Q2 Report (01 April – 30 June 2021)

Source Press Release
Company FAR LimitedPetroNor E&P LimitedSchlumbergerStena ABWoodside Petroleum Limited 
Tags Production/Development, Exploration, Discovery, Upstream Activities, Strategy - Upstream, People, Strategy - Corporate, Financial & Operating Data
Date July 22, 2021

Highlights

  • Completion of Senegal RSSD sale to Woodside and sale proceeds of US$126 million*
  • Appointment of new Chairman and non-executive director*
  • Mobilisation of drill ship for Bambo-1 well, offshore The Gambia, scheduled for mid-October
  • Planned capital return to shareholders of A$0.80 per share*

Project’s update

Offshore Senegal Rufisque, Sangomar and Sandomar Deep (FAR13.7% Working Interest (WI))

On 19 January 2021 the FAR group executed a Sale and Purchase Agreement with Woodside in relation to FAR’s Senegal RSSD asset. Shareholders approved the sale of FAR's interest in the RSSD project to Woodside at a General Meeting held on 28 April. In the intervening period, FAR and Woodside worked cooperatively to satisfy the conditions precedent for the sale and close out remaining tasks.                                       

In events post the end of the quarter, formal completion of the sale took place on 6 July in Senegal and monies received by FAR in Australia on 7 July. As consideration for the sale Woodside has paid FAR US$45 million and reimbursed FAR’s share of working capital for the RSSD Project from 1 January 2020 of approximately US$82 million, totalling US$126 million (including deductions for interest charged on outstanding cash calls).

Additional payments to FAR, up to US$55 million, are contingent on future oil price and timing of first oil. First oil is targeted for 2023.

Following the completion of the sale to Woodside, FAR has no remaining interest in Offshore Senegal.

The Gambia

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

FAR continued operational preparations for drilling the Bambo-1 well in Q4 of 2021 (see location map, Figure 1).

FAR has contracted Exceed’s wells management team in Aberdeen to assist with the planning and execution of the well.

The contract for the drillship was executed during the quarter and rig owner and operator, Stena, has advised the window for mobilisation of the Stena IceMax drillship to Gambia to be in the second half of October.

In early July, the bundled services contract with Schlumberger was executed for delivery of the drilling fluids and cement for drilling operations.

* Sale of Senegal RSSD, appointment of new directors and announcement of capital return are events following 30 June.

and rental of the wireline services and logging equipment for the well. This equipment is all scheduled to be delivered to the drill ship or FAR’s base of operations at the Port of Dakar prior to spud in late October/early November. The exact date of spud will be dependent on mobilisation of the drill ship. Other contracts for key services are in place, and long-lead materials and equipment have been ordered and drill pipe for the operation has been delivered to the Dakar shore base. In the forthcoming quarter, FAR expects to award contracts for helicopter services and marine support vessels that will transport crew and equipment to the drill ship.

The Environment and Social Impact Assessment (ESIA) has been approved and a range of secondary level permits are in progress with the regulatory authorities of The Gambia.

The well is designed to drill into a series of vertically stacked targets (Figure 2) with a combined estimated recoverable, prospective resource of 1,118 mmbbls (arithmetic sum of the Best Estimates, unrisked, 559 mmbbls net to FAR*) and the chance of geological success for the various horizons ranges from 7% to 37% (Table 1).

The targets are:

  1. Bambo - A shallower reservoir not intersected during the Senegal campaign.
    1. Soloo - The extension of the hydrocarbon-bearing reservoirs in the adjacent Sangomar Oil Field, Senegal.
    2. Soloo Deep (S552 & S562) – two additional horizons, also not penetrated during the Senegal drilling campaigns. Soloo Deep has a lower chance of success but higher potential volumes.
Gambia Prospects  Reservoir  Block  Best Estimate (P50) * 
mmbbls 
Bambo  S390  A2  464 
S400  A2  75 
Soloo  S410  A2  150 
S440  A2  51 
Soloo Deep  S552  A2  238 
S562  A2  140 
Bambo, Soloo, Soloo Deep (arithmetic Sum)    A2  1,118 
Jobo  S172  A2/A5  280 
Jatto  S176  A5  137 
Malo  S480  A5  43 
S540  A5  222 
A2 & A5 Prospective Resources      1,800 
Prospective Resource net to FAR (arithmetic sum)      900 
 
 

*The estimated quantities of Petroleum that may potentially be recovered by the future application of a development project relate to undiscovered accumulations. These estimates have an associated risk of discovery and a further risk of development. Further exploration and appraisal is required to determine the existence of a significant quantity of potentially moveable hydrocarbons.

Refer to the Cautionary Statement in this report (Page 7) relating to estimates of prospective and contingent resources.

Table 1: FAR’s prospective resources for Blocks A2 & A5, offshore The Gambia.

Figure 2: Vertically stacked targets at Bambo-1

The approved budget for the Bambo-1 well is US$51M with US$6.5M expended to date. At 50% working interest, FAR’s share of the budgted well cost is US$25.5M with US$22.25M yet to be spent. FAR’s share of the well cost will be funded from cash at hand.

Outside well preparations for the drilling of the Bambo-1 well, FAR is undertaking success case planning in the event of a discovery and continuing evaluation of the additional prospects in A2 and A5 (Jobo, Jatto and Marlo) as well as reviewing opportunities for addiitional acreage in a success case. Success in the Bambo-1 well will high grade these other prospects for drilling in the future.

Guinea-Bissau (FAR 21.43% WI)

The Sinapa (Block 2) and Esperança (Blocks 4A and 5A) licences in Guinea-Bissau have been extended for 3 years and are valid until 2 October 2023 during which time there is an obligation on the Joint Venture to drill a exploration well. FAR is working with new operator, PetroNor, to finalise the 2022 work program and budget for approval and finalisation by the end of October. FAR has commenced a farm down of it’s interest prior to drilling a well before October 2023.

PetroNor and FAR are undertaking a f potential well location for the 2023 pro Atum Propsect the key drill target (map Best Estimate Prospective Resource of gross, unrisked, 235 mmbbls net to FAR*

The Operator is also undertaking a r commerciality of the Sinapa discovery i shallow water. Sinapa contains 13.4 mm

2.9 mmbbls net to FAR in 2C contingent r Estimate*). In addition, there is an mmbbls of propective resource in the Sinapa Prospects that are able to be tied i development at Sinapa (Best Estimate, mmbbls net to FAR*).

Figure 3: Location of exploration permits offshore Guinea-Bissau

* Refer to disclaimer on Page 7.

NW Shelf (Australia 100% WI and Operator)

Through its wholly owned subsidiary, Lightmark Enterprises Pty Ltd, FAR has a 100% interest in Petroleum Exploration Permit WA-458-P, which is in the prolific oil-producing Dampier Sub-basin along Australia’s North West Shelf.

Divestment activities for some or all of FAR’s interest in WA-458-P is ongoing. FAR has a “drill or drop” obligation on the licence in early 2022.

Community and Social Projects

During the quarter, FAR on behalf of The Gambian joint venture partners, continued works on the Ndemban Clinic which is being converted into a COVID-19 testing and treatment center. The project involves the repairs and refurbishment to several buildings and upgrades to the water supply system. The project is now mostly completed, and the clinic has been put into service. Finishing touches to the project will be completed in the next month.

Corporate

On Monday 21 June, FAR announced the resignation of non-executive director, Timothy Woodall, and as a result, the resolution to re-elect Mr Woodall to the FAR board was withdrawn at the AGM.

FAR held its Annual General Meeting of Shareholders in Melbourne and online on Tuesday 22 June. At the meeting shareholders voted for a 1:100 share consolidation which was completed in early July. At the meeting, FAR recorded a ‘first strike’ vote against the remuneration report.

Following the end of the quarter, on 1 July FAR announced the resignation of non-executive chairman, Nicholas Limb, and non-executive director, Reginald Nelson coincident with the appintment of Patrick O’Connor (non- executive chairman) and Robert Kaye SC (non-executive director) to the FAR board.

The new independent non-executive directors Patrick O’Connor (Chairman) and Robert Kaye SC, together with managing director Cath Norman have undertaken a review of the capital management of the Senegal sale proceeds taking into account committed exploration costs and working capital requirements with the surplus, being approximately A$80M (at the rate of $A0.80 per share), to be returned to shareholders by way of capital return.

The Company contemplates making an application to the Australian Tax Office for a class ruling seeking advice to the effect that the capital return is not assessable to Australian resident shareholders holding their shares on capital account. It is proposed to put the capital return to shareholders for their approval at a general meeting of shareholders, as is mandated by legislative requirements. This will contain precise timing and other details.

FAR’s share of the forthcoming Bambo-1 well, offshore The Gambia, contingency, success case options as well as expenditure on other assets and general administration costs will be funded from cash at hand following the capital return.

ASX suspended FAR's shares from trading in September 2020 and following the sale of the Senegal project, the ASX has advised that it will reinstate trading of FAR’s securities on Friday, 23 July 2021.

Project Table

Project  Permits  Activity  FAR paying Interest held  Beneficial interest  Operator 
Senegal**  Rufisque, Sangomar and Sangomar Deep  Exploitation  13.6667%  13.6667%  Woodside Energy (Senegal) B.V. 
Exploration  16.67%  15.0% 
The Gambia  Blocks A2 and A5  Exploration  50.00%  50.0%  FAR 
Guinea-Bissau  Blocks 2, 4A and 5A  Exploration  21.43%  21.43%  PetroNor* 
Australia  WA-458-P  Exploration  100.00%  100.0%  FAR 

* Government of Guinea-Bissau approved the purchase of Svenska’s interest by PetroNor in April 2021

** FAR disposed of its entire interest in the Senegal project on 6 July 2021 (event following the end of the quarter)

Top 10 shareholders (12 July 2021)

  Shareholder  Units 
1.  CITICORP NOMINEES PTY LIMITED  25,796,773  25.85 
2.  HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED  5,239,402  5.25 
3.  JP MORGAN NOMINEES AUSTRALIA PTY LIMITED  5,238,795  5.25 
4.  FARJOY PTY LTD  5,144,633  5.16 
5.  CITY SECURITIES LTD  3,070,307  3.08 
6.  MORGAN STANLEY AUSTRALIA SECURITIES PTY LTD  2,321,755  2.33 
7.  HSBC CUSTODY NOMINEES LIMITED-GSCO ECA  2,315,276  2.32 
8.  CS FORTH NOMINEES PTY LIMITED  1,874,967  1.88 
9.  NATIONAL NOMINEES LIMITED  1,353,149  1.36 
10.  BNP PARIBAS NOMS PTY LTD  870,107  0.87 
  TOTAL  53,225,164  53.34 

Additional Notes to Appendix 5B

Appendix 5B reference  ASX description reference  FAR commentary 
1.2 (a)  Exploration and evaluation costs expensed  The FAR group accounts for the cost of exploring and evaluating discoveries under the successful efforts method. During the quarter, the company spent US$0.21M on exploration and evaluation expenditure, including general permit activity, geological and geophysical costs and seismic processing, mainly relating to its Gambian and Guinea-Bissau projects. 
1.2 (e)  Administration and corporate costs  Included in these costs are expenditures associated with operating the Company’s office, ASX listing fees, insurances, software licences, audit, tax, legal and other administrative costs. 
1.4  Interest received  FAR holds a significant portion of its cash in interest bearing accounts in order to optimise interest income. The amount of interest received varies each quarter based on the interest rate, the term held in the interest- bearing account and the maturity dates. 
1.8  Other  Payments related to discontinued Senegal RSSD operations 
2.1 (d)  Exploration and evaluation capitalised  During the quarter FAR spent US$1.17M on well planning activities for the Gambia project. 
2.1 (f)  Oil and gas properties  At quarter end FAR was in default for cash call amounts totalling U$85.3M for the period Jan-Jun 2021 (inclusive). FAR has recorded a payable of US$96.2M relating to the Senegal project in its financial statements at quarter end comprising of its share of the under contributions (resulting from the default cash calls) plus working capital. 
4.5  Effect of movement in exchange rates  The AUD weakened against the USD during the quarter which resulted in a foreign exchange translation adjustment on the AUD cash held that decreased the Company’s USD equivalent cash holdings by US$0.03M. 
6.1  Aggregate amount of payments to related parties and their associates  These costs include payments to Directors in respect to remuneration for the Managing Director, Executive Director (ED) and the Company’s Non- Executive Directors (NED). 
8.0  Future operating activities  For the upcoming quarter FAR forecasts US$9.08M of exploration and evaluation expenditure, and US$2.17M in corporate costs (inclusive of one-off termination payments, insurance renewal and costs to close RSSD sale). These expenditures will be funded by the US$126M FAR received on 7 July 2021 for the completion of the sale of its entire Senegal RSSD Interest. In Q3 2021 the company anticipates approximately A$80M (at a rate of A$0.80 per share) to be returned to shareholders by way of capital return, subject to shareholder approval. 
Source: EvaluateEnergy® ©2021 EvaluateEnergy Ltd