Morning All And what a morning. Well, no one saw that coming,...

Morning All

And what a morning.

Well, no one saw that coming, did they? Here we were with CNOOC/WPL as a quinella ticket and Petronas flashes down the outside to win, leaving us perplexed punters to wonder about the owner’s tip of the Chinese sprinter. More like a Chinese gelding this morning.

We also underestimated the working interest FAR retained. Fair to say that 40% plus a virtual free carry on Samo is a better outcome than we’d hoped for. If - if, for those who consider me a ramper - Samo is same old SNE reservoirs and coughs up 800m barrels, then FAR just secured itself 320m barrels of oil at no cost. Not a bad negotiation - we’ll done to Cath and the gang.

Speaking of costs, of equal interest to the market in the immediate future is the implications for FAR’s funding. Currently it has $50m in the kick and spends $1.2m a quarter on staff, admin and Bollinger for mornings like this. Last quarter it paid out $8.3m in exploration costs, which I think brings it up to date on SNE bills. Ongoing, the only confirmed drill for 2018 is Samo and if we get a Stena-like performance I expect that to be a money maker rather than a cost, with Petronas paying FAR half of any underspend on what looks to be a more-than-adequate allowance for one well. The SNE JV has a prospective well pencilled in for Ruffiesque, but as our share is just 15% that would hardly dent our suddenly healthy cash position. Other spend is just sundries, as far as I can see. In short, I can’t see a CR on the horizon for at least 18 months, probably longer, so logically the market should reward this deal with an uptick of around one cent (or $50m, equivalent to our current cash).

But it probably won’t.

OOO