Woodside’s (WPL) announcement of the $US450 million purchase of a stake in a major oil field in West Africa had the knock-on effect on sending the shares in small oil explorer, FAR, down by sharply in the first minutes of trading yesterday.
Woodside issued its announcement before trading and FAR shares tumbled at the opening as brokers worked out that the purchase price put a much lower valuation on FAR, which has a 15% stake interest in the areas acquired by Woodside.
RBC Capital Markets said yesterday Woodside’s pricing of the purchase at just $US2.20 per barrel, a “significant discount” to its own valuation of about $US7 a barrel.
FAR shares fell as much as 20% and were 13.1% lower at 7.3c before being halted from trading at 10.17am.
The suspension lasted until well after 1o’clock when FAR issued a statement at 1.23pm.
That statement said:
"FAR Ltd notes today’s announcement by our joint venture partner ConocoPhillips (COP) and Woodside Petroleum Energy Ltd regarding the proposed and conditional sale of COP’s interests in the offshore Senegal Rufisque, Sangomar and Sangomar Deep assets.
"According to the terms that FAR has seen to date, the transaction is subject to the approval of the Government of Senegal and co-venturer pre-emption rights."
"FAR managing director Cath Norman said, “ConocoPhillips flagged the potential sale of their global deep water exploration assets and we are not surprised by Woodside’s interest.”
“Woodside has clearly stated its strategic interest in Offshore Senegal and the NW margin of Africa where FAR has a significant footprint of exploration acreage.”
“FAR has discovered 561mmbbls of 2C* contingent resources and we are still assimilating the results of the 4 successful appraisal wells in the SNE field offshore Senegal. FAR has also mapped a further 1 billion bbls of undrilled exploration prospects** in the permits.
“Woodside has stated today; the SNE field is a world class asset in a highly prospective emerging oil province; the acreage encompasses one of the largest oil discoveries since 2014 in the SNE field; recent appraisal work has proved up high quality resources; there is a clear line of sight to a near term development of the SNE field; and the Senegal project offers significant future exploration upside.
"Woodside seeks to acquire COP’s 35% non-controlling equity interest in the project as well as the right to assume the role as project operator for development and production phases.
“At the end of March FAR had a strong balance sheet with A$32M, bolstered by the recent capital raise of A$57M (net of fees) in April. FAR’s focus on the Senegal project will be unchanged and we are fully funded for the foreseeable work program.”
That statement seems to be nothing more than a rehashing of what Woodside said, with an emphasis on what FAR says is its financial position – in other words it looks like an attempt to interrupt the sell off in the shares and then stabilise them.
FAR tried to suggest that there is a lot of potential new value in the exploration efforts in the area – but until there are actual results with hard data to be analysed, that is a pie in the sky approach. FAR shares ended a rough day down 12% at 7.4 cents.
