ONGC Videsh Acquires Stake in the RSSD Project Offshore Senegal
ONGC Videsh Ltd. (OVL), the overseas E&P arm of Indian state-controlled Oil & Natural Gas Corp. Ltd. (ONGC), has entered into a sale and purchase agreement (SPA) with ASX-listed FAR Ltd. to acquire its entire stake in the RSSD Contract Area located off the coast of Senegal.
Under the terms of the SPA, ONGC Videsh will acquire FAR’s 13.67% participating interest in the Sangomar exploitation area (containing the Sangomar field), and a 15% participating interest in the RSSD Contract Area outside the Sangomar exploitation area, in exchange for a total cash consideration of US$45 million, plus certain contingent payments. The agreement also provides for the reimbursement of FAR’s share of working capital for the RSSD project from January 1st, 2020, amounting to approximately US$66.6 million, payable on completion. The reimbursement is comprised of cash calls paid by FAR, including US$29.6 million to clear FAR’s default to a joint operating agreement relevant to the project .
The contingent payment comprises 45% of entitlement barrels sold over the previous year multiplied by the excess of the crude oil price per barrel (/bbl) (capped at US$70) and US$58/bbl. The contingent payments will cease by December 31st, 2027, three years from first oil being sold, or until a total contingent payment of US$55 million is reached.
The RSSD project comprises the Rufisque Offshore, Sangomar Offshore and Sangomar Deep Offshore blocks, which cover a combined area of 2,212 sq. km. The blocks are located 80 km off the Senegalese coast in water depths ranging from 800 to 2,175 m. The development of the Sangomar field began in early 2020, and it is anticipated to reach first oil in 2023. According to Lukoil’s estimates, the field contains recoverable reserves of approximately 500 million barrels of oil equivalent (MMboe).
Melbourne-based FAR is a publicly-quoted independent E&P focused on exploration activities in Sub-Saharan Africa. The company currently holds a portfolio of interests in exploration licenses in Senegal, Guinea-Bissau, Kenya, Gambia, and Western Australia.
Woodside Petroleum Ltd. currently holds a 68.33% operating interest in the Sangomar exploitation area, and state-owned company Societe des Petroles du Senegal Ltd. (Petrosen) holds the remaining 18% interest. In the remaining RSSD contract area, Woodside and Petrosen hold a 75% operating interest and a 10% interest, respectively. Woodside’s interest includes the exercise of pre-emption rights on Cairn Energy Plc’s interest in the project. The Woodisde-Cairn transaction is currently ongoing, and is expected to close by Q4-2020.
The transaction, which marks OVL’s first international deal in over two years, marks ONGC’s entry into the Sengalese offshore, as the company attempts to add high-impact exploration and near-term production assets to its portfolio through foreign acquisitions.
“ONGC is a very reputable group with global exploration and production interests. We believe they will be a valuable partner for Petrosen and Woodside going forward,” said FAR’s Managing Director, Cath Norman.
“The market for financing and selling assets has been weak since the impact of COVID was felt in March of this year. In these circumstances, the offer from ONGC represents the best option available at this time and we trust that our shareholders will vote for this transaction. FAR expects to have approximately US$130 million in cash at the close of this transaction that will be used to rebuild the Company and further our other West African prospects offshore the Gambia and Guinea-Bissau,” he added.
The transaction is subject to customary closing conditions, including the receipt of shareholder, partner and government approvals, and is expected to close in January 2021.