Far spreadsheet late NOV post issue update, page-2

Thanks pj

Your work is invaluable to our forum. I applaud your thoroughness. You know I'm a bull, so I'm firmly in the 600-800 camp. I suspect even that might be light-on; time will tell.

Your assumptions look reasonable to my untrained eye. I would, though, question a takeover premium of 10-15%. In a market where majors are cutting expenses by billions - mainly in exploration - I suspect proven future reserves might take on a higher value than would otherwise be the case. My rationale is simple:

> Supply and demand. Reduced exploration expenses today equal reduced reserves tomorrow. BP has just nine years reserves now. Companies - read FAR - with proven reserves will be able to drive a hard bargain. There will be plenty of cashed-up suitors judging by the vast war chests already amassed by the biggest five oil companies.

> The OP. A deal won't be priced at $45 ... or, I suspect, even $65. If I were FAR I'd be starting negotiations at $100 and inviting the big boys to whittle the price down. I wouldn't be starting at $50 and hoping for generosity!

> Timing. Our six-well program is now funded and due to end in late 2016, by which time in all likelihood the OP will be in recovery mode. Oh, and because we are funded we can thumb our nose at stupid offers and bargain hard on sensible ones. That CR made eminent sense to me.

> Lastly - and I readily agree this one could be nebulous - potential. If these appraisals go as well as hoped, they will derisk a vast area of the shelf, on which we now own 75% of a large new block. We will also have some idea of just what's in the FAN Field, a potential monster on which just two of seven plays have been tested to any extent. And don't forget Guinea Bisseau; I'll bet FAR hasn't.

I'm not about to guess what the takeover premium should be, but we have every reason to hope it will be much, much higher than 15% - unless of course by appraisals end the market is rating us for reserves plus potential, in which case 10-15% would be reasonable. I'm ever-mindful that our present potential rating is zero; in fact probably less than zero given CN observes we are presently receiving way below value for SNE alone. But in a different environment ...

OOO