FAR Ltd chairman Nic Limb has firmly signalled the oil junior's determination to press ahead with arbitration over the $US430 million ($574 million) sale of a stake in its Senegal oil project to Woodside Petroleum, spelling out the possibility that Woodside could be cut out of the 640 million barrel venture altogether.
Mr Limb said the arbitration process set to kick off in Paris "holds no fears" for FAR. Neither should it be of concern to shareholders given that a finding against the company would only result in the status quo, with FAR retaining its 15 per cent stake in the SNE oil project, the budget for which has now been cut by a third to $US2 billion.
Woodside's purchase of ConocoPhillips's 35 per cent stake in SNE in 2016 has been disputed by ASX-listed FAR, which believes its pre-emptive rights over the holding were ignored.
While the respondent in the arbitration process is ConocoPhillips Senegal BV, that company is now owned by Woodside Petroleum, dragging the Australian company directly into the dispute that was originally seen as between FAR and US giant Conoco.
Proceedings for the three-month arbitration process are due to get underway as soon as the terms of reference have been settled, expected within days.
Mr Limb told shareholders that the $US2.20 a barrel price that Woodside paid for its stake was "low", and that FAR wants "the opportunity to consider purchasing those barrels at the same price".
The binary outcome of the arbitration is seen as likely to draw Conoco and Woodside to the table for a potential settlement with FAR.
The oil junior, which has a market cap of about $490 million, is expected to join with a better funded partner should it get the opportunity to buy the stake, which is currently a key part of Woodside's international growth plans.
Meanwhile, FAR revealed the latest estimate of the capital investment required on SNE at $US2 billion, down from an earlier estimate of $US3 billion. A presentation to shareholders by managing director Cath Norman pointed to cost reductions for drilling and other investments that cut the estimate by 20-30 per cent.
She put the oil price at which the expected 100,000 barrels a day SNE project breaks even at $US35 a barrel.
Mr Limb said FAR is "fortunate that development costs are at multi-year lows" and that he is "encouraged" by the number of options available for financing the project.
The arrangements for financing the project are due to be lodged with the Senegal government by the year-end, ahead of a final investment decision in mid-2019. Oil production is due to start up in 2021-23.
Woodside is due to take over as operator of the SNE venture from London-listed Cairn Energy in late June, but a ruling from the arbitration in favour of FAR could see that role pass to the smaller company.
Woodside has repeatedly dismissed any possibility of being squeezed out of the Senegal venture, with chief executive Peter Coleman last week describing it as "noise out to the side" of the project.
He told investors it was "pretty far fetched" to suggest that a junior partner would put at risk the prospects of what would be its only production asset by derailing the project timetable, which requires a development plan to be submitted in the first half of 2019.
"It's a snooze or lose situation," Mr Coleman said.
Mr Limb cited FAR's exposure to the funding requirement and the arbitration as factors behind the "frustrating" stalling of FAR's share price in a 7.5¢-8.5¢ band for much of the past year, despite stronger oil prices.
(20min delay)