Consolidation

Morning All

With our threads wandering between topics, I thought it worth a quick discussion on a separate but important issue, consolidation.

Two - three? - AGMs ago, the Chairman said consolidation was “inevitable”, but had to be carefully managed to avoid destroying value. It seems to me we are now closing in on the opportunity to undertake this important milestone. Several factors are working in our favour:

> The oil price has recovered.

> Buyer sentiment has returned to oil stocks.

> FAR looks to have established a higher SP base.

> FAR’s register has tightened, with several cornerstone investors who - importantly - have appetite for more stock.

> DOC is imminent, bringing FAR within investment mandates for more instos.

> And lastly, FAR has two potentially massive game-shifting events on the horizon - Samo and PE.

Importantly, FAR’s Board boasts a Director with runs on the board in successful consolidations. In taking Beach Petroleum from zero to hero, the Admiral along the way consolidated its register in a value-accretive way. I asked him about this and wrote something at the time about his methodology. The detail escapes me now, but it included an incentive for holders of the newly priced stock to hang on to it rather than trade. Buyers were also in the wings to mop up any leakage. Without such strategies, consolidations are fraught, as we know.

The Board and Farjoy have visions of FAR as a large(r) and successful producer; it won’t get there while it’s in penny dreadful territory. I don’t think the timing for consolidation is quite right yet ... but it’s getting closer.

OOO