Australia's Woodside courts Oil Search with A$11.6b takeover proposal

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.