While Melbourne-based FAR is talking up its pre-emptive rights, Coleman said the junior was engaging in an opportunistic abuse of the pre-emption clauses in the joint operating agreement, but he is confident that the $US430 million ($A567 million) will proceed on schedule.
“You need to deal with the facts - at least the facts as we see them," Coleman said.
"The facts are we have agreed with Conoco to purchase the Senegal assets through the [holding] company that holds those assets, and so the sales process is subject to Senegal government approval and then any applicable pre-emptions.
“Our view is that we don’t believe pre-emption is applicable in this instance because we are purchasing the company.”
FAR last week said it believed the pre-emption window was yet to start, but Coleman said the facts were that the JOA required any pre-emptor to be financially and technically competent, and sets out a strict 30 day period for notice.
“FAR’s notice was surprising to us, firstly because they didn’t pre-empt and two, the asset is held within a company and you can’t pre-empt a company, and thirdly they’ll need to demonstrate their technical and financial capability,” Coleman said.
FAR certainly lacks the cash to pre-empt Woodside, and its skills are in exploration not development, which is what the SNE partners need to develop the planned deepwater project.
The 30-day pre-emption clause is to stop the gaming of the system.
“Pre-emption rights in JVs are not designed for someone to take opportunistic commercial advantage. It is for them to be comfortable to protect the investment that they already have from any unwanted third party,” Coleman said.
He said FAR had plenty of scope to increase its interest in SNE during the sales process, if that was what it aimed to do.
“This was an open process for anyone to come in. if you like deepwater, like oil, and working off Africa this was something you would have looked at,” he said.
He believed Woodside had offered a fair price with a motivated seller, not a distressed seller, and he said the bidding process had been competitive to the end.
He called on FAR to make clear its intensions.
“Just asserting the right without saying what your intention is when you assert that right, when on some of those measures you won’t meet the mark is creating a bit of uncertainty for everybody,” he said.
Woodside’s entry into the JV has the support of operator Cairn Energy (40%) and the Senegal government, both of whom see the arrival of an experienced offshore operator as a win for the JV.
Coleman said Woodside had taken legal advice that backs its position that there is no applicable pre-emption right.
“We always get our own advice. Before you make an acquisition you always form a view around pre-emption because it is one of the key risks for the likelihood of closure,” he said.
He expects ConocoPhillips to deliver the asset by the end of the year.
“They have made a choice in the way they have gone about this, but it is in their hands to deliver the asset to us and to progress the approvals both within the JV and with the Senegalese government,” he said.
Woodside is comfortable with how ConocoPhillips is going about the process.
“I don’t think there are many chapters for this [saga]” Coleman said.
There is no Plan B if Senegal doesn’t go ahead, but he said the company would pick itself up and try again.
“This is the best discovery of 2014. This is a pretty important asset [but] there are other things going around.
“It’s a good asset and it has some running room with respect to exploration and field size, so when we looked at it, it made sense to go after it.”
Woodside is sticking with its 2C estimate of 560 million barrels of recoverable oil, and is not commenting on FAR’s most recent upgrade to a 2C potential of 641 million barrels, an upgrade based on more recent drilling, although Coleman admits there is resource upside towards 1Bbbl. Centrepiece Senegal could become the centrepiece of Woodside’s emerging African business, given it has a commitment to drill a well in the AGC Profound block and in the Luna Muetse block in **on. Both are chasing large oil targets in the fourth quarter of 2017.
Successfully securing Senegal would potentially double that drilling commitment to at least four wells, and there multiple contingent wells off Senegal and one possible well in the deepwater Rabat Block, offshore Morocco.
AGC Profond lies across the principal sand fairway of the Late Cretaceous Casamance deep marine fan as well as the Jurassic-Cretaceous carbonate platform edge along the eastern flank of the block.
The petroleum system has recently been successfully tested by Cairn with the FAN-1 and SNE cluster discoveries, located to the north of the AGC Profond block.
FAR’s Kora-1, the only previous deepwater well to be drilled in AGC Profond, was drilled on the crest of a salt structure and lacked reservoir sand, however a number of large untested structural and stratigraphic leads with good reservoir development can be mapped over much of the licence.
FAR Price at posting:
7.5¢ Sentiment: Hold Disclosure: Held
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