Australian oil and gas producer Oil Search could find itself dragged into a bidding war over InterOil after a counter-bid by global energy giant ExxonMobil.
The Papua New Guinea-focused company said on Monday its near $3 billion bid for InterOil had suffered a setback with the target company switching its support to a "superior" proposal from ExxonMobil.
It is now discussing with French energy giant Total, its backer for the bid, on whether to submit a revised offer for New York-listed InterOil.
"Total SA, with which Oil Search has a memorandum of understanding regarding the InterOil assets, is aware of these developments and Oil Search's right to submit a revised offer. The parties are in active dialogue and have the flexibility to submit a revised offer," Oil Search said in a statement.
ExxonMobil's scrip-based offer comprises $US45 ($A59) a share plus a payment of 90 US cents per million cubic feet equivalent (mcfe) for resources of more than 6.2 trillion cubic feet in the Elk-Antelope gas field. The formal offer follows news earlier this month of an unsolicited, non-binding proposal from an unnamed party.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
That compares with Oil Search's bid of 8.05 of its shares - currently workth $US42.70 - per InterOil share, plus a payment of 77 US cents per mcfe for resources of more than 6.2 trillion cubic feet at Elk-Antelope.
Oil Search said it has a right to submit a revised offer and if its agreement with InterOil is terminated, it would be entitled to a $US60 million break fee, 20 per cent of which would be payable to Total SA.
Oil Search's main interest in InterOil is its stake in the Elk-Antelope gas field as well as its 36.5 per cent stake in the undeveloped Papua LNG project.
Under the deal, Oil Search planned to sell more than half of the Papua LNG project stake to Total, the operator of the project. It would end up with identical 29 per cent stakes in the planned Papua LNG project and the existing PNG LNG project, run by ExxonMobil.
Oil Search has until July 21 to submit a revised offer.
Oil Search shares closed up 27 cents or 3.9 per cent at $7.25.
