Woodside Petroleum, FAR Ltd's Senegal oil hopes swelled by reported BP interest
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The ambitions of disputing partners Woodside Petroleum and FAR Ltd to develop a circa $US7.5 billion oil project off the coast of Senegal in West Africa look set to get a boost. Jessica Shapiro
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by Angela Macdonald-Smith
The ambitions of disputing partners Woodside Petroleum and FAR Ltd to develop a circa $US7.5 billion oil project off the coast of Senegal in West Africa look set to get a boost after well-credentialled reports emerged that oil major BP is looking to buy into the venture.
BP is in talks with the current owner of the stake, Cairn Energy, to buy the 40 per cent holding in the deepwater SNE venture for about $US600 million, Reuters reported, citing an unidentified adviser to Senegal's oil minister.
The two companies haven't commented, the news wire added, but London-listed Cairn has been rumoured for some time to be a likely seller of its holding in the prospective Senegalese venture.
The entry of well-funded BP, which is highly experienced in Africa and has an existing presence in Senegal, into the SNE venture would be a positive, said RBC Capital Markets analyst Ben Wilson.
Mr Wilson said that at the cited price, the mooted deal would imply "a significant step-up" in the valuation of the SNE asset since Woodside acquired its interest last year.
Woodside bought its 35 per cent stake in the SNE project in a $US430 million deal with ConocoPhillips that was considered relatively cheap and sparked a dispute between 15 per cent SNE owner FAR and Conoco over pre-emptive rights. The dispute is currently in arbitration with a result expected in about April.
Mr Wilson said the per barrel transaction multiple - allowing for the back-in of the Senegal national oil company - worked out at $US3.40-$US3.90 a barrel for the reported BP/Cairn deal, compared to about $US2.20 a barrel for Woodside's entry.
The field is estimated to hold about 563 million barrels of oil, under Cairn's most recent estimate, although FAR uses a higher figure, endorsed by consultant RISC, of 641 million barrels.
The report of BP's prospective entry wasn't the only positive news for FAR shareholders, with the Melbourne-based explorer announcing that its two exploration permits offshore The Gambia, a country surrounded by Senegal apart from its narrow Atlantic coastline, could hold a significant 1.1 billion barrels of oil.
FAR said the Samo and Bambo prospects that it has identified in one of its permits in The Gambia are similar to its discoveries in SNE. Managing director Cath Norman said the potential resource "represents a huge prize if successful".
Shares in FAR, which owns 80 per cent of The Gambian permits, jumped 6.4 per cent to 8.3¢.
Ms Norman said FAR is "thrilled" that the independent estimate of resources in the permits backs the company's own assessment, and noted that a well is targeted for drilling at the Samo prospect in about 12 months' time.
FAR has had a data room open in London for a potential sell-down of its interest in the permits to help fund the drilling, with "numerous" parties interested, which are "all big names," Ms Norman said.
FAR may reduce its stake to 30-40 per cent in the venture, but is willing to retain a relatively significant holding given the softening in drilling costs, which means a well would cost about $US30 million, she said.
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