FAR Ltd (FAR) is entertaining a take-over offer from Remus Horizons PCC Limited (Remus) at the same time as proceeding with the sale of its entire 13.67% interest in the Rufisque, Sangomar, and Sangomar Deep Offshore Blocks, Senegal (Sangomar) to Woodside Energy (Senegal) BV  (Woodside).

In December 2020, Remus, a private investment fund, submitted a conditional non-binding indicative cash proposal to FAR to acquire 100% of the shares of FAR at 2.1c per share. Remus has stated that the offer would be funded from internal cash reserves and that any formal binding offer would not include any financing conditions. Remus has stated that it is willing to discuss the possibility of making available a zero-coupon bridge loan to FAR of up to US$50M from the date of any binding offer to enable FAR to meeting its Sangomar funding calls and for working capital. The acquisition by Remus is conditional on the Woodside Sangomar sale not occurring. The Remus offer values FAR at approximately A$210M or US$162M.

On 20 January 2021, FAR signed the Sangomar sale contract with Woodside, after Woodside exercised its pre-emptive right after FAR had signed a deal with ONGC. The sale consideration remains the same:

  • Initial cash payment of US$45M;
  • Reimbursement of development CAPEX incurred since 1 January 2020, estimated at between US80M and US$116M; and
  • Contingent payments capped at US$55M related to the volume of oil sold from Sangomar and oil price.

FAR has recommenced paying its Sangomar JV cash calls to extend the sale timeline and give time to consider the Remus offer. As reported previously, FAR is a distressed seller, with the above Sangomar sale at a 30% to 60% discount to the Cairn divestment on a 2P basis. It is likely that FAR is entertaining the Remus offer in an attempt to elicit competitive bidding between Woodside and Remus and achieve a higher price for its shareholders.  It is a classic corporate take-over versus project-level bidding situation.

The Woodside Sangomar deal is estimated to be worth between:

  • US$125M assuming US$80M capital reimbursement and 0% future contingent payments; and
  • US$216M assuming US$116M capital reimbursement and 100% future contingent payments.

FAR currently has US$10.3M in cash and has other assets including the promising Gambia blocks adjacent to the Sangomar field, where there is potential for continuation of the Sangomar field. Without valuing these other assets, it appears that the Remus offer of approximately US$162M would potentially be less appealing to shareholders holding a belief that contingent payments would eventuate under the Woodside deal.

FAR shareholders are due to convene and vote on the Woodside deal on 18 February 2021. Until then, shareholders will likely be hoping for an increase in the Remus corporate-level offer or revised Woodside deal terms.

Note: post acquisition Woodside may farm-down some of its possibly 82% interest in Sangomar at a premium to what it is offering FAR, when market conditions are more favourable.


Disclaimer: the author of this article is a FAR Ltd shareholder.