Ann: Sangomar Project Update, page-145

Extract from CNOOC Website:

"Under low oil price environment, will the Company consider any mergers and acquisitions (M&A)?"

	Column 1
1	● The Company focuses on organic growth and will seize any opportunity of potential M&A.● With healthy cash flow and low gearing ratio currently, we have the ability and willingness to acquire high-quality assets.● Under the current low oil price environment, we will pay more attention to the return on investment and make more prudent M&A decisions.

Source: https://cnoocltd.com/col/col7871/index.html

https://www.cnoocltd.com/col/col7871/index.html

I think the trick would be to sell a stake in FAR's Senegal subsidiary to major, like CNOOC, which has a low cost of borrowing. The major then acts as guarantor for the subsidiary loan which hopefully will have an interest rate a lot less than what FAR would be given. The subsidiary then funds the project capital expenditure of US$560M using the loan funds. If, for example< FAR gave 50% of the subsidiary to CNOOC, the subsidiary would borrow US$560M (with it effectively representing US$280M for CNOOC and US$280M for FAR). The loan could be repaid back with the cash flow from the project. CNOOC is already exploring in Senegal.

Doesn't have to CNOOC. Any major that has a low cost of debt and that can act as guarantor which lenders would be willing to loan funds to.

FAR could then retain the US$80M it had on hand as at 31 March to fund exploration in the Gambia.

Regards

SP