Conocophillips Arbitration update, page-82

Agree, Szaba. Good post.

I will be amazed if WPL don’t do a deal - or at least try. I would be incredulous if they bet SNE on the whim of an arbiter or two, and FAR’s A2 farm-in gives them a perfect opportunity to strike a ‘package deal’ that gives both companies the chance to claim victory. It really could be win-win, with FAR achieving its strategic goal of not paying to explore (plus some) and Woodside securing certainty about SNE plus a meaningful stake in SNE2 (aka A2).

I wouldn’t presume to take a stab at the numbers, but it seems to me this ‘double deal’ would provide enough flexibility for both Boards to sell it to their shareholders. In Richard Goyder, WPL has a Chairman who understands the strength of a good deal in which some value is left on the table for the other mob (unlike the pre-Goyder Oilsearch fiasco). Don’t worry, either, FAR will be willing to deal, too. Despite their assertion that they have nothing to lose in rolling the arbitration dice, by the admission of their chief geo they rate their chance of success at just 70%. There’s 30% of the PE value Woodside can save itself in the first minute of negotiations.

So I agree, Szaba, a deal should be struck for the good of both parties.

Muddying the water, though, are the circling sharks, led by CNOOC but including it seems BP, Total and even Exxon. Of course they can outspend Woodside should they chose, but an A2/PE deal is perhaps Woodside’s best chance to fight them off since they alone possess the PE bargaining chip. FAR cannot be certain of winning PE and IMO would therefore would be willing to deal.

All our would-be suitors visited The Gambia dataroom and will have formed their own view on the odds. Is Woodside willing to back itself and give something to get something? In my view they would be mad not to. Unlike the Big Oilers, their A2/SNE package bid would be certain of striking oil - 35% of 641m barrels of the stuff. Surely that has to be worth a premium bid.

It seems to me FAR is on a winner no matter what happens.

OOO