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FAR Ltd entering key development phase in 2020 on path to becoming oil producer

The company aims to raise up to $30 million in an SPP after securing $146 million in a placement.

FAR Ltd - FAR Ltd entering key development phase in 2020 on path to becoming oil producer
The Sangomar Oil Field JV partners plan to deliver first oil to market in early 2023

FAR Ltd (ASX:FAR) will enter a key development phase in 2020 as the Senegal joint venture begins construction and execution works for development of the Sangomar Oil Field.

The project offshore Senegal is one of the world’s largest oil discoveries this decade and is set to see FAR become an oil producer in 2023.

Share purchase plan

In a letter to shareholders seeking support for approval of a share purchase plan (SPP) to raise up to $30 million, chairman Nic Limb said the company had settled on a traditional financing mix of equity and bank debt with the sole focus to maximise shareholder returns.

He said this decision had been made after FAR had spent considerable time and effort working on various funding alternatives.

$146 million placement

“We are well advanced with our banking negotiations and have previously announced some of those details.

“Equity needs to be in place and the project advanced before we draw bank debt.

“To facilitate this, we have finalised a $146 million placement of new shares to major investors both within Australia and globally.

“This capital raising will require shareholder approval at a general meeting of the company on January 16, 2020.”

Pleased with response

The chairman said the company was very pleased with the response from existing shareholders, including FAR’s largest shareholder who subscribed in the placement component of the capital raise to increase their holding in the company substantially.

“We have also had great support from a number of large Australian and International investors.

“The intention of the SPP is to enable our smaller shareholders to participate in this capital raising on the same terms and conditions as these large investors.”

The Sangomar Oil Field development will consist of a Floating Production, Storage and Offtake (FPSO) vessel that will be connected to a subsea infrastructure via oil producing wells and gas and water reinjection wells.

This field has a footprint of over 350 square kilometres and the joint venture with Woodside Energy will be developing 640 mmboe in phases.

Limb said, “Commencing development of the Sangomar Oil Field, (previously SNE) which was recently renamed by the President of Senegal, is a major milestone in our company’s development and one which few junior oil companies have the opportunity to be part of.

“Developments of this scale are complex and require significant capital and expertise.

“The joint venture has spent some years evaluating the resource and conducting the extensive engineering planning and design work to prepare for the execution phase of the field development.

“The operator of the joint venture, Woodside Energy, has advised us and its own investors that a final investment decision is expected to coincide with Presidential approval of the Development and Exploitation Plan by year-end with works to commence early in the new year.”

SPP details

SPP participants are entitled to take up to a maximum of $30,000 or new shares irrespective of how many shares currently owned.

Company directors have indicated their intention to take up their full entitlement in the SPP.

The equity and debt raising FAR is undertaking will be directed to the company’s US$492 million share of the capital expenditure for the first development phase up to delivery of first oil to market, which is expected in early 2023.

Limb added: “I am very proud of the team at FAR who have worked extremely hard to bring this ambitious project to this point and enable FAR to become a major Australian enterprise.

“I hope you will consider this SPP and I look forward to welcoming you at the general meeting if you are able to attend.”

Quick facts: FAR Ltd

Price: 0.031 AUD

ASX:FAR
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Market Cap: $309.34 m
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