DataRoom AM: Woodside's gas lag

Woodside's Leviathan plans remain in the balance, while Lion Nathan may be seeking a joint venture with Parmalat.

Woodside Petroleum has cast a further degree of doubt over its plans to claim a stake in the massive Leviathan gas project in Israel. There is a lot to weigh up for the Australian group given a project timeline has yet to be finalised, local regulation risks remain and the development is forecast to cost $8 billion. However, the size of the project provides the potential for a big return.

Elsewhere, Lion Nathan is seen working on an Australian deal with Parmalat, Recall Holdings receives plenty of investor support on its first day of trade and BHP Billiton outlines joint venture hopes for the massive Jansen potash project.

Woodside Petroleum

The planned entry of Woodside Petroleum into the mammoth Leviathan gas field in Israel remains in the balance as the Australian company weighs the significant risks and rewards from a multi-billion dollar stake.

Around a year ago the company signed a memorandum of understanding for a 30 per cent stake worth as much as $2.3 billion.

A formal deal has not yet been concluded, however, as first there were fears about Israel’s export policies, and lately the current joint venture partners – Delek Group, Noble Energy and Ratio Oil Exploration – have reportedly been holding out for more money.

In late November there was speculation a deal was imminent but nothing has eventuated and Woodside said yesterday a deal was likely to be either confirmed or abandoned in the first half of next year.

The project is a big risk for Woodside given the size of the entry cost and the fact production is still years away.

Last week, Noble explained the project would cost $US8 billion to develop and begin production in late 2017. However, that timeline has yet to be signed off by the joint venture parties.

"First and foremost we are focussed on ensuring that we have a commercial outcome that delivers value to us," Woodside chief executive Peter Coleman said at an investor briefing yesterday.

While the Israeli courts upheld a favourable government gas export decision for the project in October, the Leviathan partners are still waiting on the government’s tax policy for gas exports.

This is expected within two months and Woodside is likely to make a final decision after the details of the policy are made public.

In the meantime, the Perth-based oil and gas group is hoping to sell gas from its proposed Browse project to Japan.

Coleman would not outline the approximate prices being negotiated, but Japan’s search for alternatives to nuclear power puts it in a strong negotiating position.

Woodside is expecting to make a final investment decision on the floating LNG project in the second half of 2015, with pricing negotiations in Japan likely to be wrapped up next year.

Warrnambool Cheese and Butter, Saputo, National Foods, Parmalat

Rumours that the dairy business of the Lion Nathan-owned National Foods is up for auction may have been swatted away by the company earlier this week, but it appears there is some kind of movement at the station regardless.

According to The Australian, Lion is in talks with Italian-based dairy giant Parmalat over a possible dairy joint venture in Australia. The discussions reportedly involve a rationalisation of their milk businesses.

It is believed Lion has also held discussions with Australia’s Murray Goulburn and New Zealand’s Fonterra over similar plans, though any deal is expected to wait until the dust settles on the takeover of Warrnambool Cheese & Butter, which could still be months away.

Meanwhile, WCB’s Canadian suitor Saputo is reportedly keen to engage with the Takeovers Panel before it hands down a decision that could force it to alter its bid. According to Business Spectator’s DataRoom, the dairy giant is prepared to call for a review of the findings should it not agree with them.

As it stands the Takeovers Panel is looking to work out whether Saputo broke the ‘truth in takeovers’ rule in saying its latest offer was “improved”. Rival suitors Murray Goulburn and Bega Cheese argue that Saputo misled shareholders in WCB by saying its latest bid of $9.20 a share was an improvement on a bid that was $9 per share plus the prospect of 56 cents per share in franking credits.

The case is not clear-cut and it is likely ASIC’s view will be a key guide to the final decision reached by the panel.

Recall Holdings, Brambles Ltd, IPO market

Brambles Ltd spin-off Recall Holdings had its first day of trade as a separate entity yesterday and investors lapped it up. While Brambles dipped 4.5 per cent, Recall added over 8 per cent to close with a market capitalisation of $1.4 billion.

The paper storage company has been criticised as a low growth business, but investors put that aside yesterday in another example of the market being attracted to anything new.

Recall chief executive Doug Pertz told Fairfax the company is now on the hunt for acquisitions, with several options being currently weighed up.

Meanwhile, another fresh face joined the ASX yesterday with a little less fanfare. Hotel Property Investments, which stems from failed pub landlord Redcape Property Group, lost over 1 per cent on its first day of trade.

It’s the third weak opening day for a notable float in the past week, though again you shouldn’t read too much into it. HPI, like Nine Entertainment and Dick Smith Holdings, is not among the best growth prospects of the current crop of floats.

There are now just two eagerly anticipated floats left on the 2013 agenda, with packaging company Pact Group and travel insurer Cover-More expected to win plenty of admirers.

BHP Billiton

The world’s biggest miner has reaffirmed plans to look for a joint venture partner in the $10 billion Jansen potash project.

The massive development, which is still years away from production, is suited to a partnership structure to reduce the risks associated with its development, BHP Billiton chief executive Andrew Mackenzie has said.

“In maintaining the right level of diversification with an appropriate degree of control but also not too much capital burn, there is a lot to be said for being in joint ventures and not owning things 100 per cent,” he said, according to the Wall Street Journal. “That’s why we’re interested in selling down a stake in potash.”

If it can find a partner for Jansen then the last major project left solely in its hands would be the massive Olympic Dam development in South Australia. The weak outlook for uranium is keeping a planned $30 billion Olympic Dam expansion on the backburner.

According to WSJ, the one problem with finding a partner would be a conflict over the timing of development. BHP has taken a very long-term view with its assets to maximise profits over the journey, while other parties might not have the same degree of patience.

For now, much of the company’s focus is on the shale boom in the US, with the company explaining it will spend $4 billion annually on onshore oil & gas development in the region.

Wrapping up

China’s state-owned Yanzhou Coal may be in line for an extension to an FIRB deadline to offload part of its majority stake in ASX-listed Yancoal. According to the Australian Financial Review, the government is considering a request to offer leeway on the December 31 deadline for it to reduce its shareholdings from 78 to 70 per cent.

Elsewhere, the Seven Group Holdings-owned WesTrac China Limited has purchased Caterpillar Global Mining's distribution and support business in parts of China. The $US130 million deal relates only to provinces in the north-east of the country where WesTrac operates.

Finally, gold miner Centamin has put forward an all-scrip $40.9 million offer for control of Ampella Mines. The bid, at over a 75 per cent premium to Ampella’s 20-day weighted average price, has received the blessing of the Ampella board. The company’s shares are currently in a halt at 7.5 cents, which is less than half the offer price of around 16 cents.

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