNG plant could generate double the return compared to building TOT's proposed $10B Papua LNG plant.
TOT says in its statement that it would remain the largest shareholder of the Elk-Antelope joint venture with 31.1% interest while IOC owns 28.3% and OISHF holds 17.7%.
The oil majors are targeting Papua New Guinea for growth as the quality of its gas, low costs and proximity to Asia's big liquefied natural gas consumers make it one of the world's most attractive places for gas projects.
Russell believes that XOM’s best option to expand its 6.9M metric tons/year capacity at its existing Papua New Guinea liquefied natural gas plant is to acquire sufficient reserves to justify building another liquefaction train in the country; IOC's Elk-Antelope gas field holds at least 6.2T cf of natural gas, and further drilling should expand this reserve.
Russell says this means that XOM's bid, if successful, could underwrite the expansion of its PNG LNG project on a time scale that may see it deliver its first cargoes just as the surplus of LNG is expected to disappear in the mid-2020s.
The big question, according to Russell is the next move from Total (TOT -1%) - operator and 40.1% owner of Elk-Antelope with IOC the next biggest holder at 36.5% - which has outlined plans to build its own LNG project in Papua New Guinea.
Exxon Mobil (NYSE:XOM) has made a superior $2.2B offer for InterOil (NYSE:IOC), outbidding Oil Search (OTCPK:OISHF) for the company's large natural gas reserves in Papua New Guinea and the possibility to export the fuel from the Pacific nation.
The move pits Exxon Mobil, the world's biggest oil company, against Total (NYSE:TOT), which is backing Oil Search. The latter has at least until July 21 to submit a revised offer.
XOM's interest is comprised of shares as well as a contingent value right, which may give IOC shareholders cash on a sliding scale depending on the value of a pending gas deposit discovery - the same structure as the Oil Search bid, but higher - according to the report.
IOC agreed in May to be acquired by Oil Search but two weeks ago it said it received another non-binding offer; XOM has been rumored to be the mystery suitor.
Exxon Mobil (XOM -1.3%) has not identified itself as the bidder announced by InterOil (IOC +0.5%) last week, but Australian newspapers are saying XOM is indeed the suitor, which also cite two sources involved in the bidding.
XOM has the most to gain from a bid: Buying IOC would secure it a 36.5% stake in Papua LNG, which contains the Elk-Antelope field located close to the XOM-operated PNG LNG, and gas from Elk-Antelope would be piped along the same offshore pipeline route as PNG LNG and ultimately shipped from the same port.