Australia’s FAR is in default for its payments due on the Sangomar field, following recent talk of delays in Senegal’s upstream plans.
The Australian company said its FAR Senegal RSSD subsidiary has not paid the most recent cash call. As such, it has been told it is in default by operator Woodside Petroleum.
If FAR cannot pay its debts within six months, it will be forced to forfeit its stake in the project without compensation. The cash call is accumulating debt at a rate of LIBOR plus 2%.
The company is working on plans to sell all or part of its stake in the production-sharing contract (PSC) and joint operating agreement (JOA).
Woodside has been taking steps in recent times to cut costs on Sangomar. FAR said the operator was carrying out a programme to “rescope, reschedule and reprice” the project, in order to cut capital expenditure.
FAR said it had opted to preserve its cash while waiting for clarity on the capex changes. While it is in default, the company’s representatives are unable to attend operating committee meetings or vote.
The Australian minnow has taken steps to cut costs, with senior executives accepting a 20% salary reduction as of July 1. FAR said it had “substantially reduced” its contractor headcount in April.
The company signalled it had run into difficulties at the end of April. FAR was on the hook for $163 million this year for its 15% stake in the project. At the end of the first quarter, the company had $80.3mn.
Speaking at the time, FAR’s managing director denied the company was defaulting on its Sangomar payments. This was “not a decision that the Board of FAR would take lightly”. Unfortunately, things have not improved.