far off to the races, page-4

Hi dangar,

My understanding is that we are looking at two farmins which need to be accounted for separately.

The Cain deal meant they were paying 65% of the $80 million costs for 65%, or a total value of $123 million. Far share is 25% or $30.7 million plus refund of past costs of $10 million or an implied value of the permit interest of $40.7 million.

After this well the JV could walk away in the event of failure.

Along comes Conoco Phillips who got very excited and say they want to drill a well for $90 million to earn $35% implying a total value of $257 million. FAR will retain a 15% interest or an implied value of $38.6 million.

Add the two together and the implied value to FAR interest of $79.3 million.

Two rolls of the dice is still probably less than a 50% chance of success, but definitely better than one.

The odds are that neither well will not be successful. A really good exploration well is rarely more than 30% chance of success which is why company making wells of the size being targeted only come along once in a decade if you are lucky.