SENEGAL: FAR Sells RSSD Assets to ONGC

FAR Limited has announced it has entered into an RSSD Sale and Purchase Agreement with ONGC Videsh Vankorneft Pte Ltd (ONGC) in respect of FAR’s entire interest in the Production Sharing Contract for the Rufisque, Sangomar, and Sangomar Deep Offshore Blocks offshore Senegal and the relevant Joint Operating Agreement (the RSSD Project). ONGC Videsh Vankorneft is a subsidiary of ONGC Videsh, the largest E&P company of India.

As consideration for the sale, ONGC has agreed to pay FAR US$45 million at completion. In addition, ONGC has agreed to reimburse FAR’s share of working capital for the RSSD Project from 1 January 2020 totalling US$66.58 million, payable on completion. The reimbursement is comprised of cash calls paid by FAR, including US$29.60 million paid to cure FAR’s default to the Joint Venture. The Transaction also includes an entitlement to certain contingent payments capped at US$55 million as outlined below.

Under the Transaction, FAR is proposing to sell to ONGC its interest in the RSSD Project, being:
 a 13.67% participating interest in the Sangomar exploitation area containing the Sangomar field; and
 a 15% participating interest in the RSSD contract area outside the Sangomar exploitation area

Contingent payment
The Transaction contemplates a contingent payment to FAR payable in the future based on various factors relating to the sale of oil from the RSSD Project.

The contingent payment comprises 45% of entitlement barrels (being the share of oil relating to FAR’s 13.67% RSSD Project exploitation area interest) sold over the previous calendar year multiplied by the excess (if any) of the crude oil price per barrel (capped at US$70) and US$58 per barrel.

The contingent payment terminates on the earliest of 31 December 2027, 3 years from first oil being sold (excluding any periods of zero production), and a total contingent payment of US$55 million being reached.

The Operator’s most recent estimate for commencement of oil production is mid-2023. The Operator may update timelines to first oil and production targets from time to time.

FAR’s Managing Director, Cath Norman said: “As we have acknowledged, the market for financing and selling assets has been weak since the impact of COVID was felt in March of this year. In these circumstances, the offer from ONGC represents the best option available at this time and we trust that our shareholders will vote for this transaction. FAR expects to have approximately US$130 million in cash at the close of this Transaction that will be used to rebuild the Company and further our other West African prospects offshore the Gambia and Guinea-Bissau.”

Impact if the Transaction does not complete
If the Transaction does not complete, FAR is not likely to be able to meet its obligations in relation to the RSSD Project beyond December 2020 in the absence of an alternative source of funding.

Impact if the Transaction completes
If the Transaction completes, FAR will be in a strong financial position and will be relieved of its future development obligations in relation to the RSSD Project, which in the absence of a sale, FAR cannot currently meet beyond December 2020.

On completion of the Transaction, FAR’s estimated cash position is expected to be approximately US$130 million. This will enable FAR to continue its exploration in its highly prospective Gambian and Guinea-Bissau acreage and execute a new long-term strategy that includes the potential purchase of a producing or other oil asset.