Oil Search $640m deal doubles down on Alaska
Oil Search has struck a $US450m ($642m) deal to double its stake in its Alaskan oil project.
Oil Search has struck a $US450 million ($642m) deal to double its stake in its Alaskan oil project, with an eventual selldown set for the first half of 2020.
The Papua New Guinea-focused LNG producer first signed a $US400m deal with privately owned Armstrong Energy and GMT Exploration in 2017 to buy stakes in three oil prospects in Alaska’s North Slope that lie between assets run by ConocoPhillips. The transaction announced yesterday will see Oil Search buy the partners’ remaining 25.5 per cent and 37.5 per cent interests in the Pikka Unit and Horseshoe area, boosting its interest in the leases to 51 per cent, with Repsol owning the balance.
It will then look to sell down a chunk of its Alaskan holdings next year to 35 per cent ahead of making a final decision on the Pikka-Nanushuk development.
The move to diversify its earnings profile has been largely welcomed by investors, attracted by the 500 million barrel resource and the prospect of strong near-term returns compared with the multi-decade income from its foundation LNG projects in PNG.
“Following the success of the Pikka Unit drilling, combined with the progress on the development plan, exercising the option to acquire the remaining Armstrong interests is a logical and value-accretive step,” Oil Search chief executive Peter Botten said.
“I am confident this decision will deliver major benefits to the company.”
RBC described Alaska “as the major swing factor for Oil Search” given the prospective PNG expansion is well understood among investors. “The proposed farm-down to a target level of 30-35 per cent should provide a good read through for the value created with appraisal drilling and offset well results since acquisition,” RBC analyst Ben Wilson said.
Bernstein analyst Neil Beveridge said the deal should strengthen its ties with Repsol.
Oil Search shares fell 1.8 per cent to $7.07 yesterday.