Just a few snippets and Q and A from the CNE transcript...
Cheers Whisky
Looking forward to the future capital programme, work on our Project Financing facility for SNE is now well-progressed. We've been working both with the Senegal government and our joint venture partners on structuring, as well as with a core group of expected lenders regarding capacity, terms and work on both of those streams is now well-progressed in readiness for a formal launch, so that we can close in conjunction with FID in mid-year.
So next up is obviously the SNE field in Senegal and, during 2018 we made considerable progress on this half a billion barrel oil and gas field. After extensive public consultation and technical review by the authorities, the environmental and social impact assessment of the plan development was approved in January. The Exploitation Plan has also been technically approved subject to finalisation of the FEED studies and presentation of the final field development costs to the government. As you are aware, the subsea front end, engineering and design or FEED as we call it is with the subsea integration alliance at Schlumberger, Cameron and Subsea Seven and the FPSO feed as with MODEC. Both well-established service providers in West Africa. We also anticipate complete award of the drilling contracts and the drilling services in the next couple of months. And we anticipate that with the incorporation of pricing from these contracts, along with the goods contract already awarded in conjunction with a sharpened focus on the well scope which you will already have seen it has gone from 26 wells to 23, will result in us being below our target capex of $3 billion for phase one.
These work streams, running in parallel with the ongoing joint venture or Project Finance outlined by James, position the project well for a Final Investment Decision in mid-2019. As a brief reminder, the upper S 400 and S 500 reservoirs, hold in aggregate 3.6 billion barrels of oil with around 500 million barrels expected to be produced over several phases of development. A Final Investment Decision, the operator expects to move around 230 million barrels, draws into 2P reserves, associated with the first phase and further phases of oil development are anticipated to come on stream anywhere between two and four years after first oil to sustain the plateau production and to maximise recovery.
Q: And then just secondly on to James maybe on the Project Financing for SNE could you give a little bit more colour as to how you're looking to structure it? I guess given the funding from the government's perspective in terms of their share of the capex, but also you've got smaller minority partners. How confident are you to be able to get to a Project Financing that will be fit for all concerned parties?
A: On Project Financing, as we guided previously, something around 50%, we'd be targeting better than that, leverage on senior secured debt in a Project Financing Facility for the joint venture, is the target. The government clearly has the right and one we expect them to take up to increase their stake from 10 to 18% and the project. And, so there will be other sources of capital that, the partners, ourselves included as well as the other non operating partners will be accessing in order to fund the balance of the non-senior debt element. And there are a number of options which we are looking at ourselves and, I know which other joint venture partners are looking at to find the balance.
Q: Would you expect this to the launch on the senior debt portion?
A: Senior portion, it's been, given the scale of the financing, being relatively unprecedented in Senegal, it's been a relatively long preparatory phase as we mentioned earlier last year we were kicking off the process. That preparatory phase is now pretty well advanced, so it's been both in terms of structuring and legal questions, that arise in Senegal when we're working with a joint venture group and the government of Senegal has been, very actively engaged in this process. So that's on the one side.And then, from late last year, we've done a market testing launch with a core group of expected lenders and commercial banks. In terms of capacity and initial feedback on a term sheet. We've now got that which again is very positive feedback. And so we're now getting ready to launch a formal banking case with a wider group of lenders. And on that it's really been about, tying down, a cost basis for that case. Well enough defined cost basis for that case and clearly where we are now with contracts with, we're pretty much ready to go on that.
Q: Just to follow up on SNE, are you still looking at potentially farming down the asset. Is that still a consideration as a separate process from, the Project Financing or are you happy with the current equity stake post the Government dilution?
A: I think we've said this before, we're happy with the current stake. And we've certainly designed it so that we can move forward with the current stake, right the way through the development. By the same token when people have asked us that before. So we'll look at around FID, we may, depending on everything else, look at selling down some of that stake. I think the important thing is we will be staying in Senegal, we've got a commitment to that project we think is a very attractive project. But obviously, depending on what the market looks like, if there's an attractive offer sitting in front of us and that's something we want to redeploy then we'll think about it. But, we designed it so we can set the current equity level if we want to.
(20min delay)