Pancon holds permit PEL87 in the Orange Basin, one of offshore West Africa's new hotspots after a spate of discoveries by Shell and TotalEnergies.
The large frontier block is beside acreage held by Woodside's West Australian LNG partner Chevron.
"Should we exercise the option for PEL 87, this agreement will allow Woodside to be an operator in what is currently one of the most exciting oil and gas basins on the planet," the company said today via a LinkedIn post.
It did not announce the transaction to the Australian Securities Exchange. Woodside operates the Sangomar oil field offshore Senegal and is midway through a 16-well development to deliver first oil by the end of the year.
The lease is close to recent major discoveries by oil majors like Shell and last year the inactive Pancon's share price was largely driven by near-ology wins.
In July, Euroz Hartley raised $2 million for Pancon so it could continue its dance partner search. It established a data room and told the market four major companies had expressed interest in the 11,000sq.m block.
Pancon said today Woodside will fully fund an estimated US$ 35 million, minimum 5,000 sq km 3D seismic survey and pay Pancontinental US$1.5 million in cash. In order to retain a 20% Pancon will pay its existing partner Custos $1 million for an additional 1%.
Woodside will carry Pancon for well costs should the JV decide to drill.
If they decide on a second well Pancontinental will have the right to either fund its 20% interest, or have a 10% interest in the well carried by Woodside in exchange for transferring an additional 10% to Woodside.
Pancont also has a "back-up" right to convert its interest to a 1.5% overriding royalty interest on revenue from any eventual oil or gas sales. If Woodside exercises its option it will pay Pancon $2.5 million, with $1.5 million of that payment for prior costs.
During an earnings call Monday, Woodside CEO Meg O'Neill noted possible new exploration by the company, which has doubled in size under her watch after taking BHP's petroleum assets last year, though she flagged assets in the Gulf of Mexico for work only.
Woodside's position in both the US and Mexican jurisdictions came from BHP's assets but it picked up new US acreage in the latest round.
In December 2021 when O'Neill was still serving as interim CEO she was clear frontier exploration would be off the table under her watch and that the company was focussed only on assets with a rapid path to commercialisation.
"Where we explore needs to be with a clear pathway to commercialisation...the oil industry has a track record of technical success and the commercialisation side takes tremendous time," she said then.
On Monday O'Neill made no mention of further work in Africa save drilling at Sangomar giving the company a better understanding of reservoir characteristics and that a plugged and abandoned well had found gas in the reporting period.
Credit Suisse analyst Saul Kavonic told Energy News that "the market is not going to be enthused by frontier Africa oil exploration given it's off strategy, there doesn't appear to be any competitive advantage and neither Woodside nor BHP's petroleum division have a good exploration track record".
Another, unnamed analyst simply called the move "strange".
Pancon last drilled in 2018, when its managing director famously offloaded a share parcel during drilling. The well came up dry.
Both Woodside and its new joint venture partner have a legal history with fellow ASX-listed oiler FAR Ltd. The West Africa explorer used its pre-emption rights to try and block the sale of a stake in Sangomar, then called SNE, to Woodside in 2016.
The move proved a death knell for the company and its longtime managing director, geophysicist Cath Norman, who lost the case in late 2019.
The funding she secured fell away early in 2020 after the oil price crash and after missing cash calls FAR was forced to offload its 13.65% stake in the asset to Woodside.
Woodside holds 82% and has said it does not need to farm down a portion.
Pancon reached its own cash settlement with FAR in 2020 over cash calls for a block offshore Kenya and agreed to pay FAR $150,000, far lower than the original $567,000 claimed.
The dispute went back to 2015 when FAR issued a cash call to the smaller company.
Pancontinental apparently disputed the amount as though it held 40% of the permit it was to farm down a share to a third party, taking its ownership to 16% while the amount FAR demanded represented the higher ownership figure.
Everything went quiet until late April 2020 when FAR unexpectedly revived the dispute and asked for cash; the smaller company said then it would "defend any action taken by FAR to attempt to recover the amounts" but went quiet on the matter until setting in July the same year.
Pancon is up over 8% today and share turnover is ten times what it was yesterday at over 100 million shares. Shares are worth 1.3c each.
