- Oil & gas explorer FAR Limited (FAR) has announced it’ll be implementing measures to cut costs and hold onto its cash reserves as it tries to stay afloat
- The COVID-19 pandemic and oil price crash have created huge uncertainties for the company’s African prospects as countries go into lockdown
- Projects in The Gambia and Senegal are now on hold as the company and its partners review their strategy and finances going forward
- The company currently holds around $150 million in cash reserves, and is implementing plans to cut or delay expenditure
- FAR’s staff predominantly work from home to accommodate African timezones, so distancing measures have been introduced with little fuss
- FAR shares have dropped 10 per cent today to sit at 0.9 cents apiece
Africa-focused oil & gas explorer FAR Limited (FAR) has announced it’ll be implementing measures to cut costs and hold onto its cash reserves as it tries to stay afloat amid the COVID-19 pandemic and oil price crash.
The company’s two principal projects in Senegal and The Gambia have been put on hold as both countries have closed their borders and gone into lockdown. Neither site is yet at the production stage, so all further exploration, drilling, and construction is on ice to reduce costs and delay expenditure.
FAR had been making preparations to drill an exploration well in the second half of this year. These plans are now being adjusted as a result of the COVID-19 pandemic. To remove the risk to FAR personnel and contractors, and in recognition that the international supply of services is currently uncertain, FAR will be temporarily suspending the drilling plans.
The project is currently at an early stage and luckily is at a good hold-point to pause activity at the site. The company plans to resume activity at some time in the future, but there’s currently no estimate as to when that might occur.
Other work in the block will be optimised to suit the business requirements and all licence obligations will continue. This program adjustment will be done in consultation with FAR’s partner Petronas and the Government of The Gambia. FAR and its partners will continue to assess the situation on the ground with a view to reactivating the drilling project when it is safe and sensible to do so. Under the licence, the well is not obliged to be drilled until Q3 2021.
In the current oil price and economic environment, FAR is working with the operator of the Sangomar development, Woodside, and its joint venture partners to explore and evaluate all options going forward. The company hopes to preserve and enhance the value of what it believes to be a world-class development, even amid very uncertain conditions.
Further details will be announced upon completion of the review. The company is aiming to reduce costs, delay expenditure and provide an estimate on any impact on the timeline to first oil.
FAR’s discussions with current and potential financiers are obviously compromised in the present market conditions. Disruptions caused by the COVID-19 pandemic and the crash in oil price present huge challenges to the FAR’s overall strategy and debt position.
The company currently holds around $150 million in cash reserves, and is implementing plans to hold onto those reserves and to cut or delay expenditure while its operations remain compromised.
FAR Managing Director Catherine Norman says, “The rapid decline in oil prices has created a significant headwind for energy companies, and the board of directors feels it is prudent to adjust our spending levels in order to protect our balance sheet and ensure the sustainability of our business based on our current understanding of market conditions.
“The Senegal [Joint Venture] is working to better understand the impact on the Sangomar development of the COVID-19 virus and we anticipate releasing an update in the near future.”
The company has stated it operates a PEARL approach to risk mitigation and management. The acronym stands for People, Environment, Assets, Reputation and Legal. In order to keep its people safe at this time, the company has adopted a work from home practice for its staff and contractors which has been in place for the past week.
Being predominantly focused in Africa, all of FAR’s Australian staff are used to working from home to accommodate the African time zone, so this measure has been implemented with minimal disruption. FAR’s Australian citizens who were travelling on business have returned and are now completing the last few days of their mandatory isolation periods.
Annual General Meeting
FAR aims to hold its AGM on 27 May 2020, but this year it will be delivered via the web. The company will be working with Computershare, the corporate share registry, to finalise arrangements. Instructions for shareholders will be mailed out with a Notice of Meeting towards the end of April.
FAR shares have dropped 10 per cent today to sit at 0.9 cents apiece as at 2 pm AEDT.