hartleys report

What a Total Disapointment>>>>
However lets see what the next few weeks bring l am sure there is a lot more news to come shortly ...

Judging by the Massive trading and sell down to a constant 5 cents seems as the 3 Senegal leases were priced at 7.5 cents by the market now valued today at 0 cents.

Hartleys report on the FAR website ..........

Shell Elects Not to Drill Senegal

First Australian Resources Limited (“FAR”, “Company”) has announced that Shell has decided not to exercise its option to drill at FAR’s blocks located offshore Senegal.

This means that FAR will retain its 90% working interest and operatorship of the blocks. The Company will also receive US$3.5m as part of the agreement. Shell is required to deliver a technical report resulting from the Geophysical Evaluation Programme no later than the 21st September 2009.

Shell has not officially stated a reason for electing not to drill and we understand that a formal presentation will be made to FAR, Petrosen (the National Oil Company who holds the remaining 10% interest) and the Senegalese government at some time in the coming weeks.

Strong Balance Sheet
FAR has cash and receivables of >$20m, which represents 3cps of cash backing. The Company also has interests in assets in the USA and Australia that we value at 4-6cps.

Senegal Potential Remains
Several parties were interested in farming in to Senegal prior to the agreement with Shell. It is likely that at least one of these parties had different priorities than Shell in terms of prospect selection.

The results of Shell’s evaluation may show that the potential of some of these other prospects has not changed, meaning that there may still be farm-in interest. There is also the possibility that Shell’s strategy has changed (it has announced a global cost cutting strategy) and that Senegal is no longer a fit with the new strategy.

FAR will be seeking an extension to the current phase of the permit, as it expires on the 22nd November 2009. The next phase of the permit is the drilling phase, which FAR would not enter into without a farm-in agreement due to the expenditure commitment required.

Recommendation Change from Spec Buy to Neutral
Until the more detailed report is received, it is unclear what the value remaining in Senegal for FAR is. To be conservative, we have risked its value to FAR down to 0cps; however, will look to re-rate once the more detailed report is released to market.

In the meantime, we view any price below 4cps as very good value and have a short-term price target on FAR of 5cps.