The FAR Ltd (ASX: FAR) share price is one of the worst performers on the Australian share market on Monday.
In afternoon trade, the oil and gas explorer’s shares are down a massive 50% to 75 cents.
Why is the FAR share price crashing today?
The good news for shareholders is that the decline in the FAR share price has nothing to do with its performance or commodity prices.
Instead, this decline has been driven by the company’s shares trading ex-capital return this morning. This follows shareholders voting to approve a capital return last month at a general meeting.
What’s happening?
Last month the company’s shareholders gave the thumbs up to an $80 million return via a cash capital return of 80 cents per share.
This capital return was proposed following the completion of the sale of its interest in the RSSD Project to Woodside Petroleum Limited (ASX: WPL) for US$126 million.
Management advised that the $80 million return represents surplus capital and leaves the company with sufficient funding for its drilling offshore The Gambia and for ongoing purposes.
Eligible shareholders can now look forward to receiving this capital return next week on 28 September.
What now?
If you were to take this capital return out of the equation, the FAR share price would actually be trading 6 cents higher today.
For example, the FAR share price is down 74 cents or 50% to 75 cents. Whereas the capital return is for 80 cents.
This appears to be an indication that some investors are confident in the direction the company is taking with its drilling campaign off the coast of The Gambia. This includes the Bambo-1 well which is targeting a combined best estimate of 1.118 billion barrels of oil.
This could make FAR one to watch in the energy sector in FY 2022.
