I have a little different take on this. First, I can assure you of two things: Exxon would never, ever farm out acreage which they thought had high potential. Second, majors covet operatorship. They want to drive the locomotive and have the capital, talent and science to do it better, they think, than anyone else. So, there are a few points.
Bdahl – “Interesting that the financial details are confidential”. I’m not so sure. Farm-outs, particularly for a company like Exxon, are never in the form of cash unless reserves are involved. It’s almost always work. Oil Search’s press release says they’re obliged to do a seismic program, apparently for $20 million, according to the revised budget figures. That’s a fairly healthy program even in PNG. So I conclude that’s the price to get 30% of acreage Exxon doesn’t like. Companies make deals like this every day. If you don’t like your acreage (and they’ve thought long and hard about it), it’s a way to get some work done that might help to give you some upside.
There is one phrase. The seismic is “part of the proposed farm-in arrangements”. That could mean many things, of course. There are the existing “discoveries”, which might be treated within the farm-in, and other issues. It could mean other costs, but I believe that if there were additional drilling or cash requirements, Oil Search would have said so. And personally, I think this deal tells me Exxon has downgraded the probably over-hyped “discoveries".
Stavros –1. Exxon is not afraid of any government. You don’t give away 30% of valuable acreage to a competitor to please a government. And 2. Exxon retains operatorship. Oil Search is running the seismic “on behalf of the operator”. Again, fairly routine farm-in/out terms. The farmer runs the farm-in program including any drilling (it’s their money, after all). When the work is completed and the interest is earned, the regular operator usually takes over unless the farm-in terms say otherwise.
3 & 4. What Santos and Total do is not “most probably” anything. This is about exploration. Everyone has different views. Exxon doesn’t like it and is farming out. Oil Search likes it enough to spend some seismic seed money. Santos and Total may or may not like the acreage. It’s not even at their option, since Exxon may or may not want to reduce their interest further. If you were them, wouldn’t you want to see the new seismic first?
Competing projects are not unusual. All these companies are used to protecting their own interests within multiple joint ventures across multiple projects. It’s not a big deal. Giving away your acreage or taking on unwanted expense to somehow make everyone feel involved is not in their playbooks.
