Australia’s FAR Limited has said it is unlikely it will be able to finance its part of the Sangomar project development in Senegal. Therefore, FAR has started a process to sell all or part of its working interest in the project.
The Sangomar development, located offshore Senegal, is operated by Woodside and FAR is one of the partners.
As reported in late March, FAR’s discussions with financiers are materially compromised in the present market conditions, presenting challenges to its debt process.
Disruptions caused by the COVID-19 pandemic and the crash in the oil price adversely impacted FAR’s financing plans for the Sangomar development.
The severe tightening of global debt markets, especially for oil and gas companies, resulted in the debt arrangements FAR had put in place at the beginning of the year being unable to close or complete, FAR said in an update on Thursday.
FAR has been taking action to seek to preserve shareholder value from this world-class asset in the intervening weeks.
FAR is contractually committed to the Sangomar development and the approved 2020 work program and budget of $163 million. A final investment decision for the project was made in January 2020.
FAR recognised that it is unlikely to be able to fund its future share of the substantial project commitments based on its current cash reserves and future equity raises alone.
The process has started to sell all or part of the FAR working interest and investigate alternative sources of finance.
In addition, the joint venture is working together with contractors to cut capex and rephase expenditure into the future to ease the pressure on all partners’ cash flow at this time.
The Sangomar development was running $117 million under budget for the year to end of March and FAR expects this trend to continue.
FAR Managing Director, Catherine Norman , said: “The key challenge for FAR over the coming weeks is managing the fallout of the COVID-19 epidemic and oil price rout with respect to our ongoing commitment to the Sangomar field development and associated work program and the budget approved for 2020.
Norman added: “Progressing a sell-down of FAR’s working interest in Senegal or arranging alternative financing for FAR’s share of the development and at the same time preserving cash and shareholder value in our assets remain clear objectives of the board at this time”.
It is also worth reminding that FAR and Woodside have recently settled their dispute related to Woodside’s entry into the Sangomar project.
Under the settlement, each party agreed to withdraw its respective claims and bear its own fees, costs and expenses in the arbitration.