Exxon Mobil Just Went All-In On This Tiny Island by Dave Forest, Pierce Points
Things are heating up in an unlikely spot for the global oil and gas industry. A place that saw a $2.2 billion takeover bid just a few months ago — and now is getting even stronger interest from the world’s largest public oil company.
The spot is the island nation of Papua New Guinea (PNG). Where Exxon Mobil leapt into the M&A fray yesterday — unveiling a bid for natural gas developer Interoil.
David Einhorn Buys Three New Stocks: These Are The Names And Theses (Q3 Letter)
David Einhorn's Greenlight Capital funds returned 5.9% in the third quarter of 2020, compared to a gain of 8.9% for the S&P 500 in the same period. This year has been particularly challenging for value investors. Growth stocks have surged as value has struggled. For Greenlight, one of Wall Street's most established value-focused investment funds, Read More
Interoil itself leapt was in the headlines this past May. When Australia’s Oil Search announced a takeover bid for the company and its natural gas development assets here, which are geared toward export of liquefied natural gas (LNG).
That deal was a significant one. With Oil Search agreeing to pay $2.2 billion for Interoil and its natural gas holdings.
But the company and its projects are apparently worth even more to Exxon Mobil. With the major offering a superior $2.5 billion to top Oil Search’s offer, according to a press release from the latter firm yesterday.
Exxon also offered Interoil shareholders an extra incentive — in the form of a contingency payment for natgas reserves proved up at Interoil’s development-stage Elk-Antelope field. Amounting to $0.90 per thousand cubic feet equivalent in excess of 6.2 trillion cubic feet equivalent.
All of which shows the major is very motivated when it comes to picking up these PNG gas assets. Which is interesting, given that the global LNG sector has been one of the most disappointing of any commodity when it comes to price action lately.
Like always however, the key here is costs. With PNG natgas projects seeing some of the lowest development and operational rates on the planet — a fact that Exxon Mobil knows well, already operating one LNG export terminal in the country.
The major obviously likes what it’s seeing in terms of operational performance at that facility. Enough that it wants to duplicate the project.
That’s a big vote of confidence for oil and gas projects in Southeast Asia. And the saga may not be done yet — with Oil Search and partner Total now having three days to submit a counter-offer to Exxon’s proposal, which the two said they are in “active dialogue” on. Watch to see just how valuable PNG’s unique gas reserves might become.
Here’s to the best places on the planet,