Today’s Blog – Monday 29th August 2016

Travel commitments over the rest of this week will render blogging services somewhat intermittent

Editorial

Our current favourite soap opera in the oil patch – the pre-emptive rights held over Conoco’s sale of its offshore Senegal assets to Woodside Petroleum (WPL) – is the topic that keeps on giving for this blog.

The latest twist was what can only characterise as the bizarre following recent media comments from WPL’s CEO, Peter Coleman:

“FAR’s notice was surprising to us because one, they didn’t pre-empt; two, the asset is a company, you can’t pre-empt companies; and three, they’d need to demonstrate their financial and technical capability. So there’re some big hurdles for them to get over.”

Taking each point:

  1. FAR agrees it has not pre-empted – it has stated it has yet to receive a valid notice upon which it could pre-empt.
  2. This is the big one – pretty much all modern JOAs have pre-emption clauses that deal with subsidiary corporate as well as asset transactions.  We cannot understand why Coleman would make a statement to the contrary.
  3. No Court would in our view find that an existing JV party in good standing exercising its pre-emptive right would fall afoul of the normal third party tests of financial/technical competence and we can think of no precedence being even close to this.

We can only conclude that Coleman is under some pressure to deliver this deal – particularly given WPL’s poor deal-making record in recent years (exemplified by its takeover approach to Oil Search which was almost contemptuously brushed off).  Why else would be talk what frankly looks like a load of rubbish?

Commodity prices

Crude prices closed up marginally on Friday’s trading, with Brent at US$49.92 and WTI at US$47.62.  Over the course of the week, prices declined by ~2%, with Friday’s small fillip being driven by uncertain readings of what the Fed in the US might do next over interest rates (and hence where the USD might go).

BHI’s weekly rig count showed a welcome pause – with no adds to the oil rig fleet and a fall in the gas rig count of two.

Henry Hub had a reasonable Friday – up ~1.2% to US$2.87 – and a very strong 11% gain over the week.  Hot weather in the US continues to draw down gas inventories faster than normal.

LNG and international gas

Late last week the proponents of the massive Alaska LNG project (BP, Exxon and Conoco) told the Alaskan State Government that they would now not be proceeding to the US$2B FEED stage of this project (they have already spend US$500M on pre-FEED).

The producers offered to sell their gas to the State if it wanted to proceed with the project alone – which bizarrely seems to be the policy of the State’s Governor (note to said Governor – please pay your debts such as the rebates owed to explorers before bankrupting your State).

We think this project now has no chance of going ahead in the short/medium term – like pretty much the vast majority of other green-fields LNG projects around the planet.

Governments, fracking, etc

So it has come to pass as predicted in the Northern Territory over the weekend – the Labor Party is now the Government – and has a policy of imposing a “moratorium” on fracking in the now commonplace display of gesture politics and political cowardice.

Company news – AWE Ltd (AWE)

AWE announced today that is has commenced gas sales of a gross 10 TJ/day from its onshore Waitsia gas-field in Western Australia.  The successful delivery of these sales (from the luxury of a brown-fields site) will likely provide the final impetus for AWE’s partner, Origin Energy (ORG) to sell its 50% stake in the field.

The JOA between AWE and ORG is likely to be an old one – perhaps so old that its pre-emptive rights could be understood by the likes of the CEO of WPL.  If so, AWE might not get a chance to pre-empt the ORG sale (it would need third party funds to do so – but has had ample time to line these up).

We look forward to another soap opera here.

Quote of the day

Thanks to a denizen of Hot Copper for reminding the blog of the following quote in the context of the WPL/FAR dispute.  The quote is from TV’s The Office (the original and best UK version) and follows the evil Finchy’s throwing of Tim’s shoes on the roof of the office and his direction to Tim to:

“Respect their elders and not f*ck with the big boys.”

 

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