No objection from FAR to Cairn’s Sangomar sale to Lukoil

Australian oil and gas company FAR Limited has decided not to object Cairn Energy’s proposed sale of a working interest in the Rufisque Offshore, Sangomar Offshore, and Sangomar Deep Offshore (RSSD) Contract Area, offshore Senegal, to Russia’s Lukoil.

Back in late July 2020, Cairn Energy entered into an agreement to sell to Russia’s Lukoil its entire 40 per cent interest in the RSSD contract area, including the Sangomar development.

Pursuant to the Joint Operating Agreement between the Senegal co-venturers, FAR was offered a preemptive right over the sale of a 40 per cent working interest held by Capricorn (a subsidiary of Cairn Energy) to Lukoil.

FAR said on Thursday it has advised Cairn that FAR does not intend to pre-empt the transaction or object to the proposed transfer of Cairn’s working interest in the RSSD Contract Area to Lukoil.

However, FAR noted that Woodside has exercised its pre-emptive right and that the sale of Cairn’s working interest is still subject to Cairn shareholder and Government of Senegal approval.

Namely, Woodside will pay $300 million upfront plus working capital adjustments, including reimbursement of Cairn’s development capital expenditure incurred since 1 January 2020.

Woodside will also pay contingent payments of up to $100 million linked to commodity price and the timing of first oil.

FAR added that the thirty-day pre-emptive period for the transaction has now expired.

FAR also said on Thursday that the state oil company Petrosen’s decision to increase its stake in the Sangomar Exploitation Area from 10 per cent to 18 per cent has been finalised.

Namely, earlier in August, Petrosen decided to increase its stake in the Sangomar Exploitation Area and, as a result, FAR’s stake in the Sangomar Exploitation Area decreased from 15 per cent to 13.67 per cent.

If Woodside successfully acquires Cairn’s interest, the working interest of the remaining joint venture partners in the Sangomar exploitation area will be Petrosen 18 per cent, FAR 13.67 per cent, and Woodside 68.33 per cent.

The working interest in the remaining RSSD evaluation area (including the FAN and SNE North oil discoveries) will be Petrosen 10 per cent, FAR 15 per cent and Woodside 75 per cent.

As previously reported, FAR remains in default of its payments to the RSSD joint venture, with the effective date of 23 June 2020.

The June, July, and August cash calls are currently unpaid and total $28.2M. The interest accrued to date on these payments is $0.07M.

As of 31 July 2020, FAR has cash of $63.4M. FAR has six months from the date of default to make good its payments (plus interest) to the joint venture to come out of default.

FAR continues to progress a sale of all or part of its working interest.

FAR’s Managing Director, Cath Norman, said: “It is pleasing to see the operator, Woodside, and Petrosen showing their support for the Sangomar Field development by increasing their working interest in the project.

“Unfortunately, due to the COVID crisis and related rout in oil price, FAR continues to pursue a sale of all or part of FAR’s stake in lieu of concluding financing for the development. The Cairn sale is a sign that there is an international appetite for this world-class project, even during challenging times”.