Sydney IP, page-4

The Sydney IP was well attended but not packed. Because the information was already available I suspect. There were several brokers/investment banks there being Macquarie and Citi. Here's my notes just as they arose during the presentation and afterwards over coffee.

Have we had any offers? A few phone calls showing interest but no offers. We are not interested in offers at the moment! Cath wouldn't respond to the question "What would it take for someone to buy FAR now", other than to say "would 20 cents do it .. no!!!"

Need for Funds: Will have around $32m by mid-year. Shareholders will be included in next CR. I suggested in question time that a rights issue with attaching options would go down well with shareholders (and incentivise us and align our interests with management's ..LOL). Cath's response was that they didn't think options were necessary as she believes there is "enough interest" in their story from shareholders. My point was that the CR would not need to be at a discount if options were attached so more cash could be raised.

Obviously I couldn't get a clear answer on timing but it will clearly be outside of the hurly burly of the drilling campaign as Cath stressed that their need to move quickly last time (post FAN discovery) meant that shareholders were not included. A shareholder issue requires much longer lead time. So I expect something between now and October ... bring it on I say!

ASX 200: If we continue as we are with liquidity and achive a higher share price later in the year we should be looking at an ASX 200 entry around year's end. This will spur index buying, greater liquidity and raise our profile.

Competitive advantage: We have the jump on our competitors in terms of information/knowledge of "the Paleo Shelf" offshore Senegal. Nobody knows the details as does the JV and FAR is looking to leverage that by farming in to 1 or more offshore blocks where the participants are struggling to meet their committments due to funding problems in the current environment. As I said last night the aim would be to get seismic completed, identify SNE look alikes and then farmout again to the majors. They are close to doing a deal on one block. At Q&A I asked whether this might be offshore The Gambia (African Petroleum) but she said she couldn't say. Later discussing this again the actual language (not the body language .. so relax TONY) did not confirm this by any means but she did make the point that African Petroleum are really desparate and have gone from $1b MC to $50m, so draw your own conclusions. If not that block (that joins Sangomar Deep to the south) then another .. but not north and not too far inshore as they don't see that as prospective (and mainly gas prone).

Senegal and Nick Limb: Nick has been operating in Senegal (he's Mr Senegal according to Cath) for 15 years. He is Chairman of Mineral Deposits that built a $650m mine which employs 700 people. He has lots of invaluable experience and contacts in Senegal.

FAN-1: World class source rocks with very high TOC. Likley to be a world class accumulation. The 2 wells drilled thus far can be used to reprocess the seismic (depth convert). Cath repeated her excitement about the potential of the reservoir to be HUGE. Regarding it being relatively on the backburner .. it became apparent that COP want 700mbbls in the shelf to proceed with that development (and we will get there said Cath) which has the better economics .. hence their focus on proving up that resource.

SNE: They are confident of upside to the 330 and perhaps as much as the 670 and some comments offline indicated that it could be more. It was almost like she was saying we will get COP's 700 mbbls just at SNE. She repeated that they had been very conservative so far with the estimates.

Two reasons why it should get bigger. Firstly, there are a lot more sands than were not included in the preliminary estimates. SNE-1 was at the crest (or pinch-out) and these other sands will come into play more as we look further out from that crestal position. She also explained the likelihood of upside at appraisal with the graphic from page 28 of the AGM Presentation. Their pre-drill map and estimate based on the amplitude anomoly turned out to be the gas cap, with the oil being below that and occupying a much larger area. The first appraisal well should confirm around 200mbbls, then the second will step out to the next deeper contour level and confirm around 300mbbls. They will then be fairly confident of the 600mbbls+ but if they drill Bellatrix which overlays the outer edge of SNE they will drill deeper through SNE and this should also confirm the 600mbbls+.

If you extraloplate this information to all the other shelf prospects(that is the seismic anomoly under-estimating the field size) it becomes apparent that these could all turn out to be larger than estimated as well.

Prospect Inventory, Exploration well and NPV: Still deciding what to drill. "You always drill your best lowest risk prospect first" and Bellatrix also has the advantage of testing SNE extension as well. But its a different play (Buried Hill) and rock type. Cath seemed to indicate that the 2 SNE look alikes were more likely but there is a lively debate within the JV on what to drill first.

On Soliel interestingly there is some thought that it could in fact be a flank of SNE. She said this will be tested at appraisal (not sure if that meant it will be the first exploration well but maybe in the "contingent group). Cath said if it were a flank of SNE there could be 1 billion barrels (recoverble I assume) just in this joint field alone.

Sirius has a less bright seismic anomoly perhaps indicating that it has less gas (as that's what shows up brightest) and more oil.

The Government has to end of June to approve the 3 year evaluation program.

We will be spudding 1 October. I think Cath said COP was willing to send the rig earlier but that the rest of the JV disn't think they will be ready until 1 October. So we are likley to see it moved from mid-September and be ready to go 1 October.

Cost will be $330k/day for rig and all up $900k/day as opposed to $1.3m last year. Wells will be 35 days and testing (first well) up to 25 days. I suspect they will be coring and testing both SNE wells. Drilling and testing of the first 3 wells in the program will run through to about March 16 ... so allowing for unexpecteds they are budgeting on A$200m with FAR's share A$33m (we pay 16.7% of costs as the 3 JV partners we cover Petrosen).

The rig is being subcontracted to the JV by COP at much lower rates than they are paying. They are wearing the difference. Cath explained they are happy to do that as its contracted long-term and they would otherwise be drilling dusters elsewhere or simply mothballing it in the current environment. This seems like a great stoke of luck for FAR and the JV IMHO.

NPV is $10/barrel at SNE according to CNE> BUt Cath said with every additional barrel tie-in from the other shelf prospects that NPV went up substantially. To perhaps as much as $20/barrel. That's why they want to prove up the large resource on the shelf before looking at FAN much more.

Appraisal Drilling: Low risk. In fact the risk is only to the upside (how much larger than the 330mbbls).

Potential Commercialisation: The Jubillee example of too rushed a development was wheeled out. We need to prove up the size of the resource and do one development not two.

CNE's economic analysis is good, but she thinks in fact that in the current environment and over the next few years Capex will come down quite a bit.

FAR is obviously undervalued on the economics of a project with potential for a 30% IRR at oil of US$70. "We see only upside in the share price from here"!

COP is already doing a lot of work on pre-development studies. Cath expects that COP will take over as operator well before FID.

GB, Kenya and Australia: GB seismic to prove up a large SNE look alike ... numbers by year end. Kenya very disappointing. Security situation remains poor. We are focussed on Senegal now. Don't be surprised if we sell it or farm it down. There is a UK company looking to consolidate a number of African projects so a deal might be done. We would probably get scrip in this company as there is no appetite for cash deals at present. Australia .. no comments made but likewise low priority.

Petrosen backin in Senegal: We are hanging onto all our project equity and in fact want more (so no asset sale foreseen)!! Cath thinks Petrosen may want to creep to 18% but not sure on how it would be financed. Petrosen have to make that decision at FID (which is a long way off). If they decide to "sell" that 8% FAR would be interested in increasing their equity (we should have lots more cash at that stage).

Pre-emptive rights: A question from one of the HC crew and asked by KKW at the IP. There are pre-emptive rights within the JV but these are at the project level. For example if CNE were to farm down some equity COP and FAR have the right to buy in. There are no pre-emptive rights in a takeover situation though.

Share price catalysts: Market sentiment and oil price improvement. Farmin to another block. The drill bit! And my interpretation .. getting a CR out of the way! Cath said it was unlikley we will see an upgrade after results are completed (for resaons explained by OOO or Mandurah) .. she couldn't promise an announcement in July/August.

Consolidation: We have to do it to bring the larger overseas funds on board as they are not interested at 10 cents. Will happen but they are very sensitive to the impact on valuation and would do it as Cath said "into a value adding event" like after successful appraisal or a discovery.

Our aim for next 3 years: Drill drill drill and define a resource of at least 1 billion barrels!!

That's all I can think of for now. Hope that's useful.

Cheers

H