FAR receives $5M for Senegal farm out deal

FAR Ltd has received $5 million from Capricorn Senegal Ltd, a subsidiary of Cairn Energy, in relation to its Senegal Farm-out deal (following final approvals from the Senegal government).

FAR will be drilling two back to back wells in Senegal the first of which is expected to spud in Q1 2014. The receipt of the US$5 million of cash proceeds strengthens the Company’s cash position to AU $29.6 million as at 10 February 2014. FAR announced two major farm-in agreements in relation to its offshore Senegal exploration permits with ConocoPhillips and Cairn Energy (a UK listed oil and gas company). Both farm-in agreements have received Senegalese Ministerial approval.

As a result of the two farm-in deals with ConocoPhillips and Cairn, FAR has secured full funding for its share of two exploration wells totalling approximately US$200 million (100% basis, FAR estimate) and net cash payments received of approximately US$10 million. FAR retains a 15% working interest in the permits. ConocoPhillips and Cairn will hold 35% and 40% respectively. Petrosen, the Senegal National Oil Company, has a 10% carried interest through this exploration phase.

FAR transferred operatorship of the Senegal blocks to Cairn in August 2013 and well preparations have progressed satisfactorily. The Transocean owned drilling rig, the Cajun Express, has commenced a multi joint venture African drilling campaign, operated by Cairn, which includes FAR’s two high impact Senegal exploration wells. Cairn is currently drilling the second well in the campaign, and FAR’s two Senegal wells will follow completion of that well.

The two back to back exploration wells, the first of which is expected to start drilling in Q1 2014, will target approximately 1.5 billion barrels (225 million net to FAR) of unrisked best estimate prospective resources . With approximately 900 million barrels (135 million net to FAR) to be tested in the deep water ‘fan’ play and 600 million barrels (90 million net to FAR) to be tested in the ‘shelf play or ‘L’ Prospect.

Both Senegal prospects have significant follow-up drilling potential in the event of a discovery. FAR’s three contiguous Senegalese blocks – Rufisque, Sangomar and Sangomar Deep – cover 7,490km2. From 2,050km2 of
modern 3D seismic data acquired in the blocks, FAR mapped 11 potentially drillable prospects as well as numerous other leads, many supported by associated seismic amplitude responses in plays including the ‘fan’
and ‘shelf. FAR has assessed its Senegal blocks to have prospective resources of 3.585 billion barrels of oil (538 million net to FAR)..