First of all I'd like to say that I'm truly enjoying reading all the posts on FAR. There is a lot of positive feedback around the company and they deserve every bit of it. Cracking the play or 2 plays with the first 2 wells in a frontier basin is quite an achievement. Being able to do so they have substantially derisked the remaining prospectivity making me feel comfortable about the continuing success in the basin.
However, like many of you I have been wondering why the share price is still around $.07 and what is the likelihood of a 1 in front of the .07. So I did a back of the envelope calculation using NPVs posted in FARs presentation an assuming the SNE 2C of 330 mmbls (I'm well prepared for someone telling me its all crap). Now, all things being equal FAR's present market cap of $262 would be based on an NPV of ~3.7 or an oil price of ~$45 (assuming everything else in their portfolio has no value)
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
Column 5 |
Column 6 |
Column 7 |
| 1 |
2C (mmbls) |
$US NPV /bbl |
Total Value ($US m) |
FAR equity |
FAR value ($US m) |
$US / AU fx |
FAR value ($AUD m) |
| 2 |
330 |
3.7 |
2475 |
0.15 |
183 |
0.7 |
262 |
|
Column 1 |
Column 2 |
| 1 |
Oil $US/bbl |
$US NPV /bbl |
| 2 |
90 |
15.5 |
| 3 |
80 |
12.75 |
| 4 |
70 |
10 |
| 5 |
60 |
7.5 |
| 6 |
50 |
5 |
| 7 |
40 |
2.5 |
| 8 |
30 |
|
If this calculation is applicable I'd say the market is assigning FAR a fair value right now. What about the upside in volume coming in and an improving oil price of $55 for 2016?
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
Column 5 |
Column 6 |
Column 7 |
| 1 |
2C (mmbls) |
$US NPV /bbl |
Total Value ($US m) |
FAR equity |
FAR value ($US m) |
$AU / US fx |
FAR value ($AUD m) |
| 2 |
660 |
6.25 |
4125 |
0.15 |
618.75 |
1.43 |
884.8125 |
Here I doubled the 2C which increases FAR's value by 240%.
And what about that 1 in front of the .07 or an increase of 1400% assuming an oil price of $80 in 2020? For that to happen the JV needs to find a 2P of ~1400mmbbls.
|
Column 1 |
Column 2 |
Column 3 |
Column 4 |
Column 5 |
Column 6 |
Column 7 |
| 1 |
2C (mmbls) |
$US NPV /bbl |
Total Value ($US m) |
FAR equity |
FAR value ($US m) |
$AU / US fx |
FAR value ($AUD m) |
| 2 |
1400 |
12.75 |
17850 |
0.15 |
2677.5 |
1.43 |
3828.825 |
This doesnt seem unlikely and quite frankly they could be halfway there if the upside of SNE and Bellatrix comes in. Still, a long way to go but right now I wouldn't wanted to be a exploring anywhere else.
Please be aware that these calculations are only rough estimates and it is not my expertise but it would be great to hear your thoughts.
(20min delay)