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- Oil and gas explorer FAR Limited (FAR) has declined to pre-emptively increase its interest in the RSSD joint venture
- Due to COVID-19 and oil prices, FAR intends to sell part or all of its share in the Senegal project
- FAR is still in default of its payments to the RSSD joint venture, which consist of nearly A$40 million
- The company has until December 23, 2020 to repay the cash calls and accrued interest in full
- FAR Limited closed 15.38 per cent in the red for 1.1 cents per share
Oil and gas explorer FAR Limited (FAR) has declined to pre-emptively increase its interest in the RSSD joint venture.
The Rufisque Offshore, Sangomar Offshore, and Sangomar Deep Offshore (RSSD) contract area is located in offshore Senegal. Under the joint operating agreement between the Senegal co-venturers, FAR was offered a pre-emptive right on the sale of interest in the project.
The sale was for 40 per cent working interest, currently held by Capricorn Senegal, a wholly owned subsidiary of Cairn Energy. Capricorn Senegal intends to sell the interest in the RSSD joint venture to LUKOIL Upstream Senegal BV.
FAR stated that it would not pre-empt the transaction, or object to Cairn’s transfer of interest to Lukoil. However, the RSSD operator, Woodside, (ASX:WPL), has exercised its pre-emptive right to the sale of Cairn’s working interest.
If Woodside does acquire this interest, the company will have 68.33 per cent interest in the Sangomar exploitation area. FAR will hold 13.67 per cent, while Petrosen will hold the remaining 18 per cent.
Woodside would hold 75 per cent working interest in the remaining RSSD evaluation area, including the FAN and SNE North oil discoveries. FAR would hold 15 per cent, with Petrosen holding the remaining 10 per cent.
FAR’s decision to decline this opportunity is no surprise, as the company intends to sell part or all of its share in the Senegal project too.
In late June, FAR’s subsidiary, FAR Senegal, defaulted on its payments to the RSSD joint venture. At the time, the company called the decision a strategic one, which would preserve company cash reserves while it awaited clarity on the Senegal project.
FAR is still in default of its payments, with the unpaid cash calls from June, July and August totalling approximately A$38.77 million. To date, the interest accrued on these payments is approximately A$96,000.
As of July 31, 2020, FAR had approximately A$86.97 million in cash. The company has six months from the date of default to repay the cash calls and accrued interest to the joint venture.
The effective deadline for this payment is December 23, 2020. If FAR doesn’t pay its debt back by this time, the company will lose all of its interest without compensation.
FAR’s Managing Director, Cath Norman, commented on the company’s ongoing plans to sell part or all of its working interest in the Senegal project.
“It is pleasing to see the operator, Woodside, and Petrosen showing their support for the Sangomar Field development by increasing their working interest in the project.
“Unfortunately, due to the COVID crisis and related rout in oil price, FAR continues to pursue a sale of all or part of FAR’s stake in lieu of concluding financing for the development.
“The Cairn sale is a sign that there is international appetite for this world-class project, even during challenging times,” she said.
FAR Limited closed 15.38 per cent in the red for 1.1 cents per share.
