FAR Limited Announce Q4 Results

Highlights
- FAR announces sale of RSSD Project, offshore Senegal
- ASX stock suspended from trading
- Cash at end of Quarter of US$25.9m, with cash at end of January 2021 approximately US$9.9m
- Upgrade to Gambian resource estimates in advance of H2 drilling

Projects update
Offshore Senegal (FAR 13.7% Working Interest (WI))
During the quarter FAR announced it had executed a sale and purchase agreement with ONGC Videsh Vankorneft Pte Ltd for FAR’s entire interest in the Rufisque, Sangomar and Sangomar Deep (“RSSD” or “Sangomar”) project. RSSD operator Woodside subsequently exercised its right to pre-empt the sale on the same terms and conditions, and in January 2021 Woodside and FAR executed a sale and purchase agreement.

Woodside’s acquisition of Capricorn Senegal Limited’s (Cairn’s) entire participating interest in the RSSD joint venture also completed during the quarter. The Sangomar Field development remains on track for first oil in 2023. Cleaning and preparation of the VLCC oil tanker for conversion to an FPSO was completed during the quarter, and work has commenced on the external turret mooring for the FPSO. The contract for operations and maintenance of the FPSO, including installation, commissioning and the initial 10 years of operations and maintenance, was awarded to MODEC in December 2020. Other activities including subsea fabrication, and preparation for development drilling are on schedule with drilling targeted to commence in mid-2021.

Processing of the high-density multi-azimuth (HDMAz) 3D seismic has shown a significant uplift in data quality over the previous 3D data. This data is being used to de-risk the Phase 1 drilling and will be applied to potential Phase 2 and later development planning. The new data is also being used to evaluate the other discoveries within RSSD, and further delineate the exploration potential of the blocks.

Offshore, The Gambia
Blocks A2/A5 (FAR 50% WI and Operator) Subsurface Studies
FAR has completed a range of subsurface studies that have focussed on quantifying the Prospective Resources in the A2/A5 blocks that may be targetted by the planned Bambo-1 well.

Processing of the existing 3D seismic data within the A2 permit has been completed using Full Waveform Inversion (FWI) for the depth modelling, which has resulted in improved seismic imaging and a more accurate depth interpretation.

In addition, a number of well studies have been conducted in nearby wells to extend the regional geological framework and provide more detailed understanding over the A5 permit.

The new FWI seismic dataset has been mapped and incorporated with the existing SAMO-1, Jammah-1 and Sangomar well data sets to confirm and refine the existing prospects, and to delineate additional prospects and potential target intervals. In particular, the new mapping has highlighted a number of additional reservoirs which are able to be tested by the Bambo-1 well. The additional targets add additional volume however some of the reservoirs have a stratigraphic component to their trapping mechanism which carries inherent risk. The un-risked prospective volumes have been quantified and are outlined in Table 1 on the following page.

Bambo-1 Well Planning
Plans to drill the Bambo-1 well were put on hold during 2020 due to the COVID-19 pandemic. FAR and its joint venture partner are now in the process of reactivating the project based on developing COVID safe practices to efficiently deliver the well H2 2021.

Most long-lead items for the Bambo-1 well have been ordered and The Environmental and Social Impact Assessment (ESIA) for the project has been approved by the National Environmental Agency in The Gambia. FAR has engaged Exceed to provide engineering and wells management services to deliver the well effectively. Exceed were previously used by FAR to deliver the earlier Samo-1 well which was delivered safely and efficiently in 2018. The Bambo-1 well is now expected to be drilled later this year.

Guinea-Bissau (FAR 21.43% WI)
The Sinapa and Esperanca licences are currently within an Extension period of the initial Exploration Term as provided for under their respective Agreements for Joint Venture Participation (‘AJVP’) where SPE Guinea Bissau AB (‘SPE GB’), a subsidiary of Svenska Petroleum Exploration AB (‘Svenska’), is Operator of the Joint Ventures.

On 20th November 2020, FAR was advised by Operator that Svenska Petroleum Exploration AB had agreed to sell the company to PetroNor E&P AS (subject to necessary government approvals).

Operations in the licences are currently suspended due to COVID-19. FAR is working with Operator to understand when operations for drilling Atum-1X can restart.

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. In April 2020, FAR received the final seismic volumes for the Davros Extension multiclient 3D survey. Interpretation and integration of the new 3D seismic data is ongoing.

A farmout process has been initiated, however this has been severely impacted by restrictions in travel and business interactions due to COVID-19. The National Offshore Petroleum Titles Administrator (‘NOPTA’) has granted an application by FAR to suspend and extend the current phase of the exploration work programme by 12 months to 22 January 2022. The current easing of travel restrictions within Australia will likely allow the farmout process to resume in Q1 2021.

Corporate
Suspension from trading
Following the Q3 release of the Company’s Half Year Report in which the auditor included a disclaimer of review opinion, FAR was suspended from trading on the ASX. FAR responded to ASX’s request for information in relation to the audit finding, which was released to the market in October. ASX has advised FAR that the suspension will not be lifted until the disclaimer of review opinion is removed by the auditor. FAR’s next audit for the year ended 31 December 2020 is due to commence in Q1 2021.

RSSD Project sale announced
During the quarter FAR announced it had entered into a Sale and Purchase Agreement with ONGC Videsh Vankorneft Pte Ltd, a subsidiary of ONGC, the largest E&P company of India, for FAR’s entire interest in the Senegal RSSD Project. That sale was subsequently pre-empted by Woodside, and FAR announced this month that FAR and Woodside had executed a Sale and Purchase Agreement on the same terms and conditions. FAR expects to have approximately US$130m in cash at hand on completion of the sale, assumed to be in April 2021.

The sale is subject to a number of conditions precedent, including approval by FAR shareholders at a general meeting. The Notice of Meeting dated 18 November 2020 contained details of the sale and the impact on the Company if approved. The meeting has subsequently been postponed until February 18 due to FAR receiving a non-binding indicative proposal to purchase FAR, discussed below. Updated meeting materials will be distributed ahead of the new meeting date.

Non-binding indicative proposal to purchase FAR
On 17 December FAR announced it had received a conditional non-binding indicative proposal from Remus Horizons PCC Limited (“Remus”), a private investment fund regulated by the Guernsey Financial Services Commission, to engage in further discussions and further investigations for the purpose of evaluating its capacity to make an offer or announce an intention to make an offer to acquire 100% of the shares of FAR at 2.1c cash per share (the “Proposal”). FAR determined that the shareholder meeting to approve the sale of the RSSD Project should be postponed in order for shareholders to see if the Remus Proposal eventuates, and if so assess its merits and consider the RSSD Project sale on the basis of more detailed information. Subsequent to the quarter, FAR communicated an update on Remus’ Proposal and advised the shareholder meeting had been further postponed until 18 February. As at the date of this report FAR has not received a binding proposal from Remus.

Default
To allow additional time to settle a sale of the asset or company, FAR paid the November and December outstanding cash calls to the Senegal Joint Venture but is now in default of the January payment to the Joint Venture of US $18.9m. FAR has until mid-July to remedy the default or risk losing its working interest in the project. FAR does not have cash reserves to pay the January cash call or future cash calls to the Joint Venture. However, the effective date of the sale to Woodside is 1 January 2020 so FAR will be reimbursed for all cash calls paid and Woodside is responsible for payment of unpaid cash calls at the time of settlement (assuming that settlement occurs).

In the event of a binding offer by Remus, Remus has indicated that it may provide a loan to FAR for cash call payments from the date of such an offer (ref. announcements dated 17 December and 8 January).

Director Resignation
In October FAR announced that Non-Executive Director, Dr Julian Fowles, resigned following his appointment as Managing Director at Karoon Energy Ltd.

Community and Social Projects
The Gambian Joint Venture has completed the three planned social projects for 2020 in The Gambia. The maternity ward and an operating theatre at Bansang hospital were successfully refurbished, which was a project completed in partnership with The Gambia National Petroleum Corporation (GNPC).

Other projects completed included enhanced water distribution and storage facilities at the Sanyang women’s garden, and the upgrading of electrical works at the Jambanjelly Lower Basic School.

Work has commenced to identify community and social projects for 2021. At the request from the Government of The Gambia, the Joint Venture is now undertaking a project to upgrade the Ndemban Clinic into a COVID testing and treatment center. This project commenced in December 2020 with the aim to fast-track the undertaking for completion early this year. A number of other projects are also being considered for later in the year.

Managing Director comments:
Key for FAR shareholders in Q4 of 2020 has been the announcement of the sale of FAR’s share of the Senegal project (including the Sangomar Field development), firstly to ONGC and followed by Woodside’s execution of their right to pre-empt the sale.

As discussed in the body of this report, FAR shareholders will be asked to approve the sale of the project to Woodside at a shareholder meeting scheduled for 18 February. The sale will leave FAR to focus on our remaining projects, especially our offshore Gambian acreage that has been assessed to house the extension of the Sangomar Field into The Gambia and current plans are to drill this extension later in 2021.

After the sale, FAR will have approximately US$130M in cash to undertake exploration activities and expand the portfolio, potentially with a producing or other oil asset.

Following the announcement of the sale of the Senegal RSSD project, FAR received a non-binding indicative proposal to purchase FAR at A$0.021c per share by the Remus group. Remus has advised that they intend to formalise this offer into a binding offer for FAR but as of today, no binding offer has been received.

In the absence of an offer from Remus or any alternative offer which may emerge, the Board urges shareholders to vote FOR the sale of the Senegal project to Woodside.