Oil Search Limited announces US$2.2 billion deal, shares rally

Oil Search Limited (ASX:OSH) shares are trading around 2.5% higher in early afternoon trade.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

What: Oil Search Limited (ASX: OSH) has today announced an agreement to acquire InterOil in a US$2.2 billion deal.

The terms of the deal will see InterOil shareholders receiving 8.05 Oil Search shares plus a "contingent value right" for each InterOil share, valuing InterOil shares at roughly US$40.25 each. InterOil shareholders also have the option of receiving all cash for their shares – up to a total value of US$770 million.

The structure of the deal also allows for a cash alternative in lieu of shares and both company boards have unanimously recommended the transaction.

Also announced in conjunction with this acquisition was a separate agreement between Oil Search and Total which will see Oil Search offload certain assets to Total, subject to the closing of the InterOil deal.

So What: Oil Search has described the deal as combining two highly complementary companies and offering compelling financial and strategic upside potential for both InterOil and Oil Search shareholders.

According to the company, this potential upside includes a pathway to optimise cooperation and/or integration between the Papua LNG Project and the PNG LNG Project driving capital efficiency, superior returns and net asset value per share accretion. Oil Search's share of the PNG LNG project will increase to 29% following the takeover.

Now What: Oil Search's move comes in the wake of a spurned offer from Woodside Petroleum Limited (ASX: WPL) to take over Oil Search in a $12 billion all-script transaction and really represents one of the first large-scale deals to occur amongst ASX-listed energy players since the oil price crashed.

Given the current low point in the oil cycle, shareholders in other energy majors such as Woodside Petroleum will certainly be hoping that their companies take advantage of the cyclical lows to acquire attractively priced assets.

Indeed, investors have responded positively to Oil Search's announcements today, pushing the share price up over 2.5% earlier although the rally was fizzing out, with shares up 0.6% at $6.95.

Motley Fool contributor Tim McArthur has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »