far smashed back down, page-15

extract from The Australian today...

in African oil and gas exploration specialist FAR Ltd (FAR) are best advised to hold on to their seats as they are in for one hell of a ride in the next 12-18 months.

The Melbourne-based group, headed by Cathy Norman of volley ball-spiking fame, is set to be involved in five high-impact exploration wells in Senegal and Kenya by the end of the first quarter of next year, with the cost of at least three of the wells to be picked up by big-brother partners that FAR has introduced into the frontier hunts.

This is what oil and gas exploration by juniors is all about. It is about being fleet of foot, moving early into new and unfolding oil and gas plays, then following up with enough desktop studies and the occasional bit of seismic survey work to entice a big brother with deep pockets to come in and drill high-cost wells on big targets, leaving the junior with a free-carried interest on a shot for the big time.

That is exactly the position that FAR, drawing on Norman’s 20 years of industry experience in the dark continent, has achieved, meaning that this year and the early part of next year are set to be as exciting as it gets for a junior oil and gas company.

Mind you, FAR is not all that small. Its shares were last trading at 4.3c but it has 2.5 billion bits of paper out there, giving it a market capitalisation of $107m, and an enterprise value of $77m after its cash holding of about $30m is taken into account.

Still, success in any one of the upcoming wells - particularly either one or both of the first two offshore wells off Senegal - would see FAR’s market cap become a multiple of what it is today.

In a research note by GMP Securities circulating in London last week, FAR was described as the “best funded small cap explorer in our coverage universe ahead of two fully carried, high-impact exploration wells (in Senegal)”.

“FAR, partnered with ConocoPhillips and Cairn Energy, has exposure to two (free) carried exploration wells offshore Senegal targeting 1.5 billion barrels of oil equivalent of gross resources with further follow up potential,” GMP said.

“The two wells offer blue sky upside of 35c a share or around 9 times FAR’s current share price. The keenly awaited first well will target the deep water slope fan play, targeting mean prospective resources of 900m barrels.”

It is not a long wait either. The drilling rig is expected to move from a Cairn-operated exploration program off Morocco to the site of the first Senegal wells in March.

FAR has held on to 15 per cent of the action. Needless to say, its leverage to success is extreme, while damage from failure will be mitigated by what could come from wells to be drilled later onshore/offshore Kenya, and offshore Guinea-Bissau.


http://www.theaustralian.com.au/business/opinion/take-care-until-iron-settles/story-fnciil7d-1226822947898#