Senegal: First oil revenues expected in 2025, Capricorn in a strong position

The Sangomar oil field, located off the coast of Senegal, is currently the focus of intense attention in the oil industry. The first revenues from production are expected in early 2025, marking a strategic turning point for the players involved. Among them, Capricorn Energy, formerly known as Cairn Energy, is set to receive up to $50 million as a contingent payment from the sale of its assets to Woodside Energy in 2020.

In an official statement, Capricorn Energy confirmed that it has been informed by Woodside Energy that the condition of continuous production, included in the contract for the sale of interests in the Sangomar Production Sharing Agreement (PSA), has now been met. The field has achieved 30 days of uninterrupted production, triggering a key clause in the asset sale agreement.

This condition is crucial for Capricorn, as it paves the way for a contingent payment of up to $50 million, depending on the performance of Brent oil prices. Specifically, the company could receive $25 million if the average price of Brent during the first six months of production exceeds $55 per barrel, and up to $50 million if the price exceeds $60.

Since production began on 10 June 2024, the price of a barrel of Brent has hovered around $80, well above the thresholds set in the sales agreement. This positions Capricorn to receive the full contingent payment of $50 million. These funds, once received, will be redistributed to shareholders, as indicated by the company, subject to the application of tax obligations due to Senegal.

The tax framework surrounding operations at Sangomar remains a point of attention for investors. Capricorn said that the Senegalese tax authorities had clarified in writing that transactions prior to first oil production would not be subject to registration fees. However, Woodside, as the direct beneficiary of the tax assessments, has expressed its intention to preserve its rights through established governance mechanisms and relevant international treaties, thereby ensuring protection for all parties involved.

The tax reassessment relates to the sale of Capricorn's assets to Woodside as part of the development of Sangomar. To date, discussions between the parties involved and the Senegalese authorities appear to be moving towards an amicable resolution, although the specific tax details have yet to be finalised.

The Sangomar oil field represents one of the largest hydrocarbon discoveries in Senegal and is seen as a major economic driver for the country. The project, which began its production phase in 2024, is the result of a partnership between Woodside, which holds the majority stake, and players such as Capricorn. Ultimately, Sangomar should not only strengthen Senegal's energy independence, but also generate substantial revenues for the government and partner companies.

Capricorn's ability to reap the benefits of this project is testament to the success of the investment and exit strategies put in place. The conditional payment expected in early 2025 also underlines the robustness of price dynamics on the world oil market, a key factor in achieving the financial objectives of the players involved in the Sangomar project.

The development of Sangomar marks a historic milestone for Senegal and its international partners. For Capricorn, the prospect of redistributing millions of dollars to its shareholders testifies to the soundness of the strategic choices made in recent years. The next few months will be decisive in confirming the exact amounts of the financial spin-offs and finalising the tax discussions under way with the Senegalese government.