COP says the appraisal and exploration phase went well but that the move is part of its strategy of prioritizing assets away from deepwater exploration efforts; meanwhile, Woodside moves into oil basins in the region that are considered one of the more lucrative prospects in West Africa.
The deal comes after COP's partner in the SNE deepwater oilfield, FAR Ltd., in August attempted to thwart a deal between COP and Woodside, claiming COP had breached their joint operating agreement.
In revealing a $5B cost blowout from its 2011 estimate, CVX cited late delivery of gas liquefaction modules, which cool gas to low temperatures to turn it into liquid that can be transported more easily, and an underestimation of the quantity of materials needed to complete the project.
CVX it still expects the plant, which will have two production units, to begin production in mid-2017.
The cost jump comes on top of a $17B blowout in CVX's bigger $54B Gorgon LNG project off Australia's west coast, where two out of three production units, are now up and running.
“The rampant cost inflation on Australian projects combined with the collapse in oil prices is damaging for a lot of these projects,” says Bernstein's Neil Beveridge.
The deal will take Woodside’s net share of the Scarborough assets to ~2.6T cf of gas out of a total resource of 8.7T cf.
Woodside says it will pay $250M to BHP when the deal is completed, which it expects by year-end, and another $150M if the companies decide to develop the Scarborough field, although Bernstein's Neal Beveridge says the structure of the deal suggests plenty of uncertainty over whether the project will move forward.
The main Scarborough field, which boasts a proved and probable contingent resource of 6.9T cf, will continue to be operated by BHP partner ExxonMobil (XOM +0.6%).
ConocoPhillips' (COP +0.3%) plan to sell its 35% stake in a the deepwater SNE oil field off Senegal to Woodside Petroleum (OTCPK:WOPEF, OTCPK:WOPEY) has hit a snag, as junior partner FAR Ltd. attempts to buy time to stop the deal.
FAR, which owns a 15% stake in the field, says COP failed to comply with the terms of their joint operating agreement as it relates to the proposed sale of its stake, and thus the clock has yet to start for it to exercise its pre-emption rights.
An analyst tells Reuters that FAR's effort to re-set the clock on its pre-emptive rights, as well as its increase in the estimate of 2C contingent oil resources for SNE to 641M barrels, suggests that the company is still trying to line up funding to buy COP's stake.
The total makes Liard the second largest gas resource in Canada behind the Montney formation in British Columbia and Alberta; the world's largest shale gas play is the Sichuan Basin in China, with more than 600T cf of marketable, recoverable gas, according to the National Energy Board.
But analysts say the economics of developing the basin are challenging, given current depressed global energy prices.
Chevron (NYSE:CVX) and Woodside Petroleum (OTCPK:WOPEF, OTCPK:WOPEY) are among the major Liard developers, hoping to use the gas to supply the proposed Kitimat LNG export facility on Canada's Pacific coast.
FY 2015 profit at Woodside Petroleum (OTCPK:WOPEF, OTCPK:WOPEY), Australia's largest independent oil and gas company, was nearly wiped out by the plunge in oil prices and hefty impairment charges.
Woodside says its 2015 net profit fell 99% Y/Y to US$26M from $2.41B in the prior year, despite achieving its second highest production result, squeezed by $1.1B in charges, mostly in impairments against the value of assets due to reduced oil price assumptions; stripping out one-time items, full-year profit was $1.13B, while revenue from operations fell 32% to $5.03B.
The company plans to pay a final dividend of US$0.43/share, down from a record payout for the same period last year of $1.44; for the year, the dividend falls to $1.09 from $2.55 for 2014.
Woodside says its proposed Browse liquefied natural gas project in Australia requires further cost reductions and does not have any firm sales; Goldman analyst Mark Wiseman says Browse is "highly unlikely” to make significant progress toward approval.
Nevertheless, CEO Peter Coleman says Woodside is "well positioned to withstand the commodity cycle," noting an overall 8% Y/Y decrease in unit production costs in 2015, with a 7% decrease in gas unit costs and a 17% decrease in oil production unit costs.
Large energy companies will slash dividend payouts by a total of $12B this year, bringing global payouts down 9% Y/Y to $147B, according to Markit's dividend forecasting unit.
Ten of the world's large-cap oil and gas companies are set to cut their dividend in 2016, Markit predicts, including ConocoPhillips (NYSE:COP), which already has slashed its payout for 2015 but likely will announce additional cuts by year-end.
The other nine large-cap energy firms Markit sees cutting their dividend this year: Anadarko Petroleum (NYSE:APC), Ecopetrol (NYSE:EC), Eni (NYSE:E), Kinder Morgan (NYSE:KMI), Noble Energy (NYSE:NBL), Sinopec (NYSE:SNP), Cnooc (NYSE:CEO), PetroChina (NYSE:PTR) and Woodside Petroleum (OTCPK:WOPEF, OTCPK:WOPEY).
The cost of Chevron’s (NYSE:CVX) Wheatstone liquefied natural gas project in Australia may rise another ~14% to $33B after its start date was delayed by some six months, Macquarie analysts say.
CVX said last week it expects first LNG cargoes from Wheatstone by mid-2017, citing a delay in building parts of the project in Malaysia, but that it had succeeded in "mitigating further delays” and "all modules required for train one are now on site."
A weaker Australian dollar likely will ease some of the pressure on Wheatstone, previously estimated to cost ~$29B, Macquarie says; the project will have an initial capacity of 8.9M tons/year.
FMC Technologies (FTI +2.2%) opens higher after announcing a $180M contract with Woodside Petroleum (OTCPK:WOPEF, OTCPK:WOPEY) for subsea production systems work at a part of the North West Shelf project off Western Australia.
The contract includes subsea production trees, wellheads, manifolds, subsea and topside controls, and flowline connection systems, with deliveries expected to begin in 2016 and continue through to 2018.
The GWF-2 project, which is expected to begin production in 2019, is the fourth major gas development for the North West Shelf project and is expected to develop 1.6T cf of raw gas.
However, Woodside says its production could rise in 2016 from the 92.2M boe of the previous year because it does not plan to carry out major maintenance on its Pluto gas export project in northern Australia while improving efficiency.
Analysts generally take the news of the impairments in stride; UBS's Nik Burns says they "reflect the realities of the low oil price environment."