FAR Ltd chief executive Cath Norman is one of a rare breed of oil CEOs, and not just because she is female in an overwhelmingly male-dominated line-up of industry bosses.
What also stands her out from the rest is the growth focus of her company in a sector preoccupied by cost cutting and debt reduction after the collapse in oil prices.
We mapped the prospects, and sited the wells, and really the discoveries are ours. It's been a wonderful ride for us.
Cath Norman
Sitting on the largest oilfield discovered worldwide since 2014, off the coast of Senegal, the Melbourne-based explorer is drilling again as it seeks further clues to unlocking a potential 1 billion barrels-plus of oil in its key acreage in waters off the West African nation.
With a 100 per cent record of success so far from five wells drilled, FAR has risen to become the fifth-largest pure oil and gas play on the ASX.
Its market cap of about $360 million remains relatively modest, but it has jumped up the rankings as once-larger players such as Senex Energy and Horizon Oil & Gas have faded on the falling oil price.
Still, life would be much easier for FAR had oil prices held up.
Different world
"We would be in a different stratosphere," Norman says in an interview in Sydney, two days after jetting back from her latest visit to FAR's Senegal operations. "Even if oil was at $US80 life would be very different here."
The SNE discovery in November 2014, stretching over a vast area of more than 300 square kilometres, is on latest figures estimated to hold about 468 million barrels of oil, about three times larger than originally anticipated.
Flow tests at SNE yielded higher rates than expected and at levels deemed commercially viable. The latest well is targeting the Bellatrix prospect, which overlies but is separate from the SNE resource and estimated at a potential 168 million barrels. The FAR venture's original discovery at FAN-1 involves a different play again, further off the coast, but could be included in a single production project with the others.
The finds are the first off Senegal since non-commercial signs of oil and gas were detected in the 1960s and 1970s, and have helped turn the country into one of the world's exploration hotspots. Woodside took up acreage off Senegal and Guinea-Bissau last month.
"It's where the biggest discoveries are being made at the moment," says Norman.
Joint venture
While FAR holds just 15 per cent of the venture, which is operated and 40 per cent owned by African oil specialist Cairn Energy, the Australian junior was responsible for picking up the acreage in the first place and developing it enough to attract partners of the calibre of Cairn and US major ConocoPhillips, which owns 35 per cent. Local Senegalese company Petrosen owns the remaining 10 per cent.
"We mapped the prospects, and sited the wells, and really the discoveries are ours," Norman says proudly. "It's been a wonderful ride for us."
Encouragingly, while Cairn has a lower estimate of the size of the SNE discovery, chief financial officer James Smith recently noted a potential break-even price "somewhere in the $US30 oil price range", even lower than today's depressed rates.
"We see the Senegal assets as one of the few deep-water oil plays that will be advanced in the current oil environment," says RBC Capital Markets, which has an "Outperform – Speculative Risk" call on FAR, with a target price of 15¢, 55 per cent higher than Thursday's close.
Development of the Senegal finds is still some way off, with Cairn pointing to likely production in 2021 using a floating production vessel flowing at 50,000 to 100,000 barrels of oil a day. The project could cost $US5 billion ($6.6 billion).
In the meantime, the venture is benefiting from sliding services costs, with day rates for exploration drilling rigs, for example, now about $US250,000 a day, down from $US650,000 a day in late 2014, according to Norman.
Investor support
While the negative investor sentiment pervading the oil and gas sector means FAR shares are significantly undervalued, according to Norman, the company has been well supported by its shareholders, successfully raising about $90 million in the last 15 months to fund drilling.
With the size of the discovery well above the 200 million barrels threshold seen needed for development and attractive economics, the Senegal venture has attracted interest from third parties wanting a piece of the action.
A formal "declaration of commerciality" for the project, expected before February 2019, will markedly reduce risks at the project and is expected to crystallise external interest. It would also trigger Conoco taking over an operator for the development phase.
Norman says FAR is "keeping all of our options" on the table as it considers whether it would see the Senegal venture through to production or sell out to focus on exploration and early development. But she points to the example set by Oil Search, now a $10 billion-plus business, which started out with just an 8 per cent stake in the Kutubu oil field in Papua New Guinea.
"I think we do have the ability to build quite a large company if we choose to," she said.
http://www.smh.com.au/business/ener...with-senegal-discoveries-20160321-gnn2ja.html
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