Cost of acquiring A2 and A5, page-2

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Oddoneout

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29/03/17

18:58

Post #: 23718099
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Originally posted by OFL8777 ↑

Just been working on what the possible costs to FAR will be depending on drill costs and farming out part of the two leases. All the below number are in millions

Firstly need to pay $5.18 USD upfront (in the next few months I would expect).
Secondly we pay for $8.00 USD either for drilling or if the drill cost is less than $40 USD the balance is paid to Erin, so regardless we are paying $8 USD for Erin's 20% share of drilling.

Cost so far $13.18 USD

If the drill cost is $25 USD for the well then our 80% share is $20 USD

Therefore the total cost to acquire 80% is $33.18 or $0.41475 per %

If we sold 40% as part of a farm in deal at the same costs, then our new 40% interest has cost us $16.59 USD
If we sold 50% on the same terms retaining 30% then the cost of our 30% would be $12.4425 USD

If drilling costs for the well go to the maximum expected by FAR eg $30 USD then our share of the drilling cost at 80% would be $24 USD, add the $13.18 USD as above and the cost of 80% equals $37.18 USD or $0.46475b per %

If we sold 40% as part of a farm in deal at the same costs then our new 40% interest has cost us $18.59 USD
If we sold 50% on the same terms retaining 30% then the cost of our 30% would be $13.9425 USD

So at the low end of my examples it could cost $12.4425 USD to own 30% of A2 and A5 which would reduce to 25.5% on development and at the high end $37.18 USD for 80% which would reduce to 68% on development (if the government takes up it's option of 15% of the project).

If these leases have even 1/3 of the SNE discovered in them(i.e. at least 200mb), it would be a very good move by management to acquire them, farm down and drill, because include in the cost to acquire is one drill result that should confirm if we're on the oil again. If they do find oil the cost per barrel would be a lot lower that what WPL paid for SNE (understand there is more rick for A2 and A5).Downside is spending up to a max of $37.18 USD with no result, but did FAR wait until the results of SNE5 where in before committing to A2 and A5? as you would have expected this deal to be in the pipeline for sometime. The reason being that if the sands flow tested at SNE5 are the same as those in A2, it may have been enough to push FAR into making this bold move.

Lets hope this time round FAR holds on to more than 15% as it would be a shame to farm down that much when you look at the costs and risks involved. Lets also hope that FAR can add value to the leases via the reprocessing of the data and farm down in such a manner that we make a profit on the disposal of the % sold.

IMHO

Zip

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Really appreciate your work, Zip. You add immeasurably to this forum.

I gave your 'sands' post a simple thumbs up yesterday because I reckon your question is spot-on. Has FAR drilled oil sands at SNE that it knows are present in A2? If so, then is that lease already derisked?

OOO

FAR Price at posting: 8.0¢ Sentiment: Buy Disclosure: Held
21 Upvote

0 Great analysis

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