Goodbye High, page-5

Investors in junior oil explorer FAR welcomed a 45 per cent surge in the value of their company thanks to an oil discovery off Senegal that has triggered comparisons with the billion barrel-plus Jubilee find off Ghana.
The discovery, made by the FAN-1 well, was revealed by venture operator Cairn Energy in London and described as “transformational” for FAR by managing director Cathy Norman, who spent much of Tuesday afternoon at a celebration lunch in Melbourne.
London-listed Cairn has given potential oil in place numbers at FAN-1 as between 250 million barrels in the 90 per cent case, to 2.5 billion barrels in the 10 per cent case, with the most likely number at 950 million barrels.
Estimates of potential recoverable volumes ranged from 15 to 18 per cent of that by more cautious analysts to 30 to 40 per cent by others.
Ms Norman signalled that FAR was assuming towards the upper end of that range, given positive results so far.
Melbourne-based UBS oil and gas banker Gordon Ramsay, a petroleum geophysicist by training, drew a comparison between the find made by the FAN-1 well and the large Jubilee oil discovery made by Tullow Oil and Kosmos Energy off Ghana in 2007, the largest oil find ever off West Africa.
“Jubilee looks like a very interesting analogy to this,” Mr Ramsay said. “It is highly likely that this is a multi-hundred million barrel oil discovery”.
Ms Norman said the comparison with Jubilee was “fair, maybe not in terms of size because we haven’t proven that, but certainly in terms of significance”. “It’s probably going to open up a whole new area for exploration, that’s the significance more than anything,” she said.
WAVE OF EXPLORATION


Ms Norman said the find would open up a wave of exploration in the Senegal, Guinea-Bissau, Guinea area just as Jubilee did around the Ghana, Sierra Leone, Liberia part of west Africa.
FAR shares jumped as much as 60 per cent, before closing at 14.5¢, adding $120 million to the junior’s market cap.
Some believe it has much further to go, with NSW silk Timothy Robertson’s family company Farjoy buying another 53 million shares in FAR on Wednesday morning at an average of 14.13¢.
Mr Robertson, whose company now owns 10 per cent of FAR, took to the daytrader website HotCopper to explain his confidence in the Senegal play, describing it as “the best prospect off the upper west coast” of Africa. He pointed to several other “fan system” structures that could also be filled with oil from the same “source kitchen”.
Many risks still remain, however.
Respected US energy consultant Tudor, Pickering, Holt & Co said it was “good to see a play-opening oil discovery”, but raised questions over whether the discovery could be commercially developed.
The quality of the reservoir will be key, as that has caused a number of finds on the west African margin to be non-commercial, the consultant said.
PRE-DRILL EXPECTATIONS

Ms Norman said that stating commerciality of the find now would be foolish. But she said that at a conservative estimate of 350 million barrels of oil, the find cleared the hurdle to be commercial, which was 150 million to 200 million barrels.

“It’s clear that what we’ve got at the moment could be a stand-alone development, which is fantastic news. And we’re only just scratching the surface, there is still a lot more to come,” she said. US major ConocoPhillips, which owns a 35 per cent stake in the find, said preliminary results from the drilling were “encouraging” but noted that further evaluation was needed “in order to determine commerciality”.
Cairn owns 40 per cent, while Senegal’s national oil company Petrosen owns the remaining 10 per cent.