Ann: Annual General Meeting Presentation, page-34

Hi All

I watched whole meeting. I don’t propose to write a book on it, but here are a few highlights preceded by my impressions.

My takeaways

We are not dead yet. We will know before September whether there is life in FAR.

Volatility remains extreme but banks and industry still see long-term value in Sangomar.

The whole way through, FAR has had to dance to Woodside’s tune, including being saddled with the FPSO cost at the 11th hour.

Financing and total/partial selldown remain live options.

Our data room has been busy for two months and we are closing in on potential announcements.

Capex is likely to be reduced.

On the evidence put forward today, I will retain the remaining one-third of my original FAR holding. Based on me selling two-thirds, I retain a Sell sentiment even though I remain a holder.

Highlights

The Chairman explained the whole PE arbitration thing in detail. In short, you would have gone crook at the Board had it not had a crack. The Chairman confirmed FAR had an agreement in place to on-sell the PE percentage at a very large profit to shareholders. Unfortunately the tribunal found the JV wording was oblique enough to give Conoco wriggle room to sell the shell company.Our other argument was that in offering FAR PE as it did, Conoco had extended and then withdrawn a contract (which you can’t do in Oz but which was less certain in Senegalese and international law). The tribunal threw up its hands and said ‘too hard’, basically inviting FAR to sue Conoco. Limb said that would have taken years and tens of millions of dollars and just wasn’t worth it.

The allegation that FAR stuffed up finance was staunchly defended. FAR received the project plan, engineering design and budget/cashflow in late October. This suddenly included an exra $US1.1 billion to buy an FPSO. With the licence due to expire in December, the JV was being pressured by the Government to commit to the project. FAR believed they could have been convinced to extend, but Woodside and Cairn shat themselves and declared FID. Even still, FAR’s banks had signed off on finance and FAR was within a poofteenth of finalising junior finance. Then we got COVIDed and the whole deal collapsed. The Chair noted that even had the finance been technically in place, FAR would not have been able to draw on it. “If the bank has loaned you the money for your house and the house burns down prior to settlement, they are hardly likely to give you the money.” (That quote might be a bit wrong but its essence is accurate.)

So, where are we at?

FAR hopes finance is back on the radar, but as bank models have moved from $60-70 oil to $45-50 our borrowing base will be more like $250m than $300. FAR continues to line up equity/mezzanine top-up but is about $50-60m shy. It continues to promote partial/full sale as an option, with the data room busy with customers who see long-term value in Sangomar. Cath made the point about recovery upside but I lost the drift when our Club Captain called at an inopportune moment!

FAR can fund cash calls until September so is aiming to wrap up finance/sale before then.

Woodside and the JV are revising timelines, budget and scaling of project, with a new cashflow model due soon. (‘Soon’ has many interpretations given the history!)

I reckon that’s the guts of it.

OOO