EnergyOil & Gas
Ephrem Joseph
FAR delivers strong September quarter,well-funded to advance West African oil & gas assets
Thecompany is an independent oil and gas exploration and development company withhigh-value assets in West Africa and another in Australia.
StenaIceMax drillship scheduled for drilling at Bambo-1
FAR Ltdmade strong progress during the September quarter and is well-funded with$64.7 million in cash at the end of the quarter as it advances its WestAfrican oil & gas portfolio.
Aftercompleting the sale of its offshore Senegal interests to Woodside Petroleum Limited (ASX:WPL) early this year, during the September quarter FAR rewarded shareholders with a capital return of A$0.80 per share from the sale proceeds.
TheAfrica-focused explorer continues with operations in preparation fordrilling the Bambo-1 well offshore in The Gambia which is scheduled forspudding on November 13, 2021.
InGuinea-Bissau, PetroNor and FAR are undertaking a full review of a potentialwell location for the 2023 program with the Atum Prospect being the key drilltarget
Operational update at Bambo-1
Operationaland logistics planning for the drilling of the Bambo-1 well in offshore BlockA2 are well advanced with the Stena IceMax drillship scheduled to be in LasPalmas in late October to complete preparations and loading before mobilisingto The Gambia.
FAR hascontracted Exceed’s wells management team in Aberdeen to assist with theplanning and execution of the well.
Allother major contracts for the Bambo-1 drilling project have been awarded,including the contract with Stena for the IceMax and Schlumberger for bundledservices.
Mostlong-lead materials and supplies have been received and are now at severallocations in readiness for the operational phase of the project.
Theshore base for the project is at Dakar, Senegal, and is now fully operationaland ready to support the upcoming drilling activities.
Location of FAR’s Gambian blocks showing the Bambo-1 welllocation.
Financials at Bambo-1
Theapproved budget for the Bambo-1 well is US$51 million with US$11.4 millionexpended to date.
At 50%working interest, FAR’s share of the budgeted well cost is US$25.5 million withUS$19.8 million yet to be spent.
FAR’sshare of the forthcoming Bambo-1 well, contingency, success case options aswell as expenditure on other assets and general administration costs will befunded from the remaining cash at hand.
Thecompany estimates a year-end cash balance of approximately US$48 million witharound US$6 million of Bambo-1 well costs to be paid in the March quarterof 2022.
Guinea-Bissau update
FAR isworking with the operator, PetroNor, to finalise the 2022 work program andbudget for approval and finalisation by the middle of December with FARremaining open to farming down its interest before drilling a well.
TheSinapa (Block 2) and Esperança (Blocks 4A and 5A) licences in Guinea-Bissauhave been extended for 3 years and are valid until October 2, 2023, duringwhich time there is an obligation on the joint venture to drill an explorationwell.
PetroNorand FAR are undertaking a full review of a potential well location for the 2023program with the Atum Prospect as the key drill target.
Theoperator is also undertaking a review of the commerciality of the Sinapadiscovery in the offshore shallow water.
Location of exploration permits offshore Guinea-Bissau
Australian interest
Through awholly-owned subsidiary, Lightmark Enterprises Pty Ltd, FAR has a 100%interest in Petroleum Exploration Permit WA-458-P, which is in the prolificoil-producing Dampier Sub-basin along Australia’s North West Shelf.
Divestmentactivities for some or all of FAR’s interests in WA-458-P are ongoing. FAR hasa 'drill or drop' obligation on the licence in early 2023.
Community and social projects
Duringthe quarter, FAR, on behalf of The Gambian joint venture partners, continuedworks on the Ndemban Clinic which is being converted into a COVID-19 testingand treatment centre.
This projectinvolves the repairs and refurbishment of several buildings and upgrades to thewater supply system.
Theproject is now mostly completed, and the clinic has been put into service withfinal touches to the project will be completed in the next month.
Senegal RSSD Project sale
OnJanuary 19, 2021, the FAR group executed a sale and purchase agreement inrelation to the Senegal RSSD asset.
Asconsideration for the sale, Woodside has paid FAR US$45 million and reimbursedFAR’s share of working capital for the RSSD Project from January 1,2020, of about US$82 million, totalling US$126 million.
Followingthe completion of the sale to Woodside, FAR has no remaining interest in theRSSD licences offshore Senegal.
Pursuantto the sale and purchase agreement with Woodside, future payments toFAR of up to US$55 million are contingent on future oil price andtiming of first oil which is targeted for 2023.
Capital return
FARshares recommenced trading on the ASX on July 23 after completing the sale ofthe Senegal project as the company’s shares had been suspended since September2020.
Followingreceipt of the RSSD sale funds on July 7, the FAR board completed a capitalmanagement review, and, taking into account committed exploration costs andworking capital requirements, determined that the surplus, being about A$80million, should be returned to shareholders by way of capital return.
Shareholdersapproved the capital return at a General Meeting on September 15 2021 andpayment was made on September 28.
FARthen announced on October 13 that the ATO had published a class ruling confirmingthat no part of the capital return would be assessable as a dividend.
Theruling also confirms that qualifying shareholders will be entitled to treat anyresulting capital gain as a discount capital gain and that certain foreignresident shareholders will be entitled to disregard any resulting capital gainor loss.
At the office
On July1, FAR announced the resignation of non-executive chairman NicholasLimb and non-executive director Reginald Nelson coincident with theappointment of Patrick O’Connor (non-executive chairman) and Robert Kaye SC(non-executive director) to the board.
Earlyin the quarter, the 1:100 share consolidation approved by shareholders at thecompany’s AGM was finalised with FAR now having 99,790,492 shares on issue.
The company has taken steps to reduce overheads and expects quarterlyemployment, administration and corporate costs going forward to averageapproximately US$1.25 million
(20min delay)