Hi BD, That very interesting...and even more so for it to be...

Hi BD,

That very interesting...and even more so for it to be highlighted in a press statement.
This must have been one of the conditions of their, at the time, generous FI terms. All the Big boys want operatorship and are prepared to pay big$ for it. All of them still remember when a pip squeak Aussi explorer called Woodside told the biggest coys in the world to get stuffed and held onto the operatorship on the NWS. Its the trump card in oil project JVA's and I recon is responsible for at least 25% of WPL's market cap today.

So Operatorship of a project is extraordinarily valuable...but only if you also have the votes. WPL was able to hop into bed with BHP and Shell to get the JV votes they needed. So by extension, COP will HAVE to get FAR on side and offer a PREMIUM to do so as CNE will also have a first right to match any offer...but only for the interest in the permit.

Herein lies a dilemma for the COP. Normally, the majors (especially foreign majors) hate the disclosure and publicity surrounding formal corporate bids for juniors. They prefer a more surgical straight buy out of the project interest. Yet a couple of such deals have attracted the attention of the country's tax dept who are more and more trying to capture tax on some of the huge profits from such deals. Just refer CNE's Indian deal which has tied up $1b.

I, not surprisingly, haven't the slightest idea of Senegalese corporate tax law in such transactions. I suspect neither do they. Regardless of T/O or simple buy out...the transaction will require Senegalese approval through a bureaucratic review process that has never been tested before. And as this is shaping up to be one of those discoveries that could attain double digit GDP proportions, the approval processes is unlikely to get smooth or quick.

IMHO, the longer CN holds onto the JV casting vote....the more valuable it becomes. But only if we can afford to play the game.

Prior to the SNE discovery, the next round was looking like 2 appraisal wells on FAN1..say $250m or $42m to FAR. Yep, FAR can play that game but now, after the SNE discovery, they are most likely sketching out an expanded 3-5 hole appraisal/exploration programme for late 15/early 16. With prelim engineering etc lets call it an even $500m to play this expanded round. FAR's share would in this case be $83m and all of a sudden, COP and CNE are out-spending FAR's negotiating power.

Its going to be a great poker game with CN saying to COP/CNE that FAR WILL be able to do the $80-100m for the next round.

But I'm not convinced a corporate move will occur soon. For the simple reason, we haven't considered the most important player at this table; Petrosen. None of us know the specific bells and whistles that are often be attached to the SOEs interest. Often these include financing from production which can come with reduced voting rights. Alternatively, they could unilaterally have or legislate for the SOE to have the casting vote in the case of a 50-50 split....which would be a very relevant issue if COP took over FAR

Its never simple. and perhaps against many posters here, I actually believe the 15% has more strategic value to CNE than to COP. CN knows this...maybe this is the reason she spends more time in London near(?) Cairns HQ. Anyone know when/if she's been to Houston lately?

Either way...Its an asset that has much more than intrinsic insitu value to either COP and CNE . And the first mover will have the advantage. Dang! this is going to be exciting if it isn't enough already.

Cheers,