AFR Articles

Relevant bits from AFR articles. Apologies if posted already...

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Woodside Petroleum profit edges higher as the company flags growth phase

Aug 15 2018 at 8:52 AM
Updated Aug 15 2018 at 11:00 AM

by Angela Macdonald-Smith

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On the international front, Woodside and its partners in the SNE offshore oil field in Senegal are aiming to start engineering and design work this December half.

The Senegal venture is caught up in a dispute involving junior partner FAR Ltd over pre-emptive rights, which is currently in arbitration. FAR has suggested the arbitration could result in Woodside being cut out of the 640 million barrel oil project altogether.

But Mr Coleman didn't refer to the dispute, noting the progress towards awarding contracts for early work. Oil production is due to begin at SNE in 2022.

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Woodside CEO Peter Coleman is earning a licence to invest from shareholders

Aug 15 2018 at 11:00 PM
Updated Aug 15 2018 at 11:00 PM

by Matthew Stevens

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That cash has been banked to cover the cost of the opening rounds of Coleman's growth story of three chapters. In order those chapters are SNE, Scarborough, and Browse and, in order, are flagged to cost up to $US3.4 billion, $US9 billion and $US20.5 billion.

SNE is an oil project in Senegal and Woodside paid $US430 million for a 35 per cent slice of that action back in July 2016, when the oil price trough was really beginning to hurt even majors. The other two are gas projects in Woodside's backyard and they are aimed at filling a supply gap that Woodside believes will progressively open up after 2025.

Given things run to the Coleman plan, Woodside should be in position for a final investment decision (FID) on SNE within the June 30 2019 deadline determined by the Senegal government.

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Commercial opportunism

So FAR has trooped of to the International Court of Arbitration and, after a number of false starts, a president has been appointed to hear a case that seems likely to get underway some time late next year.

"I am glad you asked me that one because we have some pretty good words ready on that one," Coleman said in opening response to our query.

"The arbitration is frivolous. It has no basis or substance. It is driven by commercial opportunism and it raises concerns in our minds about the ability of our partners to fund (their share) given that it is clearly a blocker for the financing of our project," Coleman said.

Woodside is presently shopping for project financing for the $US3 billion plus development. Coleman asserted that it was "clear to us" that while the arbitration remains live, securing finance and infrastructure leasing terms will be "difficult".

"The whole thing is nonsensical and ridiculous," he continued, noting that the arbitration process looked almost certain to extend beyond next year's deadline to provide the Senegal government with some level of certainty over the shape and timing of the project.

Woodside's best guess is that, should it proceed to its endgame, FAR's arbitration would not conclude until 2020. "That is beyond the point where we need to make a decision," Coleman said.

"We have rights under our title," he continued. "We will exercise those rights, we will make sure we protect Woodside's interests with respect to security over the title and the implications of that, our other partners will have to consider," he warned.

Coleman didn't want to enlighten me as to what those rights might be but his intent is clear.

And here is what I think he is saying. The SNE joint venture invests considerable authority in its operating partner and by the time decisions are made, that is what Woodside will be. That authority most likely extends to the timing of an investment decision and how the project might be funded.

Coleman is plainly saying project financing has been left uncertain. If that is unattainable, then the only obvious way for this to get done in the timeframe required by Senegal is for the partners to do it themselves by contributing capital in line with their level of ownership.

It is plain enough that Woodside could afford its share and so too could the other big owner, Cairn Energy. But, very obviously, Coleman reckons FAR would struggle to respond to that sort of capital call and, just as bluntly, he is making it publicly known that he is prepared to throw down that gauntlet.