Clearly a two-day break from SP action is too much for us. Why else spend Sunday arvo (Vic) in front of a keyboard!!!
Some interesting discussions today as we all hunt for that vital ingredient that only time can provide - a certain outcome.
Our speculation naturally centres on value: What are we worth? How soon will it be realised? Our estimates vary from the wildly optimistic - "bigger than Santos" or Aqua's blue sky chart - down to Cobra's conservative 12.7 cents pre-2C results. Time-wise we range from "give me 30 cents now and I'm gone" through to Tim's long-term view which while not specified must logically run to some years.
Only in one scenario does a short timeframe coincide with a rapid increase in value, and that's a takeover. So what might that look like were it to happen sooner rather than later?
Our most-cited example is Tullow's takeover of Hardman for $2.02 per share, announced in Sept 2006 and completed in Jan 2007. Prior to the announcement, Hardman's shares were $1.31 although five months earlier they had reached $2.50 before problems at the Chinguetti project in Mauritania saw them marked down severely.
The takeover premium, then, was 55 per cent on the current price but actually at a 20 per cent discount to the price just months earlier. Now a 55 per cent return is good by any standards ... except I suspect if you are a FAR shareholder sitting here today, in which case it's miserly.
Given it's 'quote time', I too searched some out. Here's what Hardman Chairman Robert Carroll and MD Simon Potter said when announcing the board would recommend Tullow's TO offer:
Hardman managing director Simon Potter said the board recommended the Tullow offer in the absence of a higher bid because it represented both "an attractive premium to our recent share price, (and) captures potentially several years of the risked upside in our portfolio".
Chairman Robert Carroll said: "We welcome Tullow's offer as representing attractive value. The reality is, our assets in a development sense are immature and therefore some years away from producing revenue into the company. All this adds up to an increasing level of uncertainty about how quickly that share price can appreciate and bounce back."
Those comments seem to succinctly summarise our dilemma should an early takeover offer eventuate. The market currently appraises our two discoveries as being of very modest worth. That is, it ascribes significant risk to our current value. Our assets - even after the 2C results - will be as Mr Carroll describes: Immature and some years from producing revenue. Jubilee got off to a flyer and that still took 40 months.
In my view all this adds up to a pretty modest return for us should we cash in our chips and leave the table early. Let's say the 2C doubles our resource estimates and that market sentiment remains suppressed. That might see our SP reach, what, 20 cents after the announcement? And were COP to come in with a Tullow-like 55 per cent premium, we're gone for 30 cents (which would make the bloke I quoted earlier happy). That might satisfy many of us - and to be honest it would represent easily my biggest return ever - but would it be the best outcome?
Me, I'd rather play the long game; raise the funding, drill the appraisal wells at SNE and FAN; explore the buried hills; find every frigging drop of the billions of barrels of the stuff that the basin clearly holds; grab the UN cash and set new standards for carbon-free production; lead the Senagalese to a more prosperous future ... and make millionaires of all us shareholders.
Just by the by, my reading on Hardman also turned up one more interesting observation not unrelated to my previous paragraph: That one of the chief reasons Tullow was able to snaffle Hardman for a relative song was the short-term bias of Australian investors. "I would say that Australian (investment) houses are much more influenced by short-term cash-flow issues," said one analyst. "The UK analysts would look at the full life cycle of the assets rather than the short-termist approach of looking at near-term cash flow, which is volatile and exposed to risk."
"The full life cycle of the assets." Now there's a quote for the day!
OOO
FAR Price at posting:
9.4¢ Sentiment: Buy Disclosure: Held
(20min delay)