You've triggered a few thoughts on various points:
Capital raising: Lets first talk about 'needs'. We all know that CNE has set aside US$95m for their share of the first 3 wells so FAR is in for a min of US$35m. But its early days; more SNE and FAN interpretation and more seismic to come. I believe it fair to say the first 2 SNE appraisal wells are givens at this stage. But we should all be prepared for new information to alter the program after that point and from all the feedback from the CMD, FAR pressos, lessons from Jubilee and COP conservatism, I'm betting that the program is more than likely going to expand beyond the 3 wells. And FAR should be prepared for this with an additional $44-55m. My reasoning for this quantity is that I think FAR should sensibly plan on setting aside US$50m for a 4 well program + seis, have about A$15m by end of June '16 after spending $1.25m/qtr admin and $16m for remaining 2014 drill bill.
How FAR raises this amount will be interesting. Even more so given CN's comments about raising capital on the back of early drill results in the beginning phases of the program. In the best of circumstances, a short form non- renounceable rights issue takes a minimum of 5 weeks. You can do this if all your information is static for a reasonable period up to and during the issue. But just try and do it in the middle of a multi-well program where material information and rumours are flying around the share price with unpredictable frequency. This gets even more problematic when you don't control the timing or release of such information. I wouldn't want to bank my CR program on COP, CNE and the Senegalese Govt agreeing to being quiet for 7-8 or so weeks to get an issue off from a cold start. There's also the additional complication, especially after a successful well, of obtaining the JV operator approval of any well/program information in the prospectus.
So for the above reasons, I'm thinking its more likely that the CR will come in the form of an underwritten non-renounceable rights issue (the instos can get in via the est 25% dead/OS element) before the drilling starts in October followed by quick, opportune placements during the drilling program.
Otherwise you do what everyone else does...toss the plan out the window and raise it when you can. LOL! Its a first world problem to argue dilution with shareholders when the coffers are full.
The order of the program: Don't be surprised if the order of the first wells changes to SNE2, exploration well, SNE3. They may need some time to analyse SNE2 results before going at No 3.
COP involvement: Its really nothing for COP to put a high powered exploration/pre-exploitation team of 30 together; they do it all the time and secondments are all part of the game. Even more so when exploration/development budgets are being slimmed which is great for us as there is a much better chance of getting an 'A' type team. And I'm very happy for COP to 'offering' all this as CNE really are not deep water specialists. (having said this, WPL knew SFA while playing Operator to some 1000+ Shell secondees for the NW Shelf and that turned out OK). CNE will try and hang onto Operatorship as long as it can; COP will take over when they've had enough (did anyone see CNE's 'there may be some timing/definition issues with operatorship' comment?).
Takeovers: God, I hope we don't have to go through the remaining 9,673 posts before it (may) happen. But I've got to go with history and form...all the oil majors have preferred asset purchases; not scrip bids (except in very, very few occasions). They and their legal teams absolutely detest and avoid the public attention and information outflow that such takeovers involve...especially if its a minnow. FAR will receive offers for their project interests long before we see an unsolicited open market bid from a major.
Share price: Don't sweat it. CN and GR will certainly have a strategy beyond just a few road shows to get the SP up to a more realistic CR range of 15-20c.
Cheers
FAR Price at posting:
10.0¢ Sentiment: Buy Disclosure: Held
(20min delay)