Oil Search Ltd has refused the $8-billion takeover bid made by Woodside Petroleum Ltd, the biggest energy company in Australia. The rejection has turned out to be a major hurdle for Woodside Petroleum as the energy major is exploring low-cost LNG assets in Papua New Guinea (PNG), a nearby neighbor of Australia.

Woodside Petroleum Ltd has been holding discussions with Papua New Guinea-focused oil and gas producer for the last one week. Woodside Petroleum has made an offer of one for four shares held in the company. The offer also includes conditional support from the key stakeholder. It has also sought approval and support from PNG government. 

However, Oil Search Ltd's board of directors came to a conclusion after a comprehensively scrutinizing that the offer made by Woodside Petroleum was opportunistic as it undervalued the company. In a communiqué to Australian stock exchange, Oil Search Ltd said that it was not favoring the offer. 

If Woodside's bid offer of one share for every four shares held in Oil Search Ltd is considered, then it will translate into a 14 percent premium for investors of Australian oil major. But the 14 percent premium is too low and it's nothing but undervalued Oil Search Ltd. 

Based on the offer bid, Oil Search Ltd was valued at A$11.65bn ($8.1bn). If the offer was accepted then it would be considered to be the major energy takeover deal in the Asian market. 

Oil Search shares in Australian stock market fell over three percent to A$7.22 on Sydney stock exchange. Woodside stock also shed 3.5 percent to A$27.43. 

Analysts still feel that though the offer was rejected, but the doors are open for further discussion subject to raising the offer value. Oil Search board has rejected the offer and subsequently company's chairman Rick Lee cancelled his meeting with Woodside officials. 

PNG Government and Abu Dhabi's International Petroleum Investment Corp hold one-fourth stake in Oil Search Ltd.  Oil Search further elaborated in the statement that it was in strong financial position and oil and gas exploration in PNG involves low-cost operations. The output from PNG is expected to double by early 2020. Oil Search is working with ExxonMobil Corp and France's Total SA on two liquefied natural gas (LNG) projects.

Oil Search's partners also don't see any need of Woodside's operational or marketing expertise in liquefied natural gas. Any deal offer that matches its value for shareholders of Oil Search Ltd, we'll engage on them, said Rick Lee, Chairman of Oil Search Ltd, He further added that "Shareholders found Woodside's proposal unattractive."