Page 5 - AfrOil Week 08 2021

AfrOil COMMENTARY AfrOil

Remus had said it was willing to pay that it holds 645mn barrels of oil equivalent
AUD209.6mn ($165.89mn) for 100% of equity (boe) in recoverable reserves, including 485mn
in FAR, provided that the RSSD stake remained barrels of crude oil and 160mn boe of natural
in the latter company’s portfolio of assets. gas. Production is slated to begin in 2023.
FAR has described the Remus offer as The acquisition of FAR would also expand
“incomplete,” and as noted above, its sharehold- Lukoil’s African portfolio. According to its web-
ers were due to convene on February 18 to vote site, the Australian company has stakes in nine
on approval of the Woodside purchase. Lukoil, blocks in four African countries – The Gambia,
though, said its offer was conditional on the Guinea-Bissau and Kenya, as well as Senegal.
rescheduling of that meeting and on “obtaining Five of these are in the Gambian and Senegalese
minimum acceptances of 50.1% of shares and a offshore zones, which FAR has described as its
FAR board recommendation.” “core West African programme.” Lukoil has offered
According to the press release, FAR has opted
to postpone the meeting and has retained Baker Woodside’s response to pay AUD220mn
McKenzie to advise it on the new offer. “[The It is not yet clear whether Woodside will raise
delay] will enable FAR to clarify the status of objections to Lukoil’s new bid to join the San- for 100% of
the Lukoil proposal,” it said. “FAR will advise gomar project.
the rescheduled date as soon as this has been On the one hand, the Australian company equity in FAR
determined, noting that the Lukoil proposal has said last year that it was pre-empting Lukoil’s
only just been received. FAR will provide further offer to buy Cairn Energy’s stake in RSSD
information to shareholders prior to the share- because of concerns about US sanctions on Rus-
holders’ meeting being held, and shareholders sia. The sanctions regime provides for the impo-
who have already voted will have the opportu- sition of penalties on companies that do business
nity to change their vote if they wish.” with Lukoil and that invest in deepwater projects
with Russian partners.
Advantages for FAR On the other hand, Woodside’s CEO Peter
The offer from Lukoil, the largest privately Coleman indicated last week that Lukoil’s bid
owned oil operator in Russia, does have some for FAR’s stake was less problematic because of
advantages for FAR beyond the fact that it the size of the stake involved. “The Lukoil offer
is higher than the bids received from either will not trigger the US sanctions, as it is below
Woodside or Remus. More specifically, the Rus- the 33% threshold for the sanctions to become
sian company has offered to provide FAR with applicable to the project,” he was quoted as say-
“reasonable financing support” that would allow ing by Argus Media.
the latter to cover its unmet cash call obligations He added: “Lukoil has expressed an interest
to RSSD. in buying into Sangomar before, and they know
“FAR is in default with respect to its January that having a minority stake does not give them
2021 cash call of $19.9mn,” the press release any influence over the development and opera-
explained. “FAR is also in default with respect tion of the project, whereas had they bought the
to its February 2021 cash call of $24mn. As pre- Cairn stake they would have had a much larger
viously announced by FAR, it has until mid-July say in the project.”
2021 to remedy defaults or risk losing its interest Meanwhile, there are likely to be more
in the RSSD project.” changes in the shareholder line-up later this
Additionally, FAR said, “Lukoil has advised year. Woodside, which currently owns more
that it has funds [that] are readily available for than two thirds of RSSD’s equity, has said it
deployment if its offer proceeds.” wants to reduce its holdings in the joint venture
Lukoil has also played up the fact that it is to 40-50% in 2021. ™
already familiar with Sangomar after having
attempted to buy Cairn out last year. “Lukoil has
stated that it has a deep understanding of the
RSSD project, as it had previously completed
due diligence and entered into an agreement
to acquire an interest in the RSSD project from
Cairn Energy [that] was subsequently pre-
empted by Woodside,” the press release said.
If the takeover bid succeeds, the Russian
company will gain control of a 13.67% stake in
the Sangomar Offshore field and a 15% stake in
the other two sections of RSSD’s licence area.
(ONGC Videsh Vankorneft had agreed to pay
$45mn for this asset, plus reimbursement for
FAR’s share of working capital in the project,
including cash calls.)
The Sangomar licence area includes three
separate fields: Rufisque, Sangomar Offshore
and Sangomar Deep Offshore, which give the
RSSD joint venture its name. Oil was discovered
at the block in 2014, and RSSD has estimated (Image: FAR)

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