Hi all,
I thought it appropriate to share the response I received from FAR in relation to a number of questions I asked them. The questions cover topics such as Gambia, Future funding, PE, CNOOC and DJ. FARs responses are in red below.
Question 1: There appears to be uncertainty amongst some retail shareholders at the moment as to how FAR are going to fund SNE and A2/A5 into the future. Personally I am a little concerned that we’re are only partially funded for one (1) well in A2/A5. Assuming this well is a success – what will happen then? – Looking back at the extensive exploration and appraisal well / drilling campaign which was the result of a successful SNE-1 well – if the same thing happens in A2/A5 – FAR will need a lot of funds to get through an exploration / appraisal program (Especially with a 40% WI). Obviously this is something I am sure FAR Management are fully aware of and have planned for - Will this be funded by future Capital Raising or potentially through loans ? – One of my biggest concerns is dilution of shares as we already have over 5 billion shares.
Answer 1: The funding of the SNE development and any further work in The Gambia (or any of our other projects) are two quite separate issues. The SNE financing will not be funded with only shareholder equity. FAR’s share of the development is likely to be in the order of US$450M, of which approx half will be debt financed (traditionally banks and export credit agency loans for example) and the other half will be in what is called equity but this not necessarily shareholder equity. There are many options for funding this “equity” (various forms of mezzanine finance, offtake agreements, streaming …) available to the JV and FAR and we are investigating them at present. We will probably have a mix of these options in the final financing model and it may not include shareholder equity. For Gambia, we are not “partially” funded for one well, we are fully funded (to a cap of US$45M) for the well and all of the subsurface geology and geophysics associated with the drilling. It is a terrific deal and we are getting a free look at a very large prospect. Of course we are going to have to fund any follow up work. This is a fantastic deal for a free look at what could be an enormous oil field. I have not thought in detail about funding an evaluation program should we find oil in Samo-1. It will depend on the market at the time. We will not borrow money for an appraisal drilling program, funding will come from raising capital, selling assets or farming down and those options will be assessed at the time.
Question 2: In addition to the above, I honestly believe one of the biggest things ‘holding the share price back’ is the markets concerns around how FAR will fund future commitments (SNE / A2/A5). It would be great if FAR could potentially release more information about this in future investor presentations – the reason I say this is I believe the market are currently assuming ‘Capital Raising’ and therefore the SP is staying fairly stagnant.
Answer 2: I cannot give you any more information than I have stated above – I don’t have any more information at this stage.
Question 3:
Separate to the above, I note in previous correspondence that you have indicated that the Conoco/Woodside arbitration proceedings are ‘expected to take 12months’. I noticed that the ICC website states that ‘proceedings’ don’t actually start until a panel has been agreed upon and constituted. So my question is – have the ‘proceedings’ actually commenced or is this something that could potentially take another 12 to 18 months ? I was hoping we might have an actual result in April/June this year.
Answer 3:
There is nothing to add to our previously disclosed position – that is, that we expected the process to take about 12 months from filing (June 2017). As soon as a timetable becomes clear, we will advise the market.
Question 4:
What is happening with the CNOOC AMI? I had high hopes for the AMI but so far it doesn’t appear to have really helped us. Do you expect to have announcements in relation to this anytime soon?
Answer 4:
The AMI provides for FAR and CNOOC UK to work together on new acreage applications in Senegal and give each other a first right to negotiate should one or the other party decide to dispose of an asset in the AMI area. We are working together on new opportunities but the gestation period is quite long. I don’t know whether you are aware but we were talking to Erin Energy about a farmin to blocks A2 and A5 for 3 years before finally farming in.
Question 5:
What is happening with RISC? From memory all JV partners were going to get together to agree on figures and so on. Will this be released anytime soon?
Answer 5:
I attach my statement from the quarterly report on this matter – released 4 weeks ago. The status hasn’t changed.
FAR has been planning a revised update of the contingent resources for the SNE field and the neighbouring discoveries for release. The process is intimately related to the understanding of the commercialisation of the SNE field and is drawing to a close as the joint venture also concludes its position. FAR will release this data, after review by RISC, when this process is completed. The focus has of course been on ensuring that the SNE development planning is progressing as per the tight schedule proposed by the joint venture to enable government approval of the development plan by November this year and achieve the milestone of Final Investment Decision (FID) in early 2019.
Question 6:
What is happening with the DJiferee lease ? I believe FAR funded / undertook 3D Seismic activity on this lease. Obviously there have been multiple articles implying FAR / Trace / Cap Energy are having legal discussions – are FAR able to provide an update on this? Alternatively, if no discussions have taken place – can you advise if we are in fact going to do anything with this lease?
Answer 6:
You will have seen from our reports that yes, we shot a small 3D survey in the Djiffere block as part of our option agreement with Trace. We are currently discussing the way forward with Trace and have nothing further to say at this time. As per our ASX release, the statements made in a couple of media outlets claiming that FAR had appeared in a Dakar court or even had a legal representative appear in a Dakar court are completely untrue.
I hope you all find this information useful.
Ele.
(20min delay)