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Oil Search Limited is rumoured to be a Total takeover target

The Oil Search Limited (ASX: OSH) share price is down 1 per cent to $6.76 today as investors brush off rumours in The Australian newspaper that the liquefied natural gas (LNG) giant may be a takeover target.

Oil Search has some of the best LNG assets in the world via its ownership interest in tenements in Papua New Guinea, where it runs gas fields in co-ownership with U.S. energy giant ExxonMobil.

Ever since oil prices plunged over the course of 2015 due to oversupplied markets the energy sector has been a hotbed of merger and acquisition activity, as companies struggle to survive in the face of plunging revenues.

In fact ExxonMobil is no longer the world’s largest producer of LNG, as that title was lost after Royal Dutch Shell and BG Group completed a circa A$65 billion mega-merger in 2016. Before that another mega-deal was enacted when BP Plc sold its ownership interests in oil fields to Rosneft in a deal valued at US$55 billion.

Now, The Australian is reporting that French LNG operator Total may bid for Oil Search as it already has ownership interests across PNG’s lucrative LNG fields. In 2016 Woodside Petroleum Limited (ASX: WPL) made a low-ball offer for Oil Search, which currently has a market value around A$10.5 billion.

Recently, it has also been suggested Santos Ltd (ASX: STO) and Origin Energy Ltd (ASX: ORG) could be natural merger partners, while Santos is also rumoured to be interested in buying junior oil producer Senex Energy Ltd (ASX: SXY).

This afternoon WTI crude futures are selling for US$48.01. Prices have collapsed in half since 2012 as the headwinds of rising supply from the U.S. and moderating demand continue to put downward pressure on oil futures.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

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