The FAR Ltd (ASX: FAR) share price is back from a trading halt and is sinking lower on Thursday.
In afternoon trade the oil and gas producer's shares are down 26% to 4 cents. This makes it the second-worst performer on the All Ordinaries index behind only ecommerce company Redbubble Ltd (ASX: RBL).
Why is the FAR share price sinking lower?
The catalyst for this decline was the announcement of a conditional placement to raise $146 million at 4.25 cents per share. This represents a 21.3% discount to FAR's last closing price.
In addition to this, the company is aiming to raise a further $30 million through a share purchase plan at the same price as the placement.
According to the release, the proceeds from the placement form part of the planned financing package to fund FAR's capital expenditures to first oil for the Sangomar Oil Field development, working capital, and transaction costs.
Why is it conditional?
The release explains that the shares issued under the placement are conditional.
This is upon gaining shareholder approval at a general meeting to be held in January. It also depends upon the receipt of a credit approved term sheet for an underwritten US$350 million senior debt facility by the end of December.
What is the Sangomar Oil Field development?
The world class Sangomar Oil Field is based off the shore in Senegal. It is one of the largest offshore oil discoveries of the last ten years, which post-project delivery in early 2023 is expected to make FAR one of the largest ASX-listed oil producers.
Sangomar is a phased oil development targeting up to 100,000 bpd. It is a low-cost operation with a US$22/bbl breakeven cost. Energy giant Woodside Petroleum Limited (ASX: WPL) is the operator of the Sangomar Field Development.
