Rendering of the Sangomar FPSO for Senegal project

Lukoil jumps in with takeover offer for FAR

Following a failed attempt to enter into the RSSD project located offshore Senegal through the acquisition of stake from Cairn Energy, Russia’s Lukoil has now made a takeover offer to another partner in the project, Australia’s FAR Limited.

Rendering of the Sangomar FPSO for Senegal project (Image courtesy of SOFEC)

In a statement on Wednesday, FAR Limited said it had received a conditional non-binding indicative proposal from PJSC Lukoil, one of the world’s largest publicly traded energy companies, to acquire 100 per cent of the shares of FAR at A2.2c cash per share.

The Russia-based Lukoil and its proposal values FAR at A$220 million ($171 million).

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.

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. FAR has not received a binding offer from Remus.

Namely, FAR has already had a conditional non-binding indicative proposal from Remus Horizons 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 per cent of the shares of FAR at 2.1c cash per share.

Remus’ offer was conditional on the FAR shareholder meeting to consider approving the sale of the RSSD project scheduled for 21 December 2020 being rescheduled.

The Remus Proposal was also conditional on the Woodside sale not occurring.

The meeting was first rescheduled from December 2020 to 21 January 2021 but it was rescheduled again in January, this time for 18 February 2021, to consider Remus’ takeover proposal.

Meanwhile, FAR on 20 January executed a sale and purchase agreement with Woodside in relation to the Senegal sale.

FAR’s shareholders were also due to consider authorising the agreement with Woodside at the shareholders’ meeting to be held on 18 February.

However, FAR has not accounted for the Lukoil proposal coming in, which means that the shareholders’ meeting will be rescheduled again.

Lukoil has stated that its proposal will be funded from available internal cash reserves and that any formal binding offer would not include any financing conditions.

Lukoil proposal is conditional (amongst other things) on the FAR shareholder meeting to consider approving the sale of the RSSD project to Woodside scheduled for Thursday 18 February 2021 being rescheduled.

It is also conditional on obtaining minimum acceptances of 50.1 per cent of shares and a FAR board recommendation.

Lukoil has stated that it does not believe it requires FIRB approval for the transaction and that it does not anticipate requiring any other regulatory approvals as a condition of the transaction.

Lukoil has also 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.

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Shareholders meeting rescheduled again

In these circumstances, FAR has determined to postpone the shareholders meeting currently scheduled for 18 February 2021, which will enable it to clarify the status of the Lukoil Proposal.

FAR said it will advise the rescheduled date as soon as this has been determined, noting that the Lukoil Proposal has only just been received.

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.

Lukoil has stated that it is 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.

FAR is in default with respect to its January 2021 cash call of $19.9 million. It is also in default with respect to its February 2021 cash call of $24 million.

FAR has until mid-July 2021 to remedy defaults or risk losing its interest in the RSSD Project.

Lukoil has advised that it has funds which are readily available for deployment if its offer proceeds.

Lukoil has stated that it recognises that its offer would need to be unconditional well in advance of the Woodside long-stop date for its sale (which is early June 2021 or such later date as agreed).