By Alex Tilbury BRISBANE, July 21 AAP - Oil Search Ltd will pay $US96.6 million ($A149.79 million) to buy the Papua New Guinea oil assets of United States energy major ChevronTexaco, cementing its dominant position in the region. Analysts said the agreed price was a win for Sydney-based Oil Search considering the speculated price tag had been $US200 million ($A310.13 million) to $US300 million ($A465.19 million). Oil Search plans to fund the purchase from existing cash and new debt, presently being negotiated as part of its refinancing program. Even if fully funded from new debt, the company said the deal would only increase its gearing to 20 per cent. Oil Search was seen as the natural buyer of the assets considering it already owned around 50 per cent of the oil developments and had secured operatorship from ChevronTexaco last month. Oil Search will become the operator and biggest owner of the Kutubu, Moran and Gobe fields by the end of October, when its dominant equity share pushes to more than 70 per cent across what are PNG's key oil fields. The acquisition lifts Oil Search's oil production around 20 per cent per annum in the short to medium term and strengthens its production base. Oil Search managing director Peter Botten said the company knew the assets extremely well and was very satisfied with the price to be paid. "It was a competitive tender process which settled on a price which we felt comfortable with," he told AAP. "...We were not desperate for it, as we've said publicly before that we would only be interested in the assets if they became available at the right price." Mr Botten said the acquisition would immediately deliver material positive results to the company, adding reserves and production at a very competitive price. "The acquisition adds substantial value both in terms of cash flow and earnings and it will materially change our earnings, which are dependant on the final oil price. "But we think it is materially accretive for both cash flow per share and earnings per share in 2004 and 2005." Oil Search shares were steady at 86 cents at 1230 AEST, after earlier rising to 88 cents. One Sydney-based oil and gas analyst said Oil Search secured the assets at a good price, considering the speculated range was much higher. "I think it was an opportunistic acquisition which was obviously not very competitively bid," he said. "I expect Santos to have taken a look but larger companies like Santos would have wanted to operate the assets." He said the market cheered the news as Oil Search was a cheaper operator than ChevronTexaco as it had a lower cost base was lower and was dedicated to PNG. ChevronTexaco will exit PNG after selling its four major PNG crude oil developments currently in production (Kutubu, Moran, SE Gobe and Gobe Main), as well as interests in three discoveries at SE Mananda, Saunders and Paua. Under the agreement, Oil Search will purchase all ordinary shares of ChevronTexaco Niugini Holding Ltd (CNHL), net debt, associated equity instruments and working capital for a total consideration of $US96.6 million.
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