FAR (ASX) What we know and what's next?

Originally posted by hardmano ↑

Missed HC while it was out!

Thought it was worth reviewing where we are at with FAR (chronological events and their implications, and possible/probable future catalysts and their timing):

What we know (in brief .. please add your own favourites)

FAN discovery announced but no size estimate given (due to multiple oil columns that need assessing) and no oil/water contact. Tight hole status restricts what is released but it is immediately compared to Jubileee the largest find offshore Africa in the past decade. Uncertainty about what they were doing at TD for several weeks! Tim/Farjoy postulates that Beer is a big find (it is obviously the largest structure) but may not be included in the preliminary estimates. FAR says additional reservoirs have been identified and will add to the net pay (no comment on Beer??). So ..... its big but will take a while to assess.

An active and productive petroleum system has been proven and the source rocks look prolific. Stated as being highly likely to have the potential to be a large standalone commercial development. Senegal announces that they will be selling other blocks and Kosmos pays $400m to get into one of these. So .... our blocks on their own are valuable and sort after. Some speculation that we may be looking to get into other blocks offshore Senegal. Kenyan L6 farmout still scheduled for mid-November at this stage.

Tim/Farjoy immediately buys a heap more shares to get to 10% some at "above market" prices. So their job or Tim's mission is to prevent a premature takeover. So .... FAR is attractive to majors and the immediate suspects would be the JV partners CNE and COP.

FAR does a ER at 11 cents to fund the drilling shortfall (because of the repairs but also because of the SUCCESS!).

SNE-1 finds much more oil than expected in the top Albian Sandstone target of 32 API in a high quality reservoir. Source now definitely considered prolific and the new oil province mantle is applied due to the 24 km between the two discoveries. A Contingent Resource of at least 330 mbbls P50 is quickly stated because it is a single oil column. Commerciality stated as very likely. Tim/Farjoy thinks this will be appraised and developed first.

Kenyan L6 farmout now said to be delayed to early 2015 ... the implication being that the success in Senegal will have an impact on the shape of the farm out and this won't be properly known for a few months.

Share price fails to reach peak post FAN-1 of 16 cents despite this good news. Share price declines and then SNE-1 bottom target is dry (because the oil has migrated in large quantities into the top target!!!!). Traders exit because there will be no near-term catalysts and well .. that's what they do ... buy the rumour and sell the news!

Via email correspondence FAR indicates that despite what the share price movements are, FAR has an amazing asset in Senegal (read we are in a good position!). They give a very preliminary (minimum?) claimable estimate for FAN of 300mbbls recoverable (that's around the 950mbbls in place stated by the operator). They also indicate that they won't be selling out anytime soon and say they are well funded and to relax about the share price which will sort itself out.

Long-termers settle in for the long-haul (which is what they do)!

What next?

FAR indicates in email post FAN-1 discovery that it will be at least early to mid December before they have all the data for FAN-1 and can release the net pay and Contingent Resource. Subsequent to SNE-1 success FAR indicates that they will have heads down and tails up on the technical analysis now for a while and will release final analysis of both wells early in 2015. So ... we have the possibility only of an update on FAN-1 in a couple of weeks but most likley they will hold it over until January+

Rumours spread of approaches from majors and Indian oil companies are mentioned. Posters speculate on likely price and spreadsheets abound.

SNE-1 analysis should take less time than FAN-1 because they did less testing and had only the one oil column and oil quality. There are hints that it will be bigger than the current 330mbbls CR. Its size alone points to that! FAN-1 was due to be done by mid-December after discovery in early October, so around 2 months+. SNE-1 discovery was early November ... so we could see something in 2 months from then so early January (probably won't be earlier as Xmas/NY will slow things down). Certainly we should see something before February IMHO.

January is often a good month on the ASX as traders take a break and share prices are "allowed" to rise. Volumes are generally low so moves on news can be accentuated.

Looking forward to January when we should find out if we have a Jubilee at FAN and possibly another at SNE!! That's the best case scenario and I am definitely an optimist.

Would love an update to the "What next" from Tim (like interest from majors, funding options etc) ... or anyone else who cares to comment.

Cheers

H

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Thanks so much for the clear, informative and well written post. Much appreciated by me and many others I'm sure.

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