2 weeks from Today..., page-198

Morning All

Thanks to MMM for his insightful post about the latest BP research note.

To be honest, it excited me more than the looming PE resolution, which my pessimistic side accords a low winning prospect. Just as we here follow the money (none of which has departed), FAR is now avidly following the oil.

One tends to be sceptical when explorers talk up dusters as having ‘provided valuable information’. A duster is a duster, is it not? This time, it seems not. While Samo was deeper than prognosed, and therefore disconnected from SNE, it had nonetheless contained oil at some point. Only a faulty seal, er, sealed our fate.

So where did the oil go? It went somewhere, and FAR is now on its tail, chasing it up the geological tree, as it were, to higher points. So excited is FAR by what it saw in Samo that it has lifted its targets - literally and figuratively - for oil in place in A2 and A5. We will know within 12 months - maybe less - whether that confidence is well placed.

So the market now has two horses to ride - PE and Samo 2.0 (likely to be Soloo). If I were a betting man - I’ve held FAR for five years, for heaven’s sake, so I think that question is answered - I’d wager Petronas will partner us in that next well and that there will be an optional second well slated. (By the time that rolls around you will have forgotten this prediction, so I’m on pretty safe ground here. ) We can expect the SP to run up ahead of the PE announcement - October/November? - whereupon it will fall sharply on a loss or rise stratospherically on a win. If that latter happens, and if FAR is still standing - big if - the price will go ballistic if that next well proves up FAR’s remodelling for The Gambia.

Big statements. Big dreams? Well yes, but dreams spawned within reasonable limits of possibilities. For mine success in Samo 2.0 is the more likely, but PE can’t be ruled out while it remains alive.

FAR is currently valued at $AUD400 million-odd, which seems laughingly low for a Company with 120m barrels of fully appraised oil, a third of which are on the cusp of FID and should alone be worth our current market cap. In my view we now trade at a significant discount to our current worth, let alone any potential upside from PE, Samo 2.0, appraisal of three other discoveries (remember them?), and SNE recovery rates likely to be significantly higher than the 10 per cent declared to this point.

We all talk a lot here, much - most? - of it hollow opinion. Meanwhile, Cath and her team methodically go about building a Company that in my humble view is steadily building shareholder value irrespective of today’s share price. My SMSF and I look forward to the market catching up.

OOO