Hi All
Takeovers are a bit like the biblical parable - many are called but few are chosen. They happen less often than HC typewriter jockeys would have it.
That said, FAR itself never expected to get this far into the journey to oil. Having jumped every hurdle to this point, though, the Company finds itself poised to reap the considerable rewards associated with being a long-term oil producer. Any TO proposal, then, will be regarded as hostile and rejected.
Why so certain? Consider.
At 3.8 cents, FAR is valued at roughly $AUD400 million. Any TO offer - and for these purposes we ignore PE - would likely be pitched at no more than $AUD800 million, or double the current SP, roughly 8 cents per share. Weighing this up would be Farjoy at an 8 cent average, Meridian (6.5 cents or thereabouts) and other large holders who bought in during more buoyant times. What might they think about eight cents? (I agree that despite being welcomed aboard by FAR, Meridian's motives and behavior remain unknowns. With 20-odd per cent, Meridian will be the king-makers and at the moment we can only take FAR's word that they are benign fellow travellers. Time will tell.)
Bear in mind, too, that the Board is duty bound to consider the best interests of all shareholders. Directors would keep a 'running book value' for the entire business, not just SNE, and it would be considerably higher than $AUD800 million. SNE at first oil is predicted to have an 'unlevered NPV' of $US540 million ($AUD803 million). Whilst 800 mil now versus a still risky 803 mil in three years time might seem attractive, the Board would also be factoring in much more value to be added by Gambia discoveries, appraisals of SNE North and FAN, increased recovery rates at SNE, potential discovery at Guinea Bissau, etc. While none of these factors would count in the eyes of a suitor, they certainly count for FAR.
Remember, too, that just prior to Samo1 the market valued FAR at $AUD720 million - that was pre-Reserves/FID/funding etc. Does it not seem absurd that having added all that value, FAR in the market's eyes is worth a bit more than half of its pre-Samo value? Of course it's absurd and clearly results from price manipulation and/or shorting.
My gut feel is our Board would dismiss eight cents out of hand.
Resolution of PE is speculated to be the TO trigger. FAR has buttressed against failure by raising capital and senior debt in order to fund most of its SNE contribution. It seems to me the likely reason it has not yet finalised - or at least announced - its full funding package is due to the possibility of a PE settlement providing the missing funds. That would certainly strengthen the Board's hand and our SP should it happen.
Zip noted the other day that 'someone' had predicted FAR would be attacked relentlessly after choosing to see PE through and to stay in the production game. That was me, and thus it has been. Mind you, even in my darkest days I did not expect to see sub four cents. Just goes to show what's at stake here. FAR has had - is having - the kitchen sink thrown at it by forces that do not want it to be part of the action. It's speculated that Woodside is at the heart of the conspiracy, as it is both the PE opponent (forget COP) and beneficiary of FAR's demise. Woodside could not give a continental stuff about who found the oil and who is deserving of its benefit. It will do what it must to remain at the helm of a 30-year profitable enterprise and could well be directing proceedings. It is not, though, the only suspect. We do not know if other big players want in. It is also possible that shorters have played a large part - don't forget FAR raised capital at 11 cents and 8 cents in the past and those shares could well have been loaned to shorters in order to generate short-term returns. Who knows.
It certainly seems we are at the sharp end of things now, with PE due within three weeks and the battleground for its aftermath already prepared by the price shenanigans of the past six months. Must say I'm in Hardmano's camp - FFS just bring it on and get it over with.
6.30 Friday night. Beer o'clock. OOO over and out!
OOO
Expand
(20min delay)