Woodside holds on to stake in Senegal oil field as FAR challenge fails

ConocoPhillips’ (COP.N) sale of a stake in a $4.2 billion Senegal oil and gas project to Woodside Petroleum (WPL.AX) has been cleared by an international tribunal, resolving a long-running challenge by Australian partner FAR Ltd (FAR.AX).

Woodside and FAR said on Friday an International Chamber of Commerce panel had ruled that FAR did not have a pre-emptive right to match the offer for the 35% stake in the Sangomar project that ConocoPhillips sold to Woodside in 2016 for just $350 million.

FAR said it was reviewing the arbitration award. It holds a separate 15% stake in the Sangomar project, which also counts Cairn Energy Plc (CNE.L) as a stakeholder.

FAR’s shares fell as much as 9% to 3.1 cents, their lowest level since the middle of 2013, on the news that it would miss out on the chance to potentially raise its stake in Sangomar for a comparatively low price, or win compensation.

At that level the shares were also well below the 4.25 cents apiece that investors paid in a recent issue of new stock by the company.

The resolution of the case comes just as Woodside and its partners have begun development of the Sangomar project, following final investment decisions in January, with first production expected in 2023.

FAR, which discovered the Sangomar field in the world’s largest oil find of 2014, disputed Woodside’s acquisition of its stake in the acreage, arguing it was not allowed to exercise its right to pre-empt the sale of Conoco’s stake.ConocoPhillips and Woodside, now operator of the project, had maintained that FAR’s challenge was without merit.

“Woodside is committed to working … to progress the Sangomar Field Development, which achieved final investment decision in January 2020,” Woodside said in a statement on the tribunal’s ruling on Friday.

ConocoPhillips had no immediate comment.

Analysts had thought that if FAR won the arbitration, it might get some form of compensation from Conoco or Woodside which would have helped the minnow fund its share of Sangomar development costs.

“While disappointing for FAR, we think it remains in a reasonable position with respect to its forward funding profile albeit this as come at the cost of significant equity value dilution,” RBC analysts said in a note.

The company raised A$157 million ($105 million) in December through the sale of new shares to help cover its $480 million portion of Sangomar development costs. It plans to cover the rest of its costs by taking on debt.

Reporting by Sonali Paul in Melbourne and Nikhil Kurian Nainan in Bengaluru; Editing by Kenneth Maxwell