BHP Deal Sees Woodside Take Control Of Scarborough Gas

By Glenn Dyer | More Articles by Glenn Dyer

Woodside is moving close to controlling the huge Scarborough LNG project off the Northwest coast of WA with news that it and the remaining partner, BHP, have agreed to Woodside will be the operator.

In a statement to the ASX yesterday, Woodside also said that talks with Exxon Mobil on buying its stake in the project were progressing and is on track to settle by the end of this month.

In February Woodside sold $2.5 billion worth of shares in order to acquire 50% of the Scarborough field and progress the Browse gas (also in WA) project to a final investment decision.

About $440 million will be spent on acquiring Exxon’s 50% stake in Scarborough, giving Woodside a controlling 75% share in the field.

The balance of the raising will be ploughed into Woodside’s investment in Senegal, reducing debt, strengthening its balance sheet and maintaining dividend at the current level of 80% of earnings.

Woodside estimated that Scarborough will boost its LNG flow by 40% when the project starts production starts in 2025.

In the statement issued yesterday afternoon, Woodside and BHP said that under the agreement:

  • BHP waives its right of pre-emption and provides its consent to the sale by ExxonMobil to Woodside of its 50% interest in WA-1-R and the Scarborough Joint Venture Operating Agreement (“Scarborough”). This will result in Woodside holding a 75% interest in Scarborough;
  • Woodside will become the Scarborough operator on completion of the transaction between ExxonMobil and Woodside;
  • Woodside grants BHP an option to purchase an additional 10% interest in Scarborough on equivalent consideration and terms to the transaction with ExxonMobil. The option may be exercised by BHP at any time prior to the earlier of 31 December 2019 and approval to commence the front-end engineering and design phase of the Scarborough Development; and
  • Woodside and BHP will undertake good faith discussions in relation to: the unitisation of WA-1-R (which contains the majority of the Scarborough gas field) and the adjacent WA-62-R (in which Woodside and BHP each hold a 50% interest); potential offers to sell up to a 10% interest in Scarborough to foundation LNG buyers on a pro-rata basis; and technical and commercial arrangements for the Scarborough Development.

“I am pleased BHP has agreed that Woodside will become operator of the Scarborough Development. The Scarborough joint venture will now be focused on finalising the development concept prior to entering FEED and positioning for FID in 2020,” he said.

Woodside CEO Peter Coleman said in the statement that the "announcement strengthened alignment and certainty of the Scarborough Development.”

Woodside shares rose nearly 2% to $28.94 yesterday.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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