FAR (ASX) CNOOC and the AMI

Originally posted by Kfann ↑

Hi all,

I think I'm loosing my edge. Age catching up? Or just the ever thickening 'brain-fog' that increasingly shadows my return from holidays.

I missed what could be some important speculative observations in my "A2 deal" post of yesterday (warning: I cant remember the last time I had something worthwhile (that's questionable) to say 2 days straight).

But I got to thinking about CNOOC and the AMI. And it was something elemental09 said in his great post that triggered it: "...give each other the first right to negotiate should either decide to dispose of an asset in the AMI area."

Yesterday, I had incorrectly called it as a First right of Refusal. This is completely different to a first right to negotiate. (on reflection, no AMI should ever have a FRoR unless it was accompanied by some meaningful fiscal terms).

Nuf of the legals...what this means is that FAR could have offered CNOOC the first chance to bite on the A2/A5 blocks (which FAR can refuse). It could have had a time limit (up to 30 days) and then FAR could have opened the shop to all and sundry.

Point is that CNOOC could have got it if it really wanted it. So what possible reasons or distractions could have played a part here?

1) History

Under despotic President Jammeh, the Gambian O&G scene was a corrupt shambolic mess...perfect for the likes of Timis's APL whose expenditure commitments and legal hold on the Gambian permits have been very tenuous since 2014. The APL permits have always been 'at risk'. These ultra deep permits would have popped up on Big Oil radar as soon as the Fan and SNE1 were drilled, but the OP crash of late 2014 was enough to give country corruption greater prominence forcing pretty much all Big Oil coys to the sidelines.

But FAR had worked hard (with the help of their Senegalese Govt friends) to position itself to have first choice when the Jammeh govt was tossed. It only took them 3 months to finish the deal and only 3 months for a brand new govt to approve the deal. This is light speed for any African Govt and shouts volumes that FAR really does bat way above its weight in the region.

It is also noteworthy that FAR held off the CNOOC deal for 3 days after the Erin Farm-in.

2) Speculation

But Far's primary objective would have been to focus CNOOC on growing their Senegalese/SNE development/finance options. The secondary objective would have been to present an image of associated Big Oil ability and money to the new Gambian Govt to potentially back their commitments (a breath of fresh air compared to APL!)

I'm now guessing CNOOC was never going to bid or even be allowed to win a spot in A2/A5. Reason... Strategic Rule No XX (for FAR)...never tie your only 2 real assets to the one ship. Far, IMHO, wants (needs) CNOOC to be solely focused on being the lead corporate foil for FAR's priority....increasing SNE development/finance options.

Maybe this was the understanding all along and CNOOC specifically carved out A1/A4 from the AMI so it could have an un-associated run at some Gambian acreage.

I'm now pondering what the specific terms are of the Right to Negotiate in the AMI. These will be quite influential as to how and when FAR strategically sets CNOOC off as the lead stalking horse/bidder for SNE finance options.

3) Prerequisites to a SNE deal?

This, of course, must be played with consideration to 3 strategic prerequisites: the unforeseeable outcomes of PE, completion of the JV development proposal, and the final release of the RISC report

4) Conclusion.

It must be noted that FAR really have little or no say in these 3 which makes it essentially impossible for management to enunciate one clear pathway. There are literally several dozens of possible outcomes; the most likely of which I'll bet has not even been considered in any HC post.

Including mine!

Yet, I'm pretty sure its going to be one hell of a third quarter this year.

Cheers,

Expand

Kfann,

Re "Yesterday, I had incorrectly called it as a First right of Refusal." First right of refusal is correct.

From FAR.
"The CNOOC AMI allows CNOOC first right of refusal so should they not make an offer within a determined period of time then we are able to open the farm out to all parties interested."

KKW

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Last 36.5¢		Change -0.015(3.95%)		Mkt cap ! $33.72M

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36.5¢	36.5¢	36.5¢	$147	404

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