Oil Search to Sell $1.1 Billion in Shares to Fund PNG Purchase

Oil Search Ltd. (OSH) will sell about A$1.2 billion ($1.1 billion) in shares to the Papua New Guinea government to fund the purchase of a stake in natural gas discoveries in the Pacific nation.

Oil Search will issue 149.4 million shares to Papua New Guinea at A$8.20 each, the Port Moresby-based company said today in a statement. That’s 4 percent less than its closing price on Feb. 24 and will give the government a stake of about 10 percent, according to Bloomberg calculations.

The company will use the funds to buy 22.8 percent of the discoveries, according to the statement. They are set to be developed by Total SA (FP) and InterOil Corp. Oil Search will make an initial payment of $900 million under the deal terms.

The deal gives Oil Search, Papua New Guinea’s largest oil producer, an interest in gas resources that may lead to the second liquefied natural gas export venture in the country. Exxon Mobil Corp. (XOM), Oil Search’s partner in a $19 billion LNG development in the nation, is due to start shipments to Asian customers later this year as global demand surges.

The company halted its shares on Feb. 25. They rose 0.9 percent to A$8.57 in Sydney trading on Feb. 24, valuing the company at A$11.5 billion. It has risen 5.7 percent this year.

International Petroleum Investment Co. of Abu Dhabi will become Oil Search’s largest shareholder with a 13.2 percent after the conversion of bonds, according to the statement.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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