Russian oil company Lukoil is still working to obtain a share in the offshore block in Senegal containing the Sangomar development, after its first attempt last year to buy Cairn's share in the project was blocked out by Woodside, which exercised its pre-emption rights as a partner in the block.
Namely, FAR, an Australian company that has been working to sell its stake in the $4.2 billion Sangomar project as well, as it has been unable to find the cash to fund its part of development obligations, said Wednesday it had received a conditional non-binding indicative proposal from Lukoil to acquire 100% of the shares of FAR at A2.2c cash per share. The Lukoil proposal values FAR at A$220 million [$170,4 million], Far said.
To remind, FAR in November last year agreed to sell its interest in the blocks containing the Sangomar development to India's ONGC Videsh. FAR has a 13.67% interest in the Sangomar exploitation area and a 15% interest in the remaining RSSD evaluation area.
However, Woodside then exercised its right to pre-empt the sale by FAR's entire participating interest in the Rufisque, Sangomar, and Sangomar Deep (RSSD) joint venture, to ONGC, with a matching bid.
In the meantime, FAR in December 2020 said it had received a non-binding A$209.6 million ($159.15 mln at the time) all-cash takeover proposal from private investment firm Remus Horizons.
FAR and Woodside in January 2021 executed the sale agreement, however, the sale has yet to be approved by FAR shareholders which are due to consider authorizing the agreement with Woodside at a shareholders’ meeting to be held on February 18, 2021.
Enter Lukoil
In a statement on Wednesday, announcing the non-binding takeover offer by Lukoil, FAR cautioned that the Lukoil Proposal "is not a legally binding offer, it is subject to targeted and timely corporate due diligence on FAR, it is subject to final Lukoil board approval, and that there is no certainty that the Lukoil Proposal will necessarily eventuate." Accordingly, FAR said, care needs to be used in assessing the Lukoil Proposal.
Per FAR, Lukoil has stated that the price proposed by it represents a higher value for FAR shareholders than both the proposed sale of the RSSD project to Woodside and "the incomplete proposal" from Remus Horizons PCC Limited. FAR has not received a binding offer from Remus, the Australian company said.
Lukoil's proposal is conditional on the FAR shareholder meeting to consider approving the sale of the RSSD project to Woodside scheduled
for Thursday, February 18, 2021, being rescheduled; Obtaining minimum acceptances of 50.1% of shares; and a FAR board recommendation.
According to FAR, Lukoil has stated that it has a deep understanding of the RSSD Project as it has previously completed due diligence and entered into an agreement to acquire an interest in the RSSD Project from Cairn Energy which was subsequently pre-empted by Woodside.
"In these circumstances, FAR has determined to postpone the shareholders meeting currently scheduled for February 18, 2021. This will enable FAR to clarify the status of the Lukoil Proposal. FAR will advise the rescheduled date as soon as this has been determined, noting that the Lukoil Proposal has only just been received," FAR said.
"FAR will provide further information to shareholders prior to the shareholders meeting being held, and shareholders who have already voted will have the opportunity to change their vote if they wish," FAR added.
Per FAR, Lukoil said it was open to providing reasonable financing support to allow FAR to come out of default in relation to its RSSD Project cash call defaults once its proposal is unconditional subject to customary conditions being agreed.
As previously announced by FAR, FAR is in default with respect to its January 2021 cash call of US$19.9 million. FAR is also in default with respect to its February 2021 cash call of US$24 million. The company has until mid-July 2021 to remedy defaults or risk losing its interest in the RSSD Project.
The $4.2 billion Final Investment Decision (FID) on the Sangomar offshore oil field was taken at the start of 2020 and the field development has kicked off.
The recoverable hydrocarbon reserves of the Sangomar field total approximately 500 million boe. The field is planned to be brought online in 2023 via a Modec-supplied FPSO.
"Lukoil has advised that it has funds which are readily available for deployment if its offer proceeds. Lukoil has stated that it recognizes that its offer would need to be unconditional well in advance of the Woodside long-stop date for its sale (which as previously announced is early June 2021 or such later date as agreed). FAR has appointed Baker McKenzie to advise in relation to the Lukoil Proposal," FAR added.