Extremely Rough Value Calculation, page-10

FAR's greatest chance of realising the best value is to retain the 13.7% and get finance. Assuming the fairies grant FAR this privilege then FAR sp could trade up around 8.5c before any additional capital raising dilution. I rate the chances of this occurring as very low.

FAR's best hope imo and highest probability option is for WPL to screw FAR for 8% or more of its holding and pay them something along the lines of 50% discount to WPL's book value of Sangomar which I estimate would be US $8.5M per percentage point. If this occurred WPL would pay FAR US $68M cash increasing FAR's cash reserves to US $145M approx. I am assuming WPL can make savings on the fpso of 10% and the other capex of 20% meaning that it would not be that unrealistic to see a total capex saving of 17% or US $690M reducing the total capex down to US $3.4B. FAR's remaining 7% drops to 6.44% after Petrosen backin so FAR would have a capex of US $219M plus contingencies. FAR would need to get senior debt loan of at least US $75M but lets round that up to US $100M which I think would be doable. I also would hope that as part of the deal with WPL was that WPL provide the loan as part of the deal using the 6.44% as collateral. I think this is achievable because WPL want at least 8% extra equity in the JV to ensure what they say goes and the upside is that they get the rest if FAR defaults.

Assuming this scenario plays out and oil rises back to US $65/bbl and using FAR's NPV calculations of US $640M for 13.7% and reducing that NPV down to the 6.44% then FAR's NPV would be US $300M. Not sure whether having less debt improves the NPV. The US $640M NPV assumed a debt of US $450M. At US $300M (Aud $420M) NPV assuming that transpired to sp value then FAR's sp could trade at 4.2c. That gives no upside to drilling at FAN, The Gambia and any increase in Permeability. FAR's free cash flow in this instance would be US $90M to US $100M after interest expenses assuming WPL charge FAR 2% above Libor. On a P/E ratio of 6 FAR sp could trade as high as 5c assuming capex write downs of US $30M ( US $60M profit = AUD $84M) each year over 7 years.

There are other possible scenarios but the best option is the WPL scenario above and for that to play out it would require Cath to do some serious crawling. I think the prospect of her and the board continuing to collect their big pay cheques should give her ample motivation to do so!