SOON after the release yesterday of excellent results from Oil Search Ltd, rumours circulated in Port Moresby of takeover bid by Adelaide-based Santos Ltd. The rumours, almost vicious in nature, suggested the Santos offer was priced at 68 cents a share. A bid at that level would be doomed even though it provided a slight premium to the current price. The perpetrators were possibly unaware that under PNG legislation any corporation making such a takeover bid would have to give 14 days notice to the target company, in this case Oil Search. That, of course, has not happened. Although there is a significant amount of daily trades in Oil Search, most shareholders are aware that Oil Search is highly undervalued for a variety of reasons, one of these being the continuing uncertainty over the US$3.5 billion gas pipeline project. Even if it is not true that Santos is planning to make a bid, some concern has been expressed that Santos was not being a "fair dinkum" player in Papua New Guinea. Some time ago the Adelaide-based company, which has had no significant commercial success outside of Australia, was at loggerheads with other PNG gas project partners with suggestions it was involved in delaying tactics. In the process of checking out yesterday's takeover bid rumours, The National was told by a Sydney-based oil executive: "Santos is actively in the (Australian) market to take away customers from the PNG project." The source said the company had made approaches to MIM Ltd, which has agreed to indicated sales terms for supply of 25 petajoules a year from PNG, and had also gone to Alcan's Gove alumina project in the Northern Territory, another potential PNG customer. Since Santos is not capable of supplying these markets from its traditional Cooper Basin operation in Central Australia, it is understood it will have to seek out new partnerships and/or developments in order to block or delay the PNG gas pipeline. Industry sources in Port Moresby familiar with Santos believe that if it does launch a takeover for Oil Search the South Australians, who are very much a protected species in their home territory, will be partly motivated by a desire to delay the PNG Gas Project.
OSH Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
