hartleys report

HI Farties ,


As usual Hartleys have released their report covering FAR expect some near term action as hartleys report usually comes just before incresed activity in the S.P

Hartleys report AUG 12 2010

FAR LTD
Senegal Farm-Out Efforts Continue

FAR Limited (FAR, Company) is reaching a crucial phase related to the farm-out of its 90% interest in 3 blocks, located offshore Senegal.
The current permit phase expires on 23rd November 2010, at which point FAR must commit to the drilling of a well. FAR has been in communication with several companies to provide it with a free carry on the cost of drilling the
well and reimbursement of past costs. The nature of these discussions is highly confidential and we do not expect an update unless a binding agreement has been achieved.

Deadline Approaches,
Alternative Option Available

Ideally, the Company will have secured a farm-in partner to provide a free carry on the drilling costs prior to the permit rolling over in November; however, another option is available.
It may choose to enter into the drilling phase, paying a non-refundable US$5m deposit. This would allow extra time
to finalise negotiations as well as providing leverage to possible success from likely drilling activity in H1 2011. Ophir has committed to drill the first ever deepwater well in the region in neighbouring acreage in Q1 2011.

In effect this is a US$5m option for FAR to retain exposure to the large potential of the Senegal acreage. The success of this strategy is largely
contingent on both the Companys ability to negotiate a farm-in (FAR has already bought Shell to the table) and on possible exploration success due to increased activity in the region by others.
The Company has the balance sheet strength to support such a strategy and we would view this outcome as more positive than walking away from the permit but less positive than securing a farm-in partner prior to the deadline. We remain confident in the Companys ability to secure a partner; however, timing remains the biggest question mark.

Guinea-Bissau Progresses
Large Upside Potential

FAR is commencing a 1,600 square kilometre 3D seismic survey over its 15% owned acreage located offshore Guinea-Bissau. The survey will also include bathymetry and gravity gradiometry. The acreage contains the
existing Sinapa oil discovery, which lies in 30m of water and has estimated oil in place of 240 million barrels. The nearby Sardinha prospect has estimated potential for 219 million barrels of oil in place. On an unrisked
basis, using a 20% recover factor, this represents 14 million barrels of potential, net to FAR.
This could be worth >20cps and has, in our opinion,
gone unnoticed by the market to date.

Significant Exposure to West African Potential
The level of activity off the West African Coast is set to increase, with several drilling programs scheduled to kick off in 2011. This is highly positive
for FAR, as it holds one of the largest undrilled acreage positions of any ASX listed entity in the region. We remain confident that FAR will secure a farm-in deal; however, are not willing to speculate on timing.
We retain our Speculative Buy recommendation and 6-month price target of 11cps.