To say that Exxon Mobil Corp. (NYSE: XOM) won a bidding war with Oil Search for the right to acquire InterOil Corp. (NYSE: IOC) may be something of an overstatement. But whatever it was, Exxon got what it wanted.
In its announcement Thursday morning, Exxon said the transaction is worth more than $2.5 billion. The world’s largest publicly traded oil and gas producer paid $45 a share for InterOil and agreed to pay an additional $7.07 in cash per share for every trillion cubic feet discovered in the Elk-Antelope field, up to a total of 10 trillion cubic feet. The contingent resource payment, as it is called, is not transferable and will not be listed on any exchange. InterOil shares traded both in New York and Australia.
If the full 10 trillion cubic feet are discovered and certified, Exxon will pay InterOil shareholders an additional $26.87 per share. InterOil has nearly 50 million shares outstanding currently, placing a value of around $1.3 billion on its offer. Exxon’s basic offer of $45 per share will be paid in Exxon stock.
OilSearch gets a consolation prize of a $60 million break-up fee.
Spot prices for liquefied natural gas (LNG) in Asian markets fell to around $4.25 per million BTUs earlier this year and currently stand at around $5.75. Prices rose to around $20 in Japan in 2013 and around $18 in South Korea.
InterOil is an LNG producer that holds leases for about 4 million acres in a natural gas field that holds trillions of cubic feet of reserves in Papua New Guinea (PNG). Strategically, the Asian market for LNG, which is the world’s largest, could be best served by supplies coming from PNG rather than the U.S. Gulf Coast because shipping costs would be so much lower.
At least two-thirds of InterOil’s shareholders need to approve the acquisition, and other customary closing conditions and approvals are also required. Exxon expects the deal to close in September.
Exxon’s stockholders are not too keen on the acquisition, pushing the share price down about 0.3% in the mid-afternoon to $93.63 in a 52-week range of $66.55 to $95.55.
Take Charge of Your Retirement In Just A Few Minutes (Sponsor)
Retirement planning doesn’t have to feel overwhelming. The key is finding expert guidance—and SmartAsset’s made it easier than ever for you to connect with a vetted financial advisor.
Here’s how it works:
- Answer a Few Simple Questions. Tell us a bit about your goals and preferences—it only takes a few minutes!
- Get Matched with Vetted Advisors Our smart tool matches you with up to three pre-screened, vetted advisors who serve your area and are held to a fiduciary standard to act in your best interests. Click here to begin
- Choose Your Fit Review their profiles, schedule an introductory call (or meet in person), and select the advisor who feel is right for you.
Why wait? Start building the retirement you’ve always dreamed of. Click here to get started today!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.