FAR agrees to sell offshore Senegal asset to India’s ONGC

FAR Ltd., Melbourne, agreed to sell its 15% interest in Rufisque, Sangomar, and Sangomar Deep (RSSD) offshore Senegal permits to India’s ONGC Videsh for $45 million (OGJ Online, May 1, 2020).

ONGC has agreed to reimburse FAR’s share of working capital from Jan. 1, 2020, for development of the 5-billion bbl Sangomar oil field—a figure totaling $66.58 million—payable on completion. FAR holds a 13.67% interest in the Sangomar exploitation area within the RSSD permits.

Additionally, FAR may receive conditional payments of up to $55 million dependent upon the oil price for 3 years from the time Sangomar comes on stream, currently expected in mid-2023.

The deal would lift FAR out of default on overdue payments for the $4.2 billion oil development.

FAR had previously established debt financing as part of its funding package to cover its share of the project costs, but the arrangements fell through following the fall in global oil prices in March (OGJ Online, Mar. 25, 2020). FAR went into default as operator Woodside Petroleum continued to issue periodic calls to JV partners to meet ongoing development spending (OGJ Online, June 24, 2020).

Analysts suggest that the overall deal represents a 62% discount to that paid in April by Woodside to pre-empt Lukoil’s purchase of 36.44% interest in RSSD from Cairn Energy.

FAR managing director Cath Norman said the deal with ONGC is the best the company could do. She added that Cairn’s interest in the RSSD permits was much larger, big enough to influence joint venture voting. FAR’s stake did not have the same influence.

Norman said that FAR expects to have about $130 million in cash at closing, which the company will use to rebuild and to fund its exploration work offshore Gambia and Guinea-Bissau.

The sale is conditional on approval from the government of Senegal and from shareholders. It also depends on the waiving of pre-emption rights by both Woodside and Senegal national company Petrosen. These rights are open for 30 days.

Analysts don’t believe pre-emption is likely given that Woodside is planning to sell down its enlarged stake following the acquisition of Cairn Energy’s interest.

If the ONGC transaction does not complete, FAR says it is unlikely to be able to meet its obligations to the RSSD project beyond December 2020 in the absence of an alternative source of funding.