FAR Limited Faces Potential $6.8M Claim from Woodside Over Senegal Cost Audit

Background on the Dispute

FAR Limited (ASX: FAR) has disclosed a potential financial claim from Woodside Energy (Senegal) BV following an audit by the Senegal Ministry of Petroleum, Energy and Mines (MEPM). The audit scrutinised petroleum expenditure under the 2004 Production Sharing Contract (PSC) for the Rufisque Offshore, Sangomar Offshore, and Sangomar Deep Offshore areas, collectively known as the RSSD Project.

The MEPM audit reportedly challenged certain costs incurred by FAR up to the end of 2013, citing insufficient documentation to support these expenses for cost recovery purposes. This development has prompted Woodside to alert FAR of a possible claim under the Sale and Purchase Agreement (SPA) that governed FAR's 2021 divestment of its RSSD interest to Woodside.

Financial and Contractual Implications

Under the SPA, FAR is obligated to indemnify Woodside for losses arising from unrecoverable petroleum expenditure not directly linked to exploration activities, with a maximum liability capped at approximately US$6.8 million. Crucially, any formal claim must be notified in writing by Woodside by June 2025, coinciding with the first anniversary of first oil sales from the project.

FAR has indicated it will cooperate with Woodside to provide relevant information supporting its position, emphasising that the disputed expenditures date back over a decade. Meanwhile, Woodside continues to negotiate with MEPM regarding the audit findings, which could influence the scope and validity of any claim against FAR.

Strategic and Market Considerations

This potential claim introduces a layer of uncertainty for FAR, as the final financial impact depends on the outcome of ongoing discussions between Woodside and MEPM, as well as the substantiation of FAR's cost records. While the indemnity cap limits exposure, the timing and resolution of this matter could affect investor sentiment and FAR's financial disclosures in the near term.

Given the audit relates to historical costs, FAR's ability to provide adequate documentation will be pivotal. The company’s proactive stance in engaging with Woodside suggests a commitment to resolving the issue, but the evolving nature of the claim warrants close monitoring.

Looking Ahead

FAR has pledged to update the market on any material developments, underscoring the importance of transparency as this situation unfolds. Investors and analysts will be watching for further clarity on the claim’s magnitude and timing, as well as any broader implications for FAR’s operational and financial outlook.