Evening All
DISCLAIMER: Mr Perry did a wonderful reporting job, so no need to read my rubbish unless you have time to burn and/or a masochistic streak.
When the Chairman’s opening gambit is to warn AGM attendees against beating him to the last biscuit at the tea station, two possibilities present themselves. Either the Company is going so bad that it’s rationing biscuits; or so well that its Chairman has nothing better to worry about. On the evidence presented today, Mr Limb - not, apparently the Chinese herbalist Mr Lim to whom The Australian refers - is in the second camp.
Today’s was my fourth AGM. At the first, the share price was 9.4 cents. Four years and 100-plus million barrels of oil net to FAR, the price stood at 8.8 cents, a decline of about seven per cent. Cue the Lynch Mob, one would have thought. Instead, one of the day’s highlights was when a shareholder presaged a question by congratulating the FAR team on its achievements and was met with a burst of spontaneous applause. The warmth of that gesture spoke volumes both for the shareholders’ tolerance but also their unwavering optimism that ‘this will be the year’. And on the evidence presented today, it jolly well might be.
Mr Perry outlined the timetable, which is very much more imminent than this observer believed. The SNE Evaluation Report will be presented to the Government within five or six weeks and according to Cath, ‘is essentially a statement of commerciality’ with all its attendant implications for FAR’s standing with the (real) investor community as Resources cross the commercial Rubicon to be rebirthed as Reserves.
This will be closely followed, said Cath, by the long-anticipated Joint Venture view on resource numbers for the ‘full field’. Hello, hello, hello, thought this scribe - that would be a consolidated view that starts at a base 641m barrels that did not include connectivity results. Methinks we could be in for a pleasant surprise.
The JV targets 1 September to present the SNE Exploitation Plan to a Government which has promised to approve it by year end.
The final hurdle, FID, follows in mid-2019 and I must say it looks increasingly like FAR might just make it to production against all the odds. That will require FAR to stump up a paltry $US400 million - over half a billion Aussies - based on the latest Cairn projection of a $US2 billion capital cost through to first oil. ‘That doesn’t frighten us,’ Cath told an audience visibly white with fear of a mass dilution event to rival the dinosaur apocalypse. ‘We’re pleasantly surprised by the level of interest from financiers around the World to get involved.’ The audience was less surprised once Mr Limb raised his eyes from his herbal charts to explain that the flow of SNE oil cash would cover that $2 billion capital expense in three or four years, after which ‘largely unencumbered’ cash would rain down on shareholders and financiers for a further 25-30 years. (Pausing briefly to consider if OOO would still be alive to enjoy this bounty, we returned our attention to Cath.)
SNE, she told us to audible gasps, was yesterday’s news and consumed no more than ten per cent of FAR’s time. No, the real story - and most imminent value-accretion - was six kilometres away in The Kingdom of Gambia. (Okay, it’s not a kingdom, but do not fairytales require one?) Because FAR fairytales might come true. In fact if Cath’s pre-meeting nod and a wink mean anything, should come true. We had mentioned that rebuilding hospital wings was hardly necessary if one expected to drill a duster. No, Cath agreed, it was fair to say FAR believes it is on a winner.
Officially a 50/50 coin toss, of course, but Cath’s painstaking explanation of layered sediments, sands ‘more ubiquitous’ than the fragmented and unconnected 400 sands of SNE, thickening 400 sands - which, perhaps obviously but obviously not, are up to 400 metres thick to the south of SNE, and prolific sauce kitchens (I think that’s what she said) seemed to hint at one hell of a party in Collins Street the day the Stena boys release the pigeon carrying news from their drillbit. ‘Multiple reservoir targets,’ she said, drilled into ‘the same sands we’ve had nine out of nine successful wells into the exact same reservoirs we’ve seen running into Gambia’. It did not take much imagination, Cath said, to believe this will end up being ‘one mega field’. No imagination at all, apparently: OOO has it locked and loaded in his!
Led no doubt by FAR’s geos, the JV is honing in on the spot to drill, with the final location to be decided by the end of July ... the same month in which Captain Cath and her FAR pirates board the Stena and commandeer her bound for parts soon to be known. Official start of ‘Well Season’ is 1 September and although Cath concedes they cant be ready by then, she is cracking the whips on her engineers to spud in October. Which means we could be in for one Hell of a Halloween.
Echoing Mrs OOO, Cath spoke a lot about costs, a good news story in FAR’s office, not such a good one at Chez OOO. FAR has picked up Stena’s 2018 A Team at 2017 (rock bottom) prices and the JV is looking to book rig contracts for the 7000 SNE development wells within 12 months, before the oil recovery is considered real and rates are jacked up quicker than a jack-up rig. Most companies, said Cath, are now doing their economics on an OP of $60, although she admitted no one has a clue where prices might go.
(That sounded distressingly similar to OOO, who is doing his economics on a share price of a dollar, although his clues match no one’s in the above example.)
Ah, the share price - our raison d’être (or raisin d’être as Spell Check would have it!). In a word, frustrating, said Cath, fresh from watching another round of options disappear in a puff of market indifference to her Company’s achievements. She was reduced to listing the ‘great catalysts’ for price growth ahead in the second half of the year - and by crikey they are great: 100m barrels upgrading from Resources to Reserves, a little well in The Gambia, and ... what was it again ... oh, yes, arbitration. Cath barely needed to mention it, given her Chairman, new ball in hand, had opened the meeting off his long run and bounced COP and Co to within an inch of their miserable lives.
And make no mistake, Woodside’s life will be bloody miserable if FAR wins PE. Stuff ‘em, the Chairman said - I paraphrase - they screwed us because they reckon we’re chicken sheet hicks from the sticks. They’ll get sticks alright, because we will ram one fair up their clacker. Like I said, I’m paraphrasing, but his steely-eyed determination was pure Michael Collins. FAR will take no prisoners. Deflator year relief will mean just that. The clock will restart, FAR will read the sale contract denied to it two years ago (or at least Geoffrey Robertson will read it, because, yes, he is working for us), FAR will make up its mind if it’s worth paying $1.10 per barrel for 640m barrels of the stuff (it is!), and FAR will then find a way to stump up the cash in one hand leaving the other free to wave goodbye to Mr Coleman and his Texan mates. Perhaps one of them could lend him his .44 to ease the pain.
FAR is ‘likely to abstain’ - read will abstain - from next month’s JV vote on transferring Operatorship to Woodside and steadfastly maintains the Government has not, to this day, approved COP’s sale. ‘We see this as a very valuable asset to be bought very cheaply,’ said our Chief Herballist. ‘We will not be intimidated and we will not be bullied. We will pursue our rights very aggressively.’
In case I’m not being clear: If FAR wins, Woodside is ... (fill in the blank).
Oh, and by the way, said the Chair, don’t worry about what you hear about this PE thing being noise, or frivolous, or without merit - those are weasel words without reference to the merits of FAR’s case. In a nutshell, that case is:
> PE is standard in all contracts to protect the rights of companies that take on massive risk to initiate these exploration projects.
> The seller is required to show ALL the same information to all parties.
> COP refused to do so.
> COP and WPL both acknowledged FAR’s PE rights but now say we never had any.
> COP’s contract with Woodside made PE clear.
Szaba’s ‘company sale’ crap notwithstanding, one Geoffrey Robertson believes FAR has a solid case to mount. (Szaba, I will give you his hypothetical phone number and you can argue the toss with him and leave us alone for a while.)
So what would we do if we suddenly found ourselves with another couple of hundred million barrels of crude? One thing is for certain, there would be no shortage of buyers. There is a lot of interest from major players desperate to get a foothold in this basin, the Chairman said. ‘It is fascinating to watch.’
How could you hear this stuff and not want to strap yourself in for what is sure to be a fascinating ride. I’ve probably missed lots of interesting stuff that was said today, but no doubt the ensuing discussions here will prompt me to reveal all. In the meantime, gotta go - some bastard’s eyeing off the last biscuit!
OOO
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the US $2 billion is the total JV cost to first oil...
(20min delay)