Woodside shares fell more than three percent to $29.65 after the energy giant confirmed it had made an all-scrip bid for Oil Search.
The target company's shares jumped more than 13 percent to $7.66 each.
Woodside has offered one of its shares for every four shares held in the Papua New Guinea-focused Oil Search, valuing the target at $11.6 billion.
"It's modestly dilutionary to Woodside share value, but it corrects the situation of an underleveraged balance sheet and will boost reserves and production. Overall, it seems to make reasonable sense," said Morningstar resources analyst Mark Taylor.
"Maybe the market expects the bid terms to be sweetened."
Oil Search said its board would review the offer, and will consider if the proposal reflects the growth potential of its low cost liquefied natural gas project when oil prices recover.
Share
