woodside to buy FAR???, page-28

It is interesting to consider the buyers perspective with a potential FAR take-over.

The first question is - where is the deal space? In this case it is the difference in cost of capital for FAR (high) compared to a company like Woodside. So the catalyst for a take-over will be the major capital investment of a Senegal development coming over the horizon.

The balance sheet to see out this current period of low oil prices and get the benefit of longer term oil price upside may also help.

How else could a predator get value out of FAR. Ongoing exploration potential on something like FAN which will require deep pockets for further exploration/appraisal will be a benefit, although they would be unlikely to pay much for it.

I think FAR could make sense for Woodside in a year or 2 as SNE approaches FID, as long as there is some longer term potential in FAR portfolio and no poison pills (Kenya?).

Price? - depends on FARs drilling results over the next year or 2. M&A is notoriously difficult so a buyer will be a bit wary, although I think it will be a more attractive option to take-over the company rather than take equity in the SNE project, which may not be material enough.