FAR (ASX:FAR) to offload Senegal assets

• Oil explorer and developer FAR (FAR) is looking to offload its share of the RSSD project offshore from Senegal
• FAR has struck a deal with ONGC Videsh Vankorneft (ONGC), to transfer its 15 per cent stake in the greater RSSD, and 13.67 per cent in the Sangomar area
• ONGC will pay around US$111.58 million (around A$153.16 million) for the acquisition, including the reimbursement of FAR’s cash call payments since January
• There is also a contingent payment tied to production at Sangomar and the price of oil, capped at US$55 million (roughly A$75.5 million)
• If everything goes according to plan, FAR should’ve offloaded the asset by the end of January 2021
• After the buy, the company will have around US$130 million (approximately A$178.45 million) on hand to continue exploration across its holdings in Gambia and Guinea-Bissau
• FAR shares last traded in mid-September for 1.1 cents each

FAR (FAR) is looking to offload its share of the RSSD project offshore from Senegal.

The deal

FAR’s subsidiaries, FAR Senegal and FAR Holdings 1, will sell the company’s stake in the Rufisque, Sangomar, and Sangomar Deep (RSSD) Offshore Blocks, currently held in a joint venture operated by Woodside.

FAR has struck a deal with ONGC Videsh Vankorneft (ONGC), India’s largest exploration and production company, to offload its 15 per cent stake in the greater RSSD, and 13.67 per cent in the Sangomar area.

The decision was brought after FAR failed to raise sufficient capital to fund its share of the project when the final investment decision was reached in January.

FAR had been in default of its cash call payments for the project since June, but has now paid its dues. Those funds will be reimbursed under the deal with ONGC.

ONGC will pay US$45 million (around A$61.8 million) for the RSSD stake, plus a further US$66.58 million (roughly A$91.4 million) to reimburse the cash calls paid since January.

There is also a future contingent payment due based on oil production at the RSSD.

The payment is capped at US$55 million (approximately A$75.5 million) and is based on a share oil production from Sangomar if the oil price exceeds US$58 (about A$79.62) per barrel. The contingency expires either three years from first oil production, or at the end of 2027. Production is expected to begin in mid-2023.

The deal is subject to other requirements, including FAR shareholder approval, Senegal government approval, and the waiver of pre-emption rights by FAR’s co-venturers in the RSSD project.

Outlook

If everything goes according to plan, FAR should’ve offloaded the asset by the end of January 2021 — and banked the US$111.58 million (around A$153.16 million) consideration.

That would leave the company with around US$130 million (approximately A$178.45 million) on hand to continue exploration across its holdings in Gambia and Guinea-Bissau.

FAR is also looking at other long-term strategies, including the purchase of another oil asset, either at the development or production phase.

FAR has been in a trading halt since mid-September. Shares last traded for 1.1 cents.