Australian-listed oil and gas company FAR Ltd said on Wednesday its Senegalese unit had defaulted on its obligations to the Sangomar joint venture, as the company looked to sell its interest in the project.
The company owns 15% of the Sangomar oil and gas field being developed off Senegal, while Cairn Energy holds 40%, Australia's Woodside 35%, and Senegal's national oil company Petrosen 10%, which it has the right to increase to 18%.
FAR said in late March it had failed to secure debt to fund Sangomar, which is operated by Woodside, following a plunge in global oil prices amid the coronavirus pandemic.
FAR said it was still considering selling all or part of its interest in the project, adding that it would forfeit its interest without compensation if obligations were not fulfilled within six months.
In that case, its remaining partners would also have to shoulder the investment burden.
"Project economics still stand up at $40 a barrel but the last thing Cairn needs right now is a higher capex burden that would come with FAR's defaulting stake," said BMO Capital Markets analyst David Round in a note.
"We await Operator Woodside's project scheduling and pricing review but with Cairn's >$300 million expected 2020 expenditure we see an additional funding requirement in 2021. Incorporating FAR's stake could bring this funding shortfall towards the start of 2021."
Cairn did not immediately reply to a Reuters request for comment.
The announcement comes just a day after Woodside said it expects production at Sangomar to begin in 2023.
FAR said it had implemented further cost-saving measures, including job cuts, and that senior executives and non-executive directors would take a 20% pay cut.
(Reporting by Shashwat Awasthi in Bengaluru, additional reporting by Shadia Nasralla in London; Editing by Lincoln Feast and Jan Harvey)
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