Hi All
In light of our discussion over the past few days, I revisited my AGM notebook to check on what was said about the SNE resource, FAN, the province more broadly, the timing for commerciality, and, critically, the prospects for a takeover. I am paraphrasing in brief:
SNE (CN)
Number of thinner sands can contribute significantly to net pay. Looking at a much bigger field than 330m.
FAN (CN)
500m interval. Huge amount of oil being generated. 29m net pay not fair assessment. Seismic evidence indicates oil water contact is a fair bit deeper.
The province (CN)
All partners agree have hardly scratched surface of wonderful hydrocarbon province. Prospect of well in excess of two billion barrels. Almost certain of more discoveries.
Commerciality (CN)
200m minimum @ $US50. Possible to prove up 300 with first two wells if we drill at core of SNE.
Takeover (NL)
Expect knocks on door by year end. If offer made sense we'd talk to shareholders. Trade off between selling or raising more capital but not until we better appraise what we have. We know COP not happy with 35%. The game is only just beginning.
My summary
Nothing new in this - AGM was in May - but crikey doesn't it take on some significance when talk of a dollar offer by April gets thrown around by seasoned posters. As the Chairman also said, we have a tiger by the tail here. The Board seems grimly determined not to let this opportunity slip, but equally I feel they are pragmatic enough to realise FAR can't possibly hope to extract all the value that will emerge from the Senegal oil province. While, sensibly, the Chairman said we must plan to go all the way to production, logic suggests this is not viable for a junior explorer. Clearly, though, the Board aims to stay in for as much of the appraisal - and new discoveries - as possible ... while accumulating more assets (as we saw last week) en route. The Chairman told the AGM of COP's massive firepower and the inevitability of it taking over as operator. Again, logic suggests this would not be from a position of junior partner to Cairn. COP for some time now has been running a large team in parallel to Cairn - it is running its own race already.
Malcy is right: We have made a colossal discovery. If Bellatrix comes up trumps, there's a good chance the shelf is awash with oil. And just what might be in those fans? That, for me, is where the ultimate value of the province will lie and it's for this reason I think FAR will tough it out at least until the oil water contact is found and we have a better idea of the extent of that discovery. Farjoy speculated about 12 billion barrels in place in Senegal; laugh that off at your peril.
My bet? We will raise capital to stay in for second round of appraisals. COP to buy out our share following the first FAN appraisal late next year, by which time the OP will be on the mend and FAR will have several hundred million barrels of proven reserves. Price? I might just get my buck twenty target.
OOO
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