FAR has signed a Farm-out Agreement ('FOA') with a subsidiary of Petroliam Nasional Berhad ('PETRONAS') to assign a 40% interest in each of the highly prospective offshore petroleum licences, Blocks A2 and A5 in The Gambia. FAR is to retain a 40% interest in each of the licences.

PETRONAS will fund 80% of total well costs of the Samo-1 exploration well up to a maximum total cost of US$45.0 million. Based on a completion date of 31 March 2018, FAR is to be paid estimated cash of US$13.5 million for reimbursement of back costs and cash consideration. In addition to this, PETRONAS will fund FAR’s share of non-well costs up to a maximum amount of US$1.5 million.

FAR will remain Operator through the exploration phase of the A2/A5 licences, including the drilling of the Samo-1 well, and PETRONAS has a right to become the Operator for development.

The Samo-1 well is expected to be drilled in late 2018 and will be the first exploration well offshore The Gambia since 1979. FAR estimates the Samo Prospect contains prospective resources of 825mmbbls oil (best estimate, 100%, unrisked - refer ASX announcement of 21 Nov 2017).

Completion of the FOA is subject to Ministerial approval from the Government of The Republic of the Gambia and customary joint venture consents.

FAR Managing Director, Cath Norman, said:
"This farm-out deal with PETRONAS is further recognition of the value of our Gambian licences and FAR’s status as a partner of choice in the Mauritania-Senegal-Guinea-Bissau-Conakry Basin. FAR has built an enviable position in the basin and we look forward to drilling the Samo-1 well later this year. Success in this well would be of significant value to our shareholders and truly transformational for the people of The Gambia.  

PETRONAS brings world class technical and financial strength to our joint venture. PETRONAS also has significant deep-water development expertise in the event of a discovery. FAR welcomes PETRONAS to the Joint Venture and looks forward to a long and successful relationship.

We again wish to acknowledge the cooperation and support of the Gambia Ministry of Petroleum and Energy, the Gambia National Petroleum Company (GNPC), the Government of the Gambia and our broader Gambian stakeholders as we jointly progress with our drilling preparations. This deal is further demonstration of The Gambia’s credentials as an investment destination." 

Farm-out terms

FAR Gambia Ltd, a wholly owned subsidiary of FAR Ltd, has entered in to a Farm-out Agreement with PC Gambia Limited, a wholly owned subsidiary of PETRONAS, to assign a 40% interest in its offshore Blocks A2 and A5 Petroleum Licences in The Gambia. FAR is to retain a 40% interest in the blocks.

PETRONAS will fund 80% of total well costs of the Samo-1 exploration well up to a maximum total cost of US$45.0 million (including a portion of well back costs to be paid on completion). Based on a completion date of 31 March 2018, estimated total well back costs to be refunded by PETRONAS are US$6.4 million. Also, on completion, PETRONAS will pay FAR cash consideration of US$6.0 million and reimburse non-well back costs estimated at US$1.1 million. In addition to this, PETRONAS will fund FAR’s share of non-well costs up to a maximum amount of US$1.5 million.

Based on FAR’s latest Samo-1 well cost estimates, the agreed well cost cap is expected to be in excess of FAR’s share of well costs. Pursuant to the FOA, if FAR’s share of well costs is less than the agreed cap, then at least 50% of the balance is to be paid in cash to FAR.

FAR will remain Operator through the exploration phase of the A2/A5 licences, including the drilling of the Samo-1 well, and PETRONAS has a right to become the Operator for development.

Completion of the FOA is subject to the approval of The Republic of the Gambian Government and customary joint venture consents.

The Samo Prospect, offshore The Gambia

FAR has completed detailed geotechnical studies and assessed significant hydrocarbon resource potential in its two blocks offshore The Gambia. The Blocks A2 and A5 permit area, covering 2,682km², are adjacent to and on trend with FAR’s world class SNE oil field discovery and have significant exploration potential. A2 and A5 sit within the rapidly emerging and prolific Mauritania-SenegalGuinea-Bissau ('MSGB') Basin and lie approx. 30km offshore in water depths ranging from 50 to 1,500 metres. From 1,504km² of modern 3D seismic data acquired in A2 and A5, FAR has identified large prospects similar to the 'shelf edge' plays FAR has successfully drilled in Senegal. FAR has mapped two drillable prospects, Samo and Bambo and additional leads in the blocks.

An independent oil and gas advisory firm, RISC Operations Pty Ltd (RISC), conducted an audit of FAR’s internal estimate of Prospective Resources for the Samo prospect located in The Gambia permit A2. The Samo prospect has a best estimate Prospective Resource of 825 million barrels of oil on a gross unrisked basis. RISC’s report of the assessment of the probabilistic resources confirms it was carried out in accordance with industry standard SPE-PRMS practices.

The Samo prospect has two target intervals, is on trend and shares many similarities with the giant SNE oil field. As such it is very highly rated with an estimated chance of success (CoS) in one or both targets, endorsed by RISC, of 55%. It is rare to have an exploration prospect with such a high CoS but this reflects the adjacent discovery at SNE and the confidence FAR Limited has developed in exploring in the play fairway which is yet to experience a dry well.