FAR Ltd., Melbourne, commenced the process to sell all or part of its 15% working interest in Sangomar oil field offshore Senegal while simultaneously investigating alternative sources of funding.
As outlined by managing director Kathy Norman in the company’s first quarter report, FAR will be unable to fund its future share of commitments for project development based on current cash reserves and future equity raises alone as the company has been unable to close or complete debt arrangements put in place at the beginning of the year due to the severe tightening of global debt markets.
She refuted speculation, however, that FAR is in default of its payments to the Woodside Energy-led joint venture for development.
“FAR remains up to date with all payments to the joint venture,” Norman said. “The terms of the joint venture agreement dictate that in the event of a default, a party must make good its payments to the joint venture (plus interest) within six months to avoid a loss of the working interest in the project, so defaulting is not a decision that the board of FAR would take lightly.”
FAR’s share of the 2020 Sangomar work budget is $163 million.
Final investment decision for development was taken in January for the project which is expected to produce 100,000 b/d. Phase 1 development aims to produce a total of 231 MMbbl of oil after being brought on stream in 2023.
Woodside is cutting capital expenditure on the project in light of the economic downturn and is rescheduling spending to reduce pressure on cash flow for all joint venturers. At the end of March, Sangomar was $117 million under budget. FAR said the trend is likely to continue.
FAR carried out a share placement in January with the aim of raising $300 million through a senior secured reserve-based lending facility from three backers. At the end of March the company said the COVID-19 pandemic and the corresponding fall in oil prices had made capital raising difficult. The lead banks had been unable to complete the required syndication.
In addition, FAR lost its case against Woodside in the Senegal permits over Woodside’s acquisition of ConocoPhillips interest which FAR said was in contravention of its pre-emption rights. The International Court of Arbitration of the International Chamber of Commerce ruled against FAR’s challenge in March.
Other Sangomar interest holders are: Cairn Energy PLC, 40%; Woodside, development phase operator, 35%; and Petrosen, 10%. Petrosen holds the right to increase its equity to 18% on development.