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Friday, May 1, 2020
Small independent FAR LTD out of Australia announced that it has been unable to secure financing or work out alternative financing arrangements for its stake in the Sangomar field development offshore Senegal and will look to sell all, or a portion of its stake in the field that it played an integral role in discovering.
FAR’s 2020 obligation to the development is around $163 million but with the current pandemic driving down oil demand and the following oil price crash, it has been unable to come up with the cash.
In its Q1 report, the company said: “FAR is contractually committed to the Sangomar Field Development and the approved 2020 work program and budget of US$163M (net to FAR). FAR recognizes 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 commenced 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 our 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 US$117M under budget for the year to end of March and we expect this trend to continue.”
FAR’s managing director Cath Norman, commented on the development: “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.”
A final investment decision (FID) was taken in January this year for the 100,000 barrel per day project, offshore Senegal. The first phase of development is due to produce 231 million barrels of oil, with production due to start in 2023.
Sangomar’s operator, Woodside Petroleum, has said it is working to cut capital expenditure on the project and reschedule spending in order to reduce the pressure on cash flow for all involved. As of the end of March, Sangomar was running at $117mn under budget, with FAR saying this should continue.
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