FAR Limited reports that debt financing for the Sangomar field development offshore Senegal is not proceeding as expected due to COVID-19 and oil price impact on debt markets and the Company has commenced a process to sell all or part of its working interest in the Senegal Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore (RSSD) project in parallel with investigating alternative sources of finance.
In January, The Government of Senegal approved the Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore (RSSD) joint venture Exploitation Plan and granted the Exploitation Authorisation for the Sangomar Field Development offshore Senegal.
Woodside, as Operator of the RSSD joint venture executed the purchase contract for the floating production storage and offloading (FPSO) facility and issued full notices to proceed for the drilling and subsea construction and instalment contracts, including:
- MODEC Inc for the purchase of an FPSO
- Subsea Integration Alliance for the construction and installation of the integrated subsea production systems and subsea umbilicals risers, and flowlines
- Diamond Offshore for two well-based contracts for the drill rigs Ocean BlackRhino and Ocean BlackHawk
Following the grant of the Exploitation Authorisation, the RSSD joint venture executed the Host Government Agreement with the Government of Senegal and took an unconditional final investment decision (FID) for the Sangomar Field Development phase 1.
The Development and Exploitation Plan outlines the full field multi-phase development of oil and gas and details how the Sangomar Field (formerly SNE Field) will be developed in a series of phases using a stand-alone floating production storage and offloading facility with an initial 23 subsea wells and supporting subsea infrastructure planned for Phase 1. The FPSO is sized for the integration of potential future development phases, including gas export to shore and future subsea tie-backs.First oil is targeted in 2023.
A high-definition 3D marine seismic survey across the SNE North, Spica area was completed in February 2020.
On 27 March 2020, the Sangomar Operator, Woodside, announced the joint venture was taking early action to manage the impacts of COVID-19 on the supply chain and project schedule. The joint venture continues to evaluate options to reduce the total cost and near-term spend whilst protecting the overall value of the investment.
COVID-19 and the recent oil price collapse adversely impacted FAR’s financing plans for the Sangomar Field 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 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 Field Development and the approved 2020 work program and budget of US$163M (net to FAR). FAR recognises 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 said:
Reaching FID on Sangomar was a momentous milestone for the joint venture and the people of Senegal and FAR is proud to have played an integral part in the discovery, appraisal and now commitment to develop the significant oil resource offshore Senegal. We thank all our stakeholders and assure you the joint venture is working tirelessly with our partners to manage the impact of COVID-19 on supply chain, costs, and schedule.
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 budget approved for 2020. FAR thanks its shareholders for their support in the capital raise and SPP at the beginning of the year and welcomes new shareholders to our company.
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.
Source: FAR Limited