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FAR poised to snap up new opportunities
Marija Zivkovic
Wednesday, 29 April 2009

FIRST Australian Resources’ recent exit from China, teaming up with Shell to explore Senegal and strong fiscal management has opened up new opportunities for the company.

Speaking to PetroleumNews.net, chairman Michael Evans said the company was in a strong financial position and was “poised” to take advantage of opportunities created by the global financial crisis.

“If you look at the sector, you will see that a lot of the junior oil and gas companies are enduring a lot of hardship at the moment and out of that comes a great deal of opportunity,” he said.

“We’re poised to take advantage of some of those opportunities and we will very prudently and very carefully screen opportunities that come to us.”

During the March quarter, the company topped up its coffers after reaching an agreement to sell its 5% stake in Block 22/12 in China’s Beibu Gulf for $US8 million ($A11 million) to South Sea Oil, a subsidiary of private South Korean company South Korean Majuko Group.

FAR will receive the payment in three tranches, with the first payment of US2 million made in April.

The company also carried out a share placement and convertible note issue, generating $7.25 million in new capital.

In addition to the share placement, the company joined forces with Shell to explore the offshore Sangomar, Rufisque and Sangomar deep blocks in Senegal, West Africa.

Under the agreement, Shell will fund a controlled source electromagnetic (CSEM) survey and a geophysical evaluation program over part of the licence area where drilling prospects have already been identified by FAR and partner Petrosen.

According to the company’s quarterly report, released on Monday, the CSEM acquisition phase is expected to start in the second quarter of 2009 and will be followed by processing, interpretation and integration of results.

Once the CSEM acquisition is complete, Shell will decide whether or not to exercise an option to acquire a 70% interest in the block and enter the second renewal period, which includes drilling a well.

Evans said the agreement with Shell has many benefits for the company.

“The Shell name speaks for itself. They’re at the forefront of this new technology which is called CSEM but known as sea bed logging.

“It is the domain of the major companies and for a small company like us to be exposed to that technology and to be involved in these large offshore concessions that you would normally attribute to major oil companies places us in a very strong position of leverage,” he said.

Evans went on to say that the use of sea bed logging increases confidence in the likely outcome of drilling expensive offshore wells.

In America, the company has cut back on exploration on its assets in Texas, Louisiana and California until US gas prices improve.

“We’ve got some producing assets which we will continue to maintain and we also have some good acreage and good portfolio positions which we’ll also continue to maintain,” Evans said.

He also told PNN the company has addressed every aspect of its cost base, including staff pay cuts, to ensure it is well placed going forward in the current economic climate.

“This has been a extremely difficult period not just for FAR but for all the junior oil and gas companies and I think that we’ve differentiated ourselves by rising to the challenge and actually achieving some great goals during probably the most difficult time that the sector would have endured in the last 70 years, and certainly in FAR’s case in its entire 24-year life.”