September 2023 Quarterly Activities Report

Source Company Press Release
Company FAR Limited, Woodside Energy Group Ltd
Tags Corporate: Corporate Results, Overview/Strategy, Country: Gambia, Senegal, Financial - Costs & Metrics: Capital Expenditures, Upstream: Drilling Activity
Date October 25, 2023

FAR Limited (ASX: FAR) an independent, Africa focused, oil & gas exploration company, provides its quarterly activities report for the quarter ended 30 September 2023.

Highlights

  • On 18 August 2023 shareholders approved a capital return of 40 cents per share. Cash payment to shareholders occurred on 31 August 2023 totaling US$25 million (A$37 million).
  • FAR applied for a Class Ruling from the Australian Taxation Office (ATO) seeking confirmation that the capital return will not count as a dividend for taxation purposes. On 20 September 2023 the ATO published a Class Ruling that confirms no part of the capital return will be assessable as a dividend.
  • The Company continued its efforts to remarket Blocks A2 and A5 with a substantially lower fixed permit statutory cost structure during the quarter.
  • Cash at quarter end was US$3.3 million (unaudited) after the return of capital to shareholders. Commenting on the activities during the quarter, Independent Chairman Patrick O’Connor said:

“The Company returned US$25 million (A$37 million) to shareholders during the quarter as part of its prudent capital management plan. The FAR Board believes this was an effective method of returning capital to shareholders. We are pleased that the ATO has published its Ruling that confirms the capital return will not be assessed as a dividend for tax purposes.

With a significantly reduced statutory cost base the Company continued its efforts in marketing Blocks A2 & A5 in The Gambia to create value for our shareholders from the extensive exploration data associated with the project. While we are yet to receive any firm interest in the Blocks our low-cost marketing campaign will continue in the December 2023 quarter. The FAR Board will then be in a position to consider the future of the Gambia exploration project with feedback from the marketing efforts.”

In the previous quarter the Company agreed with the Government of The Gambia for an extension to the permit term for an additional 12 months to 30 September 2025 and a substantial reduction in the future annual fixed permit statutory costs. As a result of this agreement with the Government, there is no obligation for FAR to incur expenditure on the licences for a 12-month period ending 31 March 2024.

During the quarter the Company’s efforts related to its Gambia interests were focussed on remarketing of Blocks A2 and A5, with a substantially lower fixed permit statutory cost structure, to establish a joint venture arrangement to undertake the geoscience review and ultimately drill additional exploration wells. To date the Company has not been able to secure any agreement with a third party and a decision on the future of Blocks A2 and A5 will be taken before 31 March 2024 based on feedback from the current marketing efforts.

Woodside Energy Contingent Payment

As part of the consideration for the sale of its interest in the RSSD Project in Senegal to Woodside Energy (“Woodside”), FAR received rights to a Contingent Payment with a maximum value of US$55 million.

In the third quarter 2023 report announced to the market on 18 October 2023, Woodside provided an update on the Sangomar Field Development Phase 1 project (“Sangomar”). First oil production from Sangomar is targeted for mid-2024 and as at 30 September 2023 the overall project was 90% complete.

With first oil production from mid-2024 there is likely to be a payment to FAR under the Contingent Payment in early 2025. Based on progress of the Sangomar development and current oil prices, the Board of FAR expects that the full US$55 million will be received prior to the transaction long stop date in 2027.

The Contingent Payment comprises 45% of entitlement barrels (being the share of oil relating to FAR’s previously held 13.67% of the RSSD Project comprising the Sangomar Field exploitation area of interest), multiplied by the excess of the crude oil price per barrel and US$58 per barrel (capped at US$70 per barrel). The Contingent Payment terminates on the earliest of 31 December 2027, three years from the first oil being sold (excluding periods of zero production), or a total Contingent Payment of US$55 million being reached, whichever occurs first.

The Board will consider opportunities for monetisation of this asset nearer to the commencement of first oil production from Sangomar.

Corporate

On 18 August 2023, shareholders approved a capital return of 40 cents per share. On 31 August 2023 cash payment to shareholders was made totalling US$25 million (A$37 million). FAR sought a Class Ruling from the Australian Taxation Office (ATO) to obtain confirmation that the capital return will not be counted as a dividend for taxation purposes.

On 20 September 2023, the ATO published its Ruling confirming that no part of the capital return will be assessable as a dividend. The Ruling also confirms that qualifying shareholders will be entitled to treat any resulting capital gain as a discounted capital gain and that certain foreign resident shareholders will be entitled to disregard any resulting capital gain or loss. Shareholders should refer to the Ruling for a better understanding of its contents and consult their own tax adviser as to the potential tax consequences for them with respect to the capital return.

Cash Balance and Expenditure (unaudited)

FAR had US$3.3 million of cash at the end of the quarter after the return of capital to shareholders totalling US$25.0 million. During the September 2023 quarter expenditure totalled US$1.0 million, comprising mainly corporate and administration costs and exploration expenditure to support our Gambia interests.

September 2023 Quarter  March 2023 Quarter US$M  June 2023 Quarter US$M  Sept 2023 Quarter US$M 
Opening cash balance  33.7  30.7  29.5 
Corporate and administration costs  (0.7)  (0.4)  (0.7) 
Exploration expenditure  (0.4)  (0.2)  (0.3) 
Total expenditure  (1.1)  (0.6)  (1.0) 
Financing  0.3  0.3  0.3 
On-market share buy-back payments  (1.9)  (0.9) 
Capital return to shareholders  (25.0) 
Other movements  (0.3)  (0.5) 
Closing cash balance  30.7  29.5  3.3 

Corporate and administration expenditure in the September 2023 quarter included redundancy and leave entitlement payments to the last three employees of the Company. Corporate and administration activities will now be carried out as required by contractors.

Exploration expenditure in the quarter comprised mainly Gambia in-country administration and support costs. The quarter also included a true-up licence payment of US$0.2 million covering the period to 31 March 2023 agreed with The Gambia Government as part of the negotiated lower annual statutory charges.

Financing comprises interest received on cash invested less right-of-use lease payments for the period.

Other movements in the quarter represents the unrealised foreign currency loss on conversion of AUD cash held at the end of the quarter.

As detailed in Item 6.1 of the accompanying Appendix 5B, the Company discloses that the aggregate payments to related parties and their associates during the quarter was US$94,000. The payments during the quarter represent remuneration paid to Non-Executive and Executive Directors.

Source: EvaluateEnergy® ©2024 EvaluateEnergy Ltd