australia's woodside beats exxon to africa acreage

Australia's Woodside Beats Exxon To Africa Acreage


By Stephen Bell
Of DOW JONES NEWSWIRES

PERTH (Dow Jones)--Australia's Woodside Petroleum Ltd. (WPL.AU) has trumped U.S. oil major Exxon Mobil Corp. (XOM) in a US$77 million deal to clinch majority ownership of Mauritania's emerging offshore oil province, people with knowledge of the deal told Dow Jones Newswires.

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Woodside may have achieved "deal of the century" in the West African country, as the price was set before last month's discovery of the potential 300 million barrel Tiof field, said Paterson Ord Minnett analyst Simon Oaten.

The company said Wednesday it will buy a 35% interest held by Italy's ENI Spa (E) in two key Mauritania contract areas, boosting its holding to 53.84% after a prorata allocation of interests to other joint venture holders.

A Woodside spokesman said the deal is an "attractive acquisition in a core growth area", without providing further details on the background to the transaction.

But a separate statement by junior partner Hardman Resources Ltd. (HDR.AU) revealed that the Woodside-operated joint venture had pre-empted a proposed sale of the ENI stake to a "major international oil company".

Hardman said that ENI reached agreement "some months ago" to sell its interest to the unnamed third party, "prior to the successful Chinguetti 4-5 development well and the Tiof oil and gas discovery".

Both Woodside and Hardman declined to reveal the third party, but two stockbroking sources familiar with the deal identified the company as Exxon Mobil. A spokeswoman for Exxon Mobil's Australian operation wasn't available for comment.

Analysts say the acquisition highlight's Woodside's confidence in Mauritania, where it intends to develop the US$400 million-plus Chinguetti field in 2005. "The fact that Woodside has pre-empted Exxon-Mobil suggests that they see major upside in the field," one broking source said.

Woodside will boost its stakes from 35% to 53.84% both in Production Sharing Contract Area (PSC) A, containing the Banda discovery, and PSC B, which contains the Chinguetti and Tiof discoveries.

The total cost of the acquisition is US$62 million, plus "adjustments for activities" after an effective date of August 1. A contingent payment for up to US$15 million may be paid on achievement of milestones related to future exploration, development and production success, the company said.

Hardman Takeover Not Likely, Despite Speculation

The acquisition cost is "exceptionally cheap", said Oaten from Paterson Ord Minnett in a note to clients. News of the deal comes just one day after Woodside revealed it may have discovered a major oil province offshore Mauritania, with analysts estimating that the Tiof field could hold more than 300 million barrels. Chinguetti could hold about 150 million barrels, analysts have said, but this is subject to further appraisal drilling.

Woodside is also scheduled to make a final investment decision next year on Chinguetti, leading to first production in late 2005.

Hardman will increase its stake in Areas A and B to 37.38% and 33.23% respectively. It described the deal as "very fortunate, particularly as it comes at a price negotiated in a sale to a major company before the successes from the 2003 drilling program".

The company said that it is still considering whether to retain all of the newly acquired ENI equity of "sell down a portion to provide further financing options".

"We are not irrevocably committed to funding our way through the whole project at this increased level," said Scott Spencer, an executive director of Hardman.

"It's a question of what is prudent for a company of this size and we want to keep our options open," he added in an interview with Dow Jones Newswires.

Hardman said that ANZ Banking Group Ltd. (ANZ.AU) is arranging a US$26 million loan to finance its share of the ENI interest. Spencer said that the new facility is separate from a proposed US$100 million debt package with ANZ and the World Bank-controlled International Finance Corp. to fund its share of the Chinguetti development costs.

Spencer played down talk that Hardman may be a takeover target, given the recent exploration success and the interest in Mauritania shown by at least one major oil firm. "There has been some takeover speculation in the background but we don't see any evidence of that at the moment," he said. Woodside is Hardman's biggest shareholder with a stake just above 10%.

The other parties in the Mauritania joint venture are Fusion Oil & Gas PLC, which will increase its stake to 9.23% in Area B and 4.61% in Area A; and Roc Oil Ltd. (ROC.AU), which will lift its stakes to 3.69% and 4.15% respectively.