The Papua New Guinea (PNG)-focused Oil Search has rejected Australian energy major Woodside Petroleum’s proposal to acquire the company for A$11.6bn ($8.1bn).
Prior to announcing its decision, the board of Oil Search conducted a detailed evaluation of the proposal and came to a conclusion that it is highly opportunistic and grossly undervalues the company.
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Oil Search chairman Rick Lee said: "The Board of Oil Search believes our Company is in a very strong position, both operationally and financially.
"We have a low cost, high quality, production base which is generating strong cash flows and excellent growth opportunities, with the proposed PNG LNG Train 3 and Papua LNG among the most competitive new developments in the world."
The company undertook substantial shareholder engagement since it received the proposal.
According to Oil Search, the proposal would alter the fundamental characteristic of an investment in the company while diluting the existing growth profile available to its shareholders.
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By GlobalDataWoodside said it believes that the proposal would create the regional oil and gas champion for Papua New Guinea as well as Australia with a global portfolio.
The company said in a statement: "The proposal is aligned with Woodside’s strategy of developing superior shareholder returns by maximising the value of our core assets, leveraging our capabilities and growing our portfolio."
On 8 September Woodside announced its intention to acquire Oil Search to form a combined entity.
Under the proposal, Woodside expected to acquire all Oil Search shares at a consideration of 0.25 Woodside shares for each Oil Search share.
Image: Woodside’s Pluto LNG onshore gas plant. Photo: courtesy of © Woodside
