Oil Search drops InterOil bid after ExxonMobil offer

Australian resources company Oil Search Thursday pulled out of a plan to buy rival InterOil after its bid was bettered by US giant ExxonMobil.

The move leaves the way clear for the American firm to acquire the Papua New Guinea explorer, with expectations that PNG will be well-placed to meet surging liquefied natural gas demand in Asia over the coming years.

Oil Search combined with France's Total in May to make a US$2.2 billion offer for the PNG energy firm.

But it was trumped by a "superior proposal" from ExxonMobil, Oil Search revealed on Monday, with managing director Peter Botten adding Thursday it was not in the Australian-listed company's interest to submit a revised offer.

ExxonMobil's proposal includes paying US$45 per InterOil share, valuing the firm at US$2.5 billion.

"Given the decision by ExxonMobil to make an offer for InterOil on the terms it has announced, we do not believe it is in the best interests of our shareholders for Oil Search to submit a revised offer to acquire InterOil," Botten said.

Total told AFP in Paris Wednesday it did not intend to increase its offer if there was a tussle for InterOil.

Shares in Oil Search rose 0.75 percent to Aus$7.38 in mid-day trade in Sydney.

Oil Search, Australia's second-largest oil firm, is already a partner with ExxonMobil in the massive PNG LNG Project, which made its first shipment in 2014.

Another key operation, the Papua LNG Project, is under development. It will be operated by Total and includes one of Asia's largest undeveloped gas fields, Elk-Antelope.

Botten said ExxonMobil's purchase of InterOil could facilitate collaboration between the two projects.

"The bid by ExxonMobil clearly underscores the merits of our offer for InterOil and highlights both the quality of our LNG assets in PNG and the potential value that would be created by cooperation between PNG's two world-class LNG projects," he said.