Oil Search Cancels Meeting With Woodside to Discuss Takeover Bid

  • Meeting called off amid speculation $8 billion offer too low
  • Oil Search said set to reject Woodside bid, AFR reports

A meeting to discuss Woodside Petroleum Ltd.’s $8 billion takeover bid for Oil Search Ltd. was called off amid speculation that the offer for the Papua New Guinea-focused explorer is too low to succeed.

The meeting scheduled for Sunday was postponed at Oil Search’s request, according to a statement from Woodside, the Australian oil producer. Oil Search is expected to reject Woodside’s bid as early as Monday, the Australian Financial Review reported Sunday, without citing sources.

Woodside’s offer of one share for every four Oil Search shares, which implied a 14 percent premium, is probably too low to win investors’ support, according to Sanford C. Bernstein & Co. and UBS Group AG. The offer valued Oil Search at A$11.65 billion ($8.1 billion) when it was unveiled Sept. 8.

Oil Search and Woodside declined to comment Sunday.

Woodside is targeting Oil Search’s 29 percent stake in Exxon Mobil Corp.’s $19 billion PNG LNG project. The partners are considering an expansion of that liquefied natural gas export project, while Oil Search is also in a venture with Paris-based Total SA and InterOil Corp. that’s planning the country’s second LNG project.

Papua New Guinea is seen as one of the few places where new liquefied natural gas export projects will probably succeed because costs are lower than elsewhere, according to Bloomberg Intelligence.

Developers of LNG plants face growing concerns of a glut as Japan’s return to nuclear power after the 2011 Fukushima disaster and China’s cooling economy raise speculation demand growth may slow. Revenue for existing projects is also falling, as most LNG plants sell supplies to Asian buyers at prices linked to oil, which has plunged about 50 percent in the last year.

The PNG LNG project, with an annual capacity of 6.9 million metric tons, started production last year and is sending cargoes to Asian customers including China Petroleum & Chemical Corp. and Tokyo Electric Power Co.

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