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Financial Times: Woodside says will not raise bid for EPL

By Raphael Minder in Sydney
Published: September 15 2006 09:40 | Last updated: September 15 2006 09:40

Woodside, Australia‘s leading oil and gas group, said Friday it did not plan to raise its takeover offer for Energy Partners after the US oil producer rejected the bid and said it was likely to proceed with its planned $1.4bn merger with Stone Energy.

EPL rejected Woodside’s $883m takeover offer on Thursday night as too low and ”opportunistic”, saying that it would instead combine with Stone Energy or continue as a stand-alone company, as both options offered greater value to investors.

While not ruling out altogether a higher offer, a spokesman for Woodside said there were no plans to revise the current offer, which also involved taking over $257m of EPL’s debt. When it tabled its bid last month, Woodside stressed it was conditional upon EPL dropping the Stone Energy plan.

The rebuff is certain to renew concerns about Woodside’s future in the Gulf of Mexico, after the Australian group already lost a bidding battle in the region earlier this year for some of the assets of EnCana.

That might force Woodside to raise eventually its bid for EPL, a purchase that would boost considerably its US output and strengthen the Australian group’s commitment to drilling in the Gulf of Mexico, according to analysts.

One of Woodside’s subsidiaries already acquired a 4.5 per cent stake in EPL on the open market ahead of last month’s formal bid. A Sydney-based analyst said on Friday: “Woodside was hoping to get this on the cheap. Getting it at a higher price would probably be better than not getting anything at all.”

Woodside’s limited presence in Golf of Mexico has repeatedly been questioned by analysts and Don Voelte, chief executive, has admitted the group needed either to invest more there or divest altogether from the region.

The spokesman for Woodside said Friday: “We are keen to grow our Gulf of Mexico business. We have an active mergers and acquisitions team and that will remain so.”

Woodside, which is just over a third owned by Shell, produced nearly 60m barrels of oil equivalent last year and is managing Australia‘s biggest project – the North West Shelf.

In a separate setback, a minister in the state of Western Australia warned on Friday that Woodside would be forced to re-route a gas pipeline leading to its Pluto liquid gas project to avoid damaging indigenous rock art.

EPL, meanwhile, reported a 30 per cent fall in earnings in the second quarter. Its merger proposal with Stone Energy was seen as recognition that it would struggle to continue as a relatively small stand-alone company facing rising exploration costs. Both companies are based in Louisiana.

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