Thanks as always for providing swanny.A couple of...

Thanks as always for providing swanny.

A couple of observations:

1. I wasn't aware (perhaps I knew a couple of years ago but discounted the timeframe) that KAR needed to drill 3 wells in Santos by March next year. This is achievable but requires KAR to start by July so getting the farmin sorted ASAP and ensuring there are no Transocean style rig issues is crucial. Potentially a little risk here up until the third well spuds on time.

2. Ivor Ries suggests that the farmin will take another 6-8 weeks. This suggests things are going a little slower than KAR previously expected. It also looks like the final value will be on the lower end of what we had hoped for 'strong chance that KAR will achieve its stated target' rather than a bonanza. Ivor seems to be suggesting costs plus 2:1 drilling costs for equity is a max. On this basis I think we may be looking at $60m cash plus perhaps 80% funding of 3 wells in exchange for 50% equity. So its possible KAR will need to raise another 100-150m cash in 2012. Perhaps another 20m shares @ $>7? (Surely they can't raise at $7 again following two previous CRs at that price going back 3 years?).

Otherwise a positive report. Hopefully the timeline for exploration on page 4 is met and the mid case (or better) valuations will ensue! Roller coaster 6 months ahead..