An honest question around whether we will ever see these pricing levels again;
It is at times like this we have to remind ourselves to 'be greedy when others are fearful and fearful when others are greedy'. Also that 'short term the market is a popularity contest, long term a weighing machine'.
With FAR not reliant on day to day Oil price for revenue and with Oil beyond 2018 still sitting above $45 - Oil futures 2018 and beyond are still above the $45 USD mark - http://www.barchart.com/commodityfutures/Crude_Oil_Brent/CB?search=CB* - the low oil at the moment is killing off a lot of supply and will inevitably play into a spike, which will work out enormously to our benefit. We have already seen the benefits of discounted RIG hire and this all could play into the perfect storm, when the POO recovers in time for our production. All signs point to this being the case.
A incomplete list of what I think could significantly drive our Share price;
1. We have banked a de-risked SNE appraisal - A Bumper find with more to come from our CEO - more to come would assume that we will expand our current resource base and that opinion points to SNE-3 being as successful IMHO.
2. Oil looking like it has bottomed, with OPEC looking to the potential of an early meeting. Wanting Oil pricing to go to beyond $50
3. Geopolitical risk in the Middle East - with the potential to destabilise oil production, with commentators saying that if the Hormuz strait is disrupted Oil could shoot to beyond $200.
4. The US flying B52 Nuke capable bombers over North Korea and also antagonizing China in the reclaimed sea, either of which could escalate.
5. A tight hole policy in place meaning that the size of the find is shrouded. IMHO we will see a massive resizing.
6. Kenya looking to have more action around Oil, with new entrants drilling meaning we could see a re-rate of our resources there.
7. Our GB assets which sit near Senegal and supposedly with Geo similarities pointing to a lot of interest in the area.
8. CNE's operational update on the 19th, with many expecting CNE will want to save some glory for their presentation.
9. China's market turmoil and its indiscriminate punishment of the ASX. FAR is only based on the ASX and otherwise has no reliance on the Australian economy.
10. A capitulating AUD, with more pain to come. All income from Oil will be in USD - meaning the reduction will actually be better for us. (CR not withstanding, although read point 11).
11. All signs pointing to a commercial find, awaiting confirmation post SNE-3 - with the potential that CR's will not be required into the future (This is my conclusion after reading around many other commercially viable finds and their use of Debt financing - happy to stand corrected if not applicable);
Once we have deemed the find commercial post SNE-3 and revised our development plan then we should be able to look to debt finance in lieu of Capital raising.
I would expect that terms would be fairly stringent, given the conditions of Oil financing in the US, but with us being able to be commercial at 20% below 2014 RIG rates at the $40 USD mark, you would expect we could come in well under that given better than expected drill results and the exceptional flow rates. Also given the strengthening US dollar. And of course the lower POO.
Remember the CNE assumptions were made on a 20 well field for SNE, the jury is out as to whether this many will be required, whilst of course the overall size will be material to the commerciality also.
Even given the tight oil finance market, there is still an appetite for finance deals on commercial finds.
I don't know if I could stomach sitting on the sidelines, with any of the 11 points above once understood by the wider market enabling FAR's sentiment to change as it should. We have a top 20 accumulating, with a retail base who seems to oscillate by the day judging by the comments on the Hotcopper thread.
And at the end of the day, we have Malcy calling FAR one of his best Oil stocks for 2016, coupled with it being the most likely in a T/O Bid. With many expecting this to play, including me pre end of June.
All this considered, we might drop a few pips, but the upside is enormous.
I expect when we look back into the future - FAR will never be cheaper.
(20min delay)