Papua New Guinea (PNG)-focused oil and gas company Oil Search has rejected the non-binding conditional indicative takeover proposal by Australia-based energy company Woodside Petroleum for $8bn.
The board of Oil Search has voted unanimously where majority of them supported the rejection of the takeover, claiming that it is highly opportunistic and grossly undervalues the firm.
Under the proposal made recently, each shareholder of Oil Search are expected to receive 0.25 Woodside shares for every Oil Search share and will also become shareholders in the combined entity.
The deal was a part of Woodside’s plan to create the regional oil and gas leader with a global portfolio of assets and development opportunities for both Papua New Guinea and Australia.
Oil Search, however, expects the proposal to affect fundamental characteristic of an investment and could dilute the present growth profile to shareholders.
The firm is planning to boost its operations by expanding the PNG LNG project through debottlenecking, developing third LNG train and the build the proposed Papua LNG project.
By partnering with firms including ExxonMobil and France’s Total on the two liquefied natural gas (LNG) projects, Oil Search expects to double its output in the early 2020s with strong financial position.
The company is also expecting substantial scope for capital growth due to low cost oil production and exploration portfolio.
Oil Search chairman Rick Lee said: "The Board of Oil Search believes our Company is in a very strong position, both operationally and financially.
"We have a low cost, high quality, production base which is generating strong cash flows and excellent growth opportunities, with the proposed PNG LNG Train 3 and Papua LNG among the most competitive new developments in the world.
"Our focus is on continuing to build and create shareholder value through the Company’s strong future growth prospects."
Image: Woodside’s Karratha Gas Plant in Australia. Photo: copyright © Woodside 2015.