Woodside mulls options after Russian entry in Senegal project
Woodside was a potential buyer of Cairn’s 40pc stake in their Senegal JV. Instead it’s been snapped up by Russian giant Lukoil.
Woodside Petroleum is considering “all options” after Russian oil giant Lukoil became a major partner in its $US4.2bn ($5.9bn) Senegal oil venture despite being the subject of US sanctions.
Lukoil, which will pay up to $US400m to buy out Cairn Energy’s Senegal interests, will hold a 40 per cent stake in the Sangomar project with Woodside operator and 35 per cent owner along with Australia’s FAR Ltd at 15 per cent and Petrosen with 10 per cent.
Woodside was viewed by analysts as a potential buyer of Cairn’s stake in the Senegal project, raising speculation there could be issues within the joint venture of the new ownership structure.
“This transaction is subject to joint venture and government approvals. Woodside will consider all its options," Woodside said in a statement.
Woodside may look to tap its pre-emption rights, Credit Suisse said.
“We think Woodside is interested in increasing its stake in Sangomar and may prefer a different joint venture makeup, so may seek to pursue rights to pre-empt or challenge the sale,” Credit Suisse analyst Saul Kavonic said. “But Woodside has other mergers and acquisition opportunities too including possibly FAR’s stake in Sangomar.”
The offshore development, operated by Woodside, would be the first oil project in the West African country and is targeting production of 100,000 barrels a day of oil from early 2023.
The Sangomar development has endured a rocky few months after Woodside’s partner FAR Ltd saw banks walk away from a finalised debt deal in late March as oil crashed below $US20 a barrel, with the producer failing to conclude a $US300m reserve-based lending facility to fund its share of the giant Senegal project.
FAR said on July 16 it had been notified by Woodside it was in default of its cash call obligations and its voting and meetings rights have been suspended due to its financial distress. FAR had previously opened a data room to consider selling some or all of its 15 per cent stake in the Sangomar development.
Woodside is seen as the logical acquirer of FAR’s stake and chief executive Peter Coleman has said the company will “just watch that one very, very closely”.
Asked if Woodside would look to buy out FAR’s stake or part of Cairn’s share, Mr Coleman told analysts at its second quarter results on July 15 that it “still has development risk associated with it, so it’s got a different profile than a flowing asset in Western Australia. But they’re still attractive assets for us to look at should they come to market”.
FAR chief executive Cath Norman said a number of potential buyers had entered the process but many had “come in cold” and needed time to understand a complex set of data underpinning the project.
The first phase of the Sangomar development includes a stand-alone floating production, storage and offloading facility with 23 subsea wells.
The project is designed to allow for it to be integrated into further developments, including gas exports to shore, Woodside said.
Woodside fell 1.4 per cent to $20.53 while FAR jumped 27 per cent to 1.4c.
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