Private investment fund Remus Horizons has launched a conditional takeover offer for the Australian oil company FAR, which owns a stake in the RSSD offshore area in Senegal, containing the Sangomar offshore oil development.
FAR has recently agreed to sell its stake in the Sangomar to Woodside, its partner in the project, as the company has been unable to fund its share for the development of the field and has been in default concerning its January 2021 cash call of US$19.9 million for its part of the Sangomar development costs and has until mid-July 2021 to remedy defaults or risk losing its interest in the project.
The Australian company said in March it would sell its stake in offshore blocks in Senegal to Woodside, subject to the approval of its shareholders at a meeting scheduled for April 15, as the previously proposed company takeover offers made by Remus and Lukoil had been incomplete. Subsequently, Lukoil confirmed it wouldn't be making a firm offer.
As previously reported, FAR had in 2020 agreed to sell its stake in the Senegal project to ONGC, only for Woodside to exercise its pre-emption rights as the partner in the project and block the ONGC swoop.
Accordingly, Woodside’s offer reflects the terms of the FAR/ONGC transaction, including payment to FAR of US$45 million, reimbursement of FAR’s share of working capital, including any cash calls, from January 1, 2020, to completion, and entitlement to certain contingent payments capped at US$55 million.
However, on Wednesday, April 14, a day ahead of the expected FAR shareholders meeting to approve the Woodside transaction, FAR said it had received a letter from Remus Horizons advising its intention to make a takeover offer for FAR at 2.1 Australian cents per share.
The proposed offer is conditional upon FAR’s shareholders rejecting the sale of FAR's interest in the RSSD Project to Woodside and the FAR Directors confirming that there is no intention to dispose of this interest before the closing of the takeover offer.
FAR said: “FAR shareholders are due to consider approving this sale at a shareholders’ meeting which has been convened for tomorrow, 15 April 2021. The FAR Board recognizes that FAR shareholders are likely to want an opportunity to consider the implications of this prior to voting on the sale resolution. Accordingly, the FAR Board intends to address this development as the first item of business at the meeting, including whether shareholders would seek more time to consider its implications.”
In its letter announcing the proposed offer, Remus said that its offer presented a clear alternative for FAR shareholders to the proposed sale of FAR’s entire interest in the Production Sharing Contract for the Rufisque, Sangomar, and Sangomar Deep Offshore Blocks offshore Senegal and the Sangomar to Woodside.
Namely, Remus said that its offered provided an exit route for shareholders who may exit their FAR investment for cash "at a price which represents superior value compared with remaining a Shareholder" and should be seen as attractive "when considered in the context of the significant risks and uncertainties of remaining a shareholder," including FAR's plan to use the cash proceeds from the potential Woodside transaction to rebuild the company and invest in prospects offshore the Gambia and Guinea Bissau with, as Remus says, "the value proposition of this business plan being uncertain, long term and subject to significant risks."
"Remus’ objective is to achieve outright ownership of FAR and subsequently fund the Phase 1 development of the RSSD Project. The Remus Offer is consistent with Remus’ strategic objectives to acquire petroleum development and production assets in targeted geographies, including the African Continent," Remus said.
Remus further said: "Remus has a present funding capacity totaling US$400 million of which it has currently allocated up to US$250 million towards the acquisition of FAR and the provision of additional funds to FAR post the completion of the acquisition or through a potential working capital support bridge loan..."
"This being more than sufficient to fund the total consideration payable to Shareholders under the Remus Offer of approximately A$210 million. For completeness, we confirm Remus’ present funding represents unconditional investment commitments from accredited investors and that Remus is well advanced with securing additional funding, which it recognizes will be required to meet funding calls in relation to the RSSD Project in the event the Remus Offer is successful," the company added.
Remus also said it was aware that FAR was "subject to near term funding constraints," and that it was willing to discuss making available a bridge loan to FAR, to enable FAR to meet its funding calls in relation to its interest in the RSSD Project and other necessary working capital requirements.
"We are hopeful that the FAR board of directors will form the view that a successful Remus take-over of FAR will present a superior outcome to Shareholders than the Asset Transaction and as such will withdraw from the Asset Transaction or recommend that Shareholders reject it and instead recommend Shareholders accept the Remus Offer," Remus said:
The Woodside-operated Sangomar field development, located in the RSSD area off Senegal, was sanctioned in early 2020. The field will be developed using an FPSO to be delivered by MODEC.
The FPSO will be deployed approximately 100 kilometers south of Dakar, Senegal, and will be Senegal's first offshore oil development.
The FPSO is scheduled for delivery to support the first oil production in 2023 and will be moored in approximately 780 meters water depth. The recoverable hydrocarbon reserves of the Sangomar field total approximately 500 million boe.
FAR has a 13.67% interest in the Sangomar exploitation area and a 15% interest in the remaining RSSD evaluation area.