Morgan Stanley Note Overnight

Fan South-1 appears to have found oil. No detail has been
provided on reservoir thickness. We assume the discovery is a
"technical success" meaning commerciality of this new find
could be challenging. No change to the previous SNE discovery
which remains world class.
FAR and its JV partners have recently reached total depth in Fan South-1. Fan
South-1 was a higher risk exploration well to the south-west of the discovered
SNE resource. Probability of success was 18% and we previously assumed no
value for the exploration well. The discovery has found oil, but no reservoir
thickness has been stated. FAR states, "further work is being undertaken to
integrate this discovery with FAN-1 to establish the commerciality of these deep
water basinal resources". We assume there is insufficient sand development
(challenge with previous FAN-1 result) but this is an assumption as no detail has
been provided by FAR.
The next well is SNE North-1. This exploration/appraisal well is targeting a
structure to the north of the existing SNE discovery. The probability of success is
higher (FAR estimates 60% chance of geological success). SNE North-1 could
form part of the existing SNE discovery or it could be a stand alone structure. If
successful, it is likely to be value additive given its proximity to the SNE discovery
meaning it could potentially be developed as part of a broader SNE
development. We remain Overweight.