At last, a date has been set for the much-postponed shareholder meeting of Melbourne-based FAR Ltd (ASX:FAR). This is the third time since December 2020 that the Africa-focused oil and gas exploration company has had to do this.
Notwithstanding the fact that shares were suspended in September 2020 because of accounting issues, the firm has had three, or is it four, potential buyers: ONGC Videsh Vankorneft, Remus Horizons, PJSC Lukoil and Woodside Energy.
To make matters worse, FAR announced in January that it is in default of the January payment ($18.9 million) to the Sangomar joint venture. The firm has until mid-July to pay it or risk losing its working interest in the project. FAR stated in January 2021 that it does not have the cash reserves for the January cash call or future cash calls.
Apart from Australia where FAR has a 100% interest in the oil-producing Dampier Sub-basin along Australia’s North West Shelf and interests in The Gambia and Guinea-Bissau, the Sangomar Oil Field offshore Senegal is FAR’s principal asset.
As part of a joint venture, Woodside (the operator), FAR and Holding Societé des Petroles du Sénégal (Petrosen) with stakes of 68.33%, 13.67% and 18% respectively, have been developing one of the largest offshore oil discoveries of the last ten years. The Sangomar field, which contains both oil and gas, is located 100 km south of Dakar and will be Senegal’s first offshore oil development.
The aim, before Covid-19 struck, was for the project to deliver in early 2023 and it was expected to make FAR one of the largest ASX-listed oil producers.
FAR still on course for the Woodside sale
Having said all that, FAR has stated the shareholder meeting which is reconvened for 15 April 2021 will not be postponed any further and that it intends to proceed with the Woodside sale, which is for FAR’s 13.67% interest in the Senegal Sangomar, or RSSD Project. As long as approval is given by the shareholders that is. According to MarketScreener.com, Meridian Capital International, Allan Gray Australia and Farjoy are some of the top shareholders. In January, FAR executed the Sale and Purchase Agreement with Woodside Energy.
The agreement with Woodside is on the same terms and conditions as the previously announced sale to ONGC Videsh. The Indian-based oil and gas company is now out of the picture because Woodside, the existing project operator, exercised its right to pre-empt the sale.
The T&Cs include: payment to FAR of $45 million, reimbursement of FAR’s share of working capital, including any cash calls, and entitlement to certain contingent payments capped at $55 million.
Last minute bid from Lukoil
That’s not quite the end of the story though. Following the news about the Woodside sale, on 17 February, FAR received a conditional non-binding indicative proposal from Lukoil for 100% of its shares. The Lukoil proposal values FAR at A$220 million.
Meanwhile the proposal from Remus Horizons is still on the table, although FAR has stated that it is conditional on the Woodside Sale not occurring. Both the Remus Horizons and Lukoil proposals are worth more than the offer from Woodside – 2.1 and 2.2 Australian cents per share respectively and they want to buy FAR outright.
FAR will provide further information to shareholders prior to the shareholders meeting, and shareholders who have already voted will have the opportunity to change their vote if they wish.
FAR’s Board announcements state that the proposals from Remus Horizons and Lukoil are not legally binding offers and therefore incomplete and there is no certainty that they will necessarily come to fruition. The Board recommends that care needs to be used in assessing the Lukoil Proposal. As far as we are concerned, the message from FAR is coming in loud and clear.