(Adds Woodside, investor comments)
MELBOURNE, Oct 5 (Reuters) - Woodside Petroleum's chief executive said he does not want to sweeten an A$11.6 billion ($8.2 billion) offer for Oil Search Ltd OSH.AX because it would hurt his own shareholders.
Oil Search rejected the proposed all-share offer from Australia's biggest oil and gas producer in September, saying it grossly undervalued the company's low cost, high quality liquefied natural gas stake in Papua New Guinea and its gas exploration assets in the island nation.
"Offering more is dilutive to our shareholders," Woodside CEO Peter Coleman told the Australian Financial Review in his first public comments since the proposal was rebuffed.
"We are already at that balance point and we don't want to go any further," he said in an interview published on Monday.
A Woodside spokeswoman said in an email to Reuters that the quotes in the newspaper were accurate. She did not comment on whether the company was ruling out a higher offer.
Woodside did not release a statement to the Australian stock exchange. Oil Search executives based in Sydney did not respond to calls or emails on what was a public holiday.
Analysts have said the company would have to offer A$9 to A$10 a share, or at least A$13 billion, to win over Oil Search shareholders, led by the PNG government, Abu Dhabi's International Petroleum Investment Company and Capital Group.
"There was a lot of water to go under the bridge before that(bid) was going to be successful," said Tim Schroeders, a senior fund manager at Pengana Capital.
Coleman said Woodside did not want to include cash on top of its four-for-one share offer as that could hurt shareholders if already weak gas prices fell further.
"In this environment cash is king. You don't want to be using cash. If you pay cash you are locking in a particular price outcome," Coleman said.
Woodside chased Oil Search to fill a gap in its near term growth prospects.
Coleman said his next step would be to wait for Oil Search shareholders to start asking, 'Where's the deal?'"
"I'm a patient man. This is a once-in-a-cycle opportunity to do something quite special."
Woodside's shares have jumped 7.2 percent since Oil Search rejected the proposal on Sept. 14, reflecting relief among Woodside shareholders. Oil Search shares have fallen 1.3 percent over the same period, trading below the value of the offer on doubts a higher bid would emerge.
($1 = 1.4176 Australian dollars)