Announcing a Q2 Activity Report, FAR Limited has provided an update on the sale process for its interest in the Sangomar development project, offshore Senegal. The Company has also signed new JOA’s for Blocks A2 and A5, The Gambia.

Senegal Rufisque, Sangomar and Sangomar Deep (RSSD) (FAR 15% Working Interest)

Over the past three months, the Operator has been undertaking a program to rescope, reschedule and reprice the Sangomar Field Development project in order to reduce capital expenditure to ease the pressure on financing or the development. As previously reported, FAR had been continuing to seek financing for its share of the Sangomar Field Development but concluding these arrangements has been challenged by the current slump in oil price and global pandemic. FAR also made the strategic decision to preserve the group’s cash whilst it awaits clarity on project capex amendments and is progressing efforts to sell all or part of its holding in the RSSD blocks.

FAR has been notified by the operator that it is in default of its cash call obligations, and has received notices of demand from one of the Joint Venture parties to compensate it for its share of the cash call it is funding on FAR’s behalf. FAR has been notified by the operator that its Joint Venture voting and meeting rights have been suspended. Subject to this, FAR continues to work with the Operator to manage the continued impact of COVID-19 on the supply chain and project schedule for the Sangomar Field Development and other activities under the Production Sharing Agreement. The Operator is working with project contractors and the Government of the Republic of Senegal to optimise near-term spend whilst protecting the overall value of the investment and remain on schedule to deliver first oil in 2023.

Detailed engineering is progressing and long lead item purchase orders are continuing to be awarded for major equipment items in preparation for commencement of drilling operations in mid 2021.

Processing of the high definition seismic survey over the Sangomar field and FAN discovery has been completed and interpretation of this data has commenced.Processing of the seismic data over the exploration area to the north of the Sangomar field is ongoing.

During the quarter, FAR Senegal RSSD SA (a wholly owned subsidiary of FAR limited) did not pay the June,and subsequent, cash call and accordingly has received notification from the Operator of the RSSD Joint Venture that FAR Senegal is in default. FAR has received notices of demand from oneof the Joint Venture parties to compensate it for its share of the cash call it is funding on FAR’s behalf.

Under the JOA default provisions, if a defaulting party has not fulfilled its financial obligations within 6 months from the date of notification of the default, it shall forfeit its participating interest without compensation. Unpaid amounts accrue interest at the LIBOR rate + 2%. Key points of the Joint Operating Agreement (JOA) default provisions are:

  • 6 month period to fulfill its financial obligations before forfeiting participating interest
  • non-defaulting parties must pay defaulting party’s unpaid amounts pro-rata to their participating interests over this period
  • defaulting party does not attend Operating Committee meetings or vote during default period

The Gambia Blocks A2/A5 (FAR 50% WI and Operator)

During the quarter, FAR Gambia Ltd (a wholly owned subsidiary of FAR Limited) signed new JOA’s in respect of the A2 and A5 Blocks in The Republic of The Gambia with PC Gambia Ltd (a subsidiary of PETRONAS). This follows the granting of new Licences for those Blocks by The Government of The Gambia effective 1 October 2019, after which FAR and PETRONAS took the opportunity to update the terms of the existing JOA’s by entering into new JOA’s with effect from 1 October 2019.

Efforts to find an additional partner for the drilling of the next well in The Gambia are ongoing with FAR having run numerous data room presentations for interested parties. FAR is working to conclude a farm-out before the restart of the drilling operations.

Towards the end of the quarter, FAR Gambia Ltd submitted an updated Environmental and Social Impact Assessment for the planned Bambo-1 well to fulfill statutory and regulatory requirements. It has now been advertised in local newspapers for public review with comments due 23 July 2020.

Guinea-Bissau Blocks 2, 4A, 5A (FAR 21.43% WI)

Well planning for drilling Atum-1X was placed into permanent suspension by Operator during the quarter. FAR began working with the Operator to help identify and protect the Joint Venture from any further associated cost exposures during the COVID-19 shutdown. Decrees in relation to the Joint Venture’s licence extension requests have been drafted by Petroguin for formal submission to the Council of Ministers and to the President of Guinea-Bissau. FAR anticipates Operator will submit them on behalf of the Joint Venture in the coming quarter.

Kenya L6 Block (FAR 60% WI and Operator)

Following a long period of inactivity due to land access issues, Flow Energy, a FAR Limited subsidiary, and its co-venturers, Pancontinental Oil & Gas and Afrex, a subsidiary of Pancontinental, agreed to surrender the Block L6 PSC. A Surrender and Termination Notice was formally issued to the Government of Kenya in late June.FAR anticipates concluding the termination arrangements in the next quarter.

Late in the quarter, FAR concluded negotiations with Pancontinental and Afrex regarding payment of outstanding cash calls to the Operator. Pancontinental agreed to settle this matter with payment of US$150,000 as full and final settlement of any and all outstanding cash calls relating to Kenya Block L6.

Western Australia WA-458-P (FAR 100% and Operator)

Early in the quarter, FAR began implementing measures to manage and plan through the COVID-19 pandemic, which the Joint Authority (the Australian offshore regulator) regards as a force majeure event. As a result, FAR engaged with the National Offshore Petroleum Titles administrator (‘NOPTA’) to advance arequest to suspend and extend the current phase of the exploration work programme by 12 months. FAR lodged the application in early Q3 2020.


This year, FAR Limited’s AGM was held virtually via a ZOOM webinar because of restrictions on public gatherings in the wake of the COVID-19 pandemic. The Company thanks shareholders for their patience as we navigate through these unprecedented times.

During the quarter FAR made staff redundancies, and all senior executives and Non-Executive Directors have accepted a 20% salary or fee reduction. The Board will review this fee and salary reduction at least quarterly. FAR also substantially reduced contractor headcount in April.

Social Programs

Great progress was made with social programs in The Gambia this quarter with the Jambanjelly Lower Basic school project fully completed. The project involved installation of electricity so that the 1,400 pupils had lights for their classrooms, offices and around the perimeter of the school. A handing over ceremony will be completed once the school reopens, noting that The Gambia is also under movement restrictions to ease the spread of COVID-19.

The upgrade of the Sanyang women’s garden water storage and distribution project is now 95% complete and Bansang hospital roofing repairs and ward rehabilitation are 90% complete. We look forward to bringing you final updates on those projects in the coming months.

Managing Director comments:

‘This has been a challenging quarter for FAR and our industry generally.The Board of FAR has been focussed on finding a way forward for our Sangomar asset since we announced in March that the Company’s debt financing for the project would not proceed as planned. The Board is actively exploring a sale of the asset, and work continues on this front.

FAR’s aim is to conserve shareholder cash by firstly reducing expenditure in the business and to this end, FAR has reduced the headcount and cut salaries of staff and non-executive directors.

However, by far the largest cost to the business has been expenditure on FAR’s share of the Sangomar Field Development (US$39.7M to date this year). In order to conserve cash and whilst we wait for the Operator’s forecast reduction in CAPEX due to the changing business environment in the wake of COVID19, FAR has made the decision to cease to pay cash calls for this project. In doing so, we are formally in default and have 6 months to make good on the default.

As time progresses and global markets continue to be stressed, there remains uncertainty around FAR’s ability to conclude a financing option. At this point in time, a sale or partial sale is a more likely outcome. FAR has run data rooms for this purpose and has had good level of interest.

As with Senegal, FAR continues to engage with a number of parties interested in farming-in to our interest in the A2 and A5 blocks in The Gambia. Activity in this data room has been strong, and we anticipate bringing in a partner before drilling in 2021.

The board understands that our shareholders are keen to know the results of FAR’s activities as soon as possible. In entering default, we have allowed a 6 month window in which to find a solution and will report immediately to the market when any definitive commitments are made.

Many thanks to the shareholders that attended our virtual AGM.

FAR hopes that all shareholders are remaining healthy in these unprecedented times’.


Source: FAR Ltd