FAR (ASX) The FAR success story

Originally posted by homeales ↑

Thanks for the long post it would appear that the Forum is returning to normality and a Community of Shared Interest. The market depth also appears to be cleaned out of traders with todays price drop. The bid and offer volume appears to have normalised.

In terms of FAR there are many challenges and demands on their limited Cash that could get in the way of "hanging on to" the Senegal Equity until much more of the value is monetised in the Share Price.

Also FAR Board and Management need to decide if the strategy is to stick with current business model or become an oil producer with its greater free cash flow in production. Are they prepared to sell as much of the other acreage positions and the furniture to stay with Senegal.

This strategy change brings with it its own organizational transformation risks and costs.

The AGM and Annual Report this year will be most illuminating and a key funding document - the market will want to know the strategic direction and believe they can deliver - otherwise it will be guessing the exit strategy and the patient shareholder will not be happy having their "equity" sold out from under them too early.

As a former financial modeller in corporate finance for long term projects and structured deals I have been perplexed why so many Research Houses get their pricing estimates wrong - I understand the conflicts of interest and management desire to guild the lily but the gap is too large. I think their models have left out key cash flow elements.

When one purchases a FAR share one is really entering an 8 year subscription agreement according to Potters assumption of oil flowing in 2022.

The cash flow funding needed to finance the field development will require more Capital Raisings, sale of other fields to finance the equity portion of the development cost. FAR does not have the Balance Sheet strength to debt fund that much.

The cash flow and uncertain corporate strategy is being severely marked down by the market.

The juniors I have seen over the years in Aussie have not been able to achieve it for any field size.

This needs big licks of equity and debt even with subsidized support from IMF, UN, World Banks, Sovereign Funds COP can do it doubt CNE or FAR can without being left with a small remaining interest.

Never mind the cash demands for other acreage to get them to a "valuable sale commodity the corporate cash burn keeps ticking over. Every year FAR keeps coming back to the well.

The cluttered Corporate Strategy needs cleaning up or mothballed as many of the targets from last year have not advanced that much and Senegal exercise will require the whole team to make sure we and them as big shareholders are not ripped off or bullied by big gorillas.

Change of operator to COP for the appraisal drilling would be a good move in the right direction as they are the world's best deep water field developers.

I will move my financial model from the back of the envelope to excel as I have examined many long term projects that were big NPVs but could never get off the ground because of the cash shortfall in the start up years and Government would not give them a Government Guarantee or cheap finance. I was in the latter part.

Finally I will go though the more sensible threads and place any trolls on ignore.

I departed as I was not interested in spending heaps of time identifying them.

PS I invested some of my spare cash again today and am in make money mode and savings mode to finance my small portion of the development costs and admin budget.

I will post my model when at stage suitable for peer review.

warm regards

HomeAles - Patient Investor

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I like this post HA, thank you for your thoughts....I am not a believer in a takeover (for reasons I have explained in previous posts) and I dont think Kenya should be taken lightly. I think that Kenya will have a profound impact on FARs future and I think it is still very big on CN's radar and FARs overall plans.

If a Kenya farmout on more favorable terms than Senegal (thinking cheaper platforms and FARs new-found strength) eventuates into more discoveries then FARs whole future financial issues completely transform.

It does sound like wishful thinking (I know) but Kenya does look very, VERY promising!

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(20min delay)
Last 52.0¢		Change 0.000(0.00%)		Mkt cap ! $48.05M

Open	High	Low	Value	Volume
52.0¢	52.5¢	51.5¢	$289.9K	557.5K

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