FAR Limited’s (ASX:FAR) high rating of the Samo oil prospect offshore The Gambia is shared by oil major PETRONAS, which is farming-in to the project in a deal worth up to US$53.6 million.
The world-class company is buying 40% of FAR’s 80% working interest in the Samo-1 exploration well by paying for 40% of total well costs to a cap of US$45 million.
It will also pay cash consideration of about US$8.6 million excluding its 40% share of ongoing operational and well costs until completion.
Industry expert Wood Mackenzie has ranked the Samo-1 well as one of the key wells to watch around the globe for 2018. The well will be drilled in the second half of the year.
FAR will remain operator through the drilling of the planned Samo-1 well, which is scheduled to begin by the end of 2018, and retain 40% working interest.
The farm-in agreement assigns PETRONAS a 40% interest in each of the highly prospective offshore petroleum licences, Blocks A2 and A5.
“Testimony to quality of opportunity”
Managing director Cath Norman said, “It is a testimony to the quality of the Gambian opportunity that FAR was able to farm-out to a company of the calibre of PETRONAS and we look forward to working with them going forward.
“The deal will formally close on Government of The Gambia approval, which is expected to by the end of the June quarter.”
FAR is the operator and has a 40% working interest in the A2 and A5 petroleum licences with PETRONAS holdings 40% and Erin Energy 20%.
55% chance of success
The Samo prospect in Block A2 is assessed by FAR to contain a best estimate (P50) prospective resource of 825 million barrels of oil with a 55% chance of success.
This high success chance is due to the adjacent discovery at SNE, in the neighbouring waters offshore Senegal, which is on trend and shares many similarities with Samo.
The Samo prospect is believed to be an extension of the SNE trend.
It is also attributable to the confidence FAR has developed in exploring in the play fairway, which is yet to experience a dry well.
First exploration well offshore since 1979
The company is making steady progress in preparation for the Samo-1 well, which will be the first exploration well offshore The Gambia since 1979.
It has awarded a contract to drill the Samo-1 well using the Stena DrillMAX drillship.
Attractive drilling contract
This has been finalised at a very attractive operating day rate in line with 2017 rates.
Stena DrillMAX is a state of the art, dual mast, dynamically positioned, deepwater drill ship with a rig crew that has extensive international and regional West African experience.
The vessel is a harsh environment dynamically positioned DP class 3 drillship capable of drilling in water depths up to 3,000 metres and at drilling depths to 10,700 metres.
“We are delighted to have secured the Stena DrillMAX,” Norman said, “as it was our rig of choice given it completed a highly successful, efficient and under budget drilling campaign for our Senegal joint venture in 2017.
“The FAR drilling management team consists of several personnel involved with the Senegal joint venture’s previous drilling campaigns,” she said.
“FAR was recently described as possibly Australia's best oil explorer for 10 years and we hope to add to our discovered, recoverable resource base with the Samo-1 exploration well.”
Healthy cash position
The company ended the March quarter with a healthy cash position of $40.38 million, which was ahead of forecast by $6 million, largely as a result of slowed expenditure in Senegal.
“A net spend of $100,000 is expected this quarter because we are expecting an inflow of $18.1 million from settlement of the PETRONAS farm-in,” Norman said.