Woodside to buy ConocoPhillips oil assets in Senegal
Woodside will pay $US430m for ConocoPhillips assets including one of the world’s largest recent oil finds.
Woodside Petroleum has agreed to pay $US430 million for ConocoPhillips’ 35 per cent stake in a Senegal offshore oil joint venture containing the world’s second — biggest offshore oil discovery since 2014, called SNE, and in which Melbourne explorer FAR has a 15 per cent stake.
The move will give Woodside (WPL) a non-operating stake, but an option to take over as operator through the development and operating stage of what joint venture partner Cairn Energy has said could be a $US5.6 billion to $US8.6bn project producing up to 100,000 barrels of oil per day from 2021.
The deal gives Woodside potential commercial production growth that the market has been pressuring it to buy, and comes ahead of further data on the SNE field that is set to be released to the market soon by FAR (FAR).
The look-through value of the Woodside deal for FAR’s stake is $US184m, well below FAR’s market value of $A375m and indicating Woodside has got itself the stake cheaply, as Conoco conducts a worldwide sale process of its deepwater assets.
FAR went into a trading halt this morning after its shares dropped 9c, or 11 per cent, to 7.3c in early trade in reaction to the Woodside deal.
Woodside chief Peter Coleman said the acquisition aligned with the company’s growth strategy by providing a significant position in an under-explored and highly prospective emerging oil province.
“The SNE and FAN (also part of the joint venture) discoveries opened up the basin, and recently completed appraisal work has proven up high-quality resources,” Mr Coleman said.
“We are taking advantage of our balance sheet to acquire a world-class asset that fits well with our capabilities, offers significant future upside in exploration and line-of-sight to near term oil production.”
The SNE field — one of the world’s largest deepwater oil discoveries since 2014 — contains an estimated 560 million barrels of recoverable oil, Woodside said.
The deal will see Woodside pay $US350m upfront and a completion payment of $US80m.
RBC analyst Ben Wilson said the acquisition price of $US2.20 per barrel of recoverable oil was attractive and a significant discount to the bank’s unrisked valuation of $US7.
“The discount to our unrisked valuation is deeper than we would have anticipated given the appraisal work completed to date, the quality of the resource, the favourable production sharing contract terms, and the bonus of operatorship,” Mr Wilson said.
“We therefore conclude that Woodside has executed a strongly accretive deal.”
Mr Wilson said that the read-through for FAR was not great, but that helping explain this was that the asset still required further appraisal and engineering work before a development was firmed up and that ConocoPhillips was a strongly motivated seller given its commitment to exit its deepwater portfolio.
At 10.25am, Woodside shares were off 9c at $26.95.
