ExxonMobil is doubling down on Papua New Guinea (PNG), topping a rival offer for InterOil Corp, a gas explorer focused on the South-east Asian nation.
Yesterday's offer by the energy giant values InterOil at US$2.5 billion (S$3.4 billion), including debt, beating an earlier bid from Oil Search and Total.
Exxon already runs Papua New Guinea's only liquefied natural gas terminal and buying InterOil, which has gas fields and a stake in a second gas export project in the country, would give it a new source of the fuel for its exports.
Oil Search and Total have three days to decide whether to counter Exxon's offer.
"This was widely expected by the market and looks at first glance to be in line with our estimates that Exxon's bid would be 10 per cent higher than the original Oil Search bid," said Mr Neil Beveridge, an analyst at Sanford C. Bernstein in Hong Kong.
"The key question now is whether we see a counter-bid from Total and Oil Search."
InterOil said Exxon is offering it a fixed price of US$45 per share, and values the company at US$2.5 billion, including US$188 billion in net debt.
As part of Oil Search's US$2.2 billion bid with Total in May, it offered 8.05 shares for each of InterOil's, valuing InterOil's share at US$40.25.
Oil Search said it is talking to Total about its options and that it is entitled to a US$60 million break-up fee, with 20 per cent going to Total, if the deal does not go through after InterOil changed its recommendation.
"InterOil has advised that it intends to make a change in its recommendation and enter into an arrangement agreement with ExxonMobil," Oil Search said in a statement.
Exxon is targeting gasfields that hold enough reserves to supply the United Kingdom for three years. The company already operates the existing US$19 billion PNG LNG gas liquefaction plant in Papua New Guinea.
InterOil and its partners have planned the nation's second export project, Papua LNG. Oil Search is a shareholder in both ventures and has encouraged a tie-up to lower development costs.