Australian oil and gas explorer, FAR Limited, has announced plans to hold a phased withdrawal from the company’s assets in Senegal, Guinea-Bissau and The Gambia. This follows the latest group operating results confirming a net loss for the company of $44.782 million for the 2021 financial year. In its financial interest, FAR will seek to farm-out or sell outright its 50% operating stake in a pair of licenses (Blocks A2 and A5) in The Gambia co-developed in partnership with Malaysia’s Petronas. The firm will also be pushing for an exit from its assets offshore Guinea-Bissau following the failure of a farm-down attempt in conjunction with Norway’s PetroNor.
The strategic intent behind these moves is to minimize FAR’s exposure to fiscal risk together with the cost of a new exploration well in the A2 and A5 blocks next year, therefore, trimming its balance sheet to maintain solvency and value for shareholders. To this end, a demerger has also been suggested by group senior executives for the company’s Gambian activities – offloading costly ventures onto a freshly formed standalone entity.
In Senegal, FAR started the region’s oil rush with the discovery of large hydrocarbon reserves at FAN-1 and SNE-1 wells in Sangomar Deep in 2014. The company subsequently obtained a set of three exploration and production licenses at Rufisque Offshore, Sangomar offshore and Sangomar Deep (RSSD). This production sharing contract gave the company operating interest in the 7,490km2 triad of zones, launching two further drilling campaigns in mid-2017 and reaching final investment decision towards extraction for January 2020.
In 2017, FAR entered into negotiations with Woodside for the sale of the RSSD licenses and closed in July 2021 at $126 million in return for the entirety of FAR’s interest in these major oil zones. The sale also entitles FAR to a possible $55 million in contingency payments once first oil is achieved in 2023, provided commodity prices remain above $58 per barrel. Once the Woodside contingency payment is transferred, FAR will look to undertake a further capital return round to shareholders, digging the company out of financial troubles and consolidating their portfolio of ventures.
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