Hi H
Thanks. Should have known I could rely on you.
I wanted to see this for three reasons: Firstly because many on the forum will not have read these emails, secondly to review them in the wake of subsequent events, and thirdly to refresh my understanding of Tim’s (Farjoy’s) thinking and expectations for his investment.
Forum members can read them and draw their own conclusions. I am reassured that the patient holders will be well rewarded. Why?
Firstly, nothing we’ve seen in the past three years of appraisal and further exploration has done anything to disabuse Tim of his belief that: “I have no doubt at all that FAR and its partners have discovered a new oil province, which will exceed other African fields.” He talks of six billion barrels in the Fans; maybe as much again on the shelf. That’s a huge claim, but already SNE looks to have several hundred million barrels of easily recoverable oil, Cairn’s 10% estimate at FAN1 is 2.2 billion, oil has been discovered in the South Fan and SNE North (in a lower prospect), and FAR’s audited best estimate for the first Gambian prospect is 1.1 billion barrels. The seismology of the central Fan, Djiferre, Bambo and a number of other prospects has not even been assessed (as far as I’m aware). To quote Tim:
“FAN 1 is more than the sum of its parts. It was carefully selected to give the partners an insight into 4 geological structures, and the interim results suggest that each structure will contain commercial oil. Volumetrically, the northern fan is the smallest of these structures, from which I infer that at least 6 billion barrels of oil has been discovered. There is a good chance that at least as much again will be discovered upslope. Now look at Cairn's latest announcement. It has 2.2B barrels for the 10% case - if that if just the northern fan and a part of Beer, then you can reasonably assume that the best case will be higher for the central and southern fans.”
Tim’s thoughts are instructive of we HC optimists who surmise the best possible outcomes to fit our investment aims. For instance - and yours truly is guilty as charged - many of us have talked about the magic billion for SNE’s 2C in the belief the market will instantly pump up the SP in response. Reading Tim, though, we should more properly focus on Cath’s intimated increase in the 1C. “Commercial fields are not developed on optimistic projections, but usually on pessimistic parameters to determine whether it will be profitable in the worst case. Whether the deposit will be declared commercial depends on what is happening at the 90% interval.” Elsewhere Tim notes that the value ascribed to oil increases the closer it is to production. Thus an increase in SNE’s 1C and the impending FID should be of much more interest to us than a pissing contest on the absolute volume of SNE.
These emails were written three years ago, pre SNE appraisal, and contain a lot of (well-informed) supposition, much of which seems to have been borne out by subsequent events. Of most interest to me is the hints these missives provide into the material now likely being reviewed in FAR’s data room by those players of most interest to us - the super majors. The information in the public realm is but a small fraction of the available data. There will be data on those four structures mentioned by Tim which will be under review by experts who have the ability to project likely outcomes based on the drilling results to date.
Only a fool would believe FAR has not added value as yet not recognised by the market. As I’m finding, oil is a slow game being played in a market more attuned to fast wins, but as Tim said: “Farjoy does have a different investment horizon and price perturbations are of little interest to us, except I suppose as buying opportunities. We have been prepared to sit out long periods of quiescence in the belief that fundamental value will eventually emerge.”
And he has been as good as his word, with Farjoy adding 50 million shares to join other top 10 shareholders in increasing their grip on the Company.
Our mate Wasa and I were talking this week about which lithium or cobalt stocks we might buy. Wasa mentioned a couple before saying, I might even just buy more FAR, which to me represent almost no downside risk but a lot of upside potential. Touché, Wasa.
OOO
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