Woodside Petroleum and Oil Search are in talks to merge the two energy companies.
Under the deal, Oil Search shareholders would receive 0.25 Woodside shares for every Oil Search share, valuing the bid at $11.65 billion.
Woodside says the proposal is consistent with the company strategy of delivering superior shareholder returns by maximising the value of core assets, leveraging capabilities and growing its portfolio.
The company has been buying assets in a depressed market. Woodside bought out Texas-based Apache Corporation’s interests in the Australian Wheatstone natural gas project, plus the Balnaves oil and the Kitimat gas projects in Canada for a total of US$2.75 billion (AU$3.348 billion).
Woodside is being advised on the Oil Search deal by Merrill Lynch, Gresham and Herbert Smith Freehills.
Oil Search, a Papua New Guinea-based oil and gas player, says it’s considering the proposal. It has appointed Morgan Stanley as its financial adviser and Allens as its legal adviser.
The company has a stake in the foundation Exxon Mobil-led PNG LNG project. “This, combined with the company’s low operating cost producing assets, reserves upside, significant discovered resources and extensive and high quality exploration acreage position provide substantive scope for capital growth and position the company to capitalise from a recovery in the oil price,” Oil Search said in a statement.
“Shareholders are entitled to an offer which adequately reflects this value potential.”
Oil Search shares were up more than 13% to $7.62. Woodside was down more than 3% to $29.61.
The deal was underpinning energy stocks which were up more than 2% on the ASX today. Santos was more than 7% higher at $4.50.
Woodside Petroleum’s half-year profits fell 39% to $US679 million. Revenue was down 28% to $US2.556 billion, due to lower commodity prices and some reduced sales volumes.