With chatter that Oil has bottomed and is recovering, with CNE up .3% and COP up almost 5% and the Oil sector overall sitting at 2.73% up as I write this, is the FARst train about to board?
Reasons I think so;
- Speculation Oil is rebounding, CNE and COP especially showing massive gains.
- We are only 30 days from Feb 1st, we know that we have ANN's around Senegal being trued up and Kenya being FARmed out. Every time we are in the lead up to ANN timing we build in the process.
- Speculation around a sell out of our Senegal tenants - whilst this has been rumoured for some time, to me it makes perfect sense, perhaps not in full maybe just a partial selldown, sell 10% and keep 3.7%?
- There is very little FAR for sale, less than 25M on sell, with VERY light volume for sale near the money. When was the last time we have had so few for sale???
So, what do I think is fair value for us right now?
With Oil at ~$61, USD to AUD at $1.22 (Yes - our dollar is taking a beating!)
Now to ramp things up a little
Yes, this is a plug - but I think it is warranted;
Cath Norman on FAN1, "the size of the potential pool of oil could be much larger than we have estimated and significantly larger than the SNE-1 discovery". and "The first well FAN-1, drilled using the Cajun Express, discovered high quality, light oil in multiple stacked clastic reservoirs".
I want to change two things in my table, no 1 - Tim thought we could have as many as 6B+6B in and around FAN-1, lets move this find to 12B across the top section. With regards to SNE-1 - there has been calls it could be more than triple its current sizing, what does this look like?
What if we now work to $80 Oil and 60% recovery in place of the 30% I have been using.
You will notice on the right hand side of the table a new mini 'traffic light' system, with returns at the varying levels - Market Knowledge, Waiting for results and Awaiting Farm-in. The reality is that I have de-risked each of these sections accordingly wherein for example the Kenyan tenant has a 10% overall POS (Probability of success), although of course we will dilute our holdings.
I will be accused of ramping no doubt from this post, there seems to be a lot of posts down-ramping FAR currently with calls it will head to 4 cents... Are you serious? With a cash value of 1.5 cents, we would have 2.5 cents remaining, this would mean we would in theory have to half the current value of Oil. (Not happening IMHO).
FAR is a great company and I honestly believe we are undervalued by at least 342%, see top table - mini traffic light to right. This excludes the value of what we haven't drilled yet, as well as Kenya. If our ANN's in Jan/Feb true up what we have to what has been speculated a 1,500% upgrade is not out of the question.
If we see Oil return to $80 per Barrel and work on 60% recovery, we 2,500% return.
If we take into account all of FAR 3,141% return.
Many people appear to be trying to pick a bottom and bounce. My honest advice would be to ensure you have a ticket in the first place, when the train takes off - you do not want to be waiting at the station.
If I wanted to be totally bullish I would forecast the impact another 20% devaluation of the AUD dollar looks like for us, unfortunately I think Australia is in for a very tough time. Resources has been our backbone the last few years and with so much investment being reduced - unfortunately the impact will be very severe to the overall economy, with regards taxes and jobs etc. The upside with FAR is that we are a lean company with proven resources about to be ANNed, money in the back and we receive our income in USD - any devaluation in the AUD will amplify our earnings down-track, furthermore it makes FAR cheaper to invest in for anyone offshore (30% cheaper in 2 years!!), ignoring the reduction in the SP.
You can call this post a ramp, abuse me, question my calculations - It is literally water off of a ducks back, I think you will agree however you cannot ignore the potential of this company.
I have bought a ticket and sit patiently at the station. I am as excited as ever about the FAR journey. It has been amazing to date and with fewer weak hands wanting out - it's only a matter of time before I think we will see a massive rebound.
I am continuing to buy at every opportunity I can and look forward with eager anticipation to a transformational New year.
(20min delay)