Woodside Petroleum, Australia's biggest independent oil and gas producer, has approached rival Oil Search with an A$11.6 billion (HK$62.75 billion) all-share takeover plan that would give it stakes in two of the world's lowest-cost LNG projects. In what would be a record deal for Australia's energy sector, Woodside would gain a 29 per cent stake in Oil Search's PNG liquefied natural gas project, coveted as a one of the few expandable LNG projects that will be viable in a world of weak oil prices. ExxonMobil, operator of PNG LNG, France's Total and Asian state oil companies like Malaysia's Petronas could emerge with rival bids, although Woodside had already started talks with key shareholders, analysts said. "It makes sense for Woodside - a company that's ex-growth that's looking for the next leg," said Ric Ronge, a portfolio manager at Pengana Capital, which owns stakes in Woodside and Oil Search. Perth-based Woodside is one of the few oil companies with enough cash to chase acquisitions after a collapse in oil prices to six-year lows. Its move on Sydney-based Oil Search follows Royal Dutch Shell's push to expand in LNG with a US$70 billion bid for BG Group. If successful, the takeover would fill a gap in Woodside's growth prospects as the firm has no major new projects due to start producing this decade. In addition to the coveted PNG LNG project, it would gain a 23 per cent holding in PNG's biggest undeveloped gas prospect, the Elk and Antelope fields. Woodside has offered one of its shares for every four Oil Search shares, subject to gaining a period of exclusivity to look at the company's books and securing support from key stakeholders. "Clearly, Oil Search shareholders are entitled to an offer which adequately reflects this value potential," Oil Search said in a statement to the Australian market. Investors and analysts considered it a low-ball bid and predicted Oil Search's top shareholder, the PNG government, would press for more, as it bought into Oil Search last year at A$8.20 a share, well above the value of the proposal. The premium was 14 per cent based on Monday's close. However, based on Oil Search's and Woodside's average share prices over the three months before August 27, when rumours of a bid emerged, the premium was 23 per cent, a Woodside adviser said. Energy takeovers typically commanded premiums of 30 per cent to 40 per cent, Deutsche Bank analyst John Hirjee said. Oil Search shares leapt as much 17 per cent to A$7.87 after the proposal was announced, trading above the implied value of the offer, suggesting investors expect it will have to raise its bid. Woodside's shares fell. "It's a first shot. The premium being offered looks very modest," Karara Capital portfolio manager Rohan Walsh said. A takeover of Oil Search would boost Woodside's production by about 30 per cent and offer low-cost development opportunities in contrast to the two projects it is considering building, Browse floating LNG off Australia and Kitimat LNG in Canada.