Oil Search Ltd (ASX: OSH) shares could increase in intrinsic value ahead of the company's merger with Santos Ltd (ASX: STO). Government approval for its 38.5% owned P'nyang gas field is reportedly imminent.
At Monday's close, the Oil Search share price is $3.91, 2.01% lower than at the end of Friday's session.
For context, the S&P/ASX 200 Index (ASX: XJO) slid 0.54% today while the All Ordinaries Index (ASX: XAO) fell 0.49%.
Let's take a closer look at today's reports of Oil Search.
Is Oil Search fairly valued in its planned merger?
Oil Search's merger with Santos might be weighted even more heavily in Santos' favour as a major project is reportedly about to get the green light.
Oil Search owns the P'nyang gas field in conjunction with Exxon Mobil Corp (NYSE: XOM). The pair have been fighting to get approval for the venture for several years.
Exxon announced negotiations between it and the Papua New Guinea Government were to restart in August. The subject of the talks is to allow the development of the gas field.
According to today's reporting by The Australian, those discussions are expected to come to an end next week, with Exxon to walk away with the government's permission to get to work.
If the venture is granted governmental approval, it might exacerbate the already unequal distribution of shares in the entity resulting from Oil Search and Santos' fusion.
As The Motley Fool previously reported, an independent expert has already found the merger doesn't reflect Oil Search's true value. They said:
Oil Search shareholders are contributing around 43%-44% of the aggregate estimated underlying value of the merged group compared to the 38.5% of the merged group that they will receive.
However, the expert still deemed the scheme is in the best interests of Oil Search shareholders. Whether shareholders will agree is yet to be seen.
For the merger to go ahead, 75% of Oil Search shareholders must vote in favour of the scheme. The vote is due to be held on 7 December.
