Extremely Rough Value Calculation, page-3

There is always a buyer and those that think otherwise are delusional. It always comes down to price!

WPL purchased COP's assets when oil was trading at similar prices and payed US $14M per percentage point when including additional costs. That values FAR at 15 x US $14M = US $210M. WPL has spent a considerable amount of money since the purchase so lets say US $100M or an additional US $3 per percentage point. So that makes US $17M per percentage point as fair value.

WPL are naive if they believe market forces and the fairies will deliver FAR's assets to them for zip. The CEO of WPL did not get to his current position by believing in fairies. To do nothing risks another entity obtaining FAR's 15% and depending on that entity also gives them potential access to CNE's 20%. I dare say if CNE coughed up 21% WPL would risk losing the operatorship so again WPL needs to eliminate risk.

FAR are desperate and the market knows this but no one turns their back on a good deal. What is a good deal? Good question! Noting that WPL's carrying value would be around US $17M per percentage point and that was a bargain back in 2016 then you would have to think anything 30% or higher discount to WPL's costs would be of interest to someone wanting access to oil. 30% discount to WPL's carrying value of Sangomar is US $10M per percentage point valuing FAR's holding at US $150M (AUD $210M). A 50% discount values FAR at US $127M (AUD $178M).

My first thought is the Chinese with their bullying tactics with regards to trade and stealing sovereign interests in the Sth China Sea, cyber crime and Covid-19 debacle are alienating themselves from a good proportion of the western and Nth Asia world. China's main problem is lack of resources and one of these is oil, hence their aggression in the Sth China Sea where an estimated 3.8T (trillion) boe are estimated. Finding, developing and pumping said oil will take many years. In the mean time China needs oil. FAR may be in the right place at the right time.

WPL can sit on its hands and wait for FAR to default but here's the catch! WPL would only be entitled to 6.17% of the FAR equity. CNE 7.05% and the remainder goes to Petrosen. I have already stated that WPL needs a minimum of 8% to ensure that they cannot be vetoed by the other partners when voting. Something I guarantee that they are aware of.

So using a 50% discount to WPL's carrying value and adding cash of AUD $100M would value FAR at 2.7c. If using a 30% discount then that increases FAR's value to 3.1c.

I don't think WPL can go out and buy FAR's 15% without triggering a PE event. My prediction! WPL will make a move on FAR and put it out of its misery. Expect a takeover bid starting in the mid to high 2c range especially if there are whispers of a cashed up entity doing due diligence.