Hi there Flight, I've spent a bit of time in international...

Hi there Flight,

I've spent a bit of time in international resources M&A in the past (now earning a somewhat more honest (?) living) and while it makes a lot of sense for FAR to be targeted by majors, the reality is quite a bit different.

I think the first point to make is that majors absolutely detest the processes involved in undertaking a public acquisition on any micro-cap junior. Not all, but most equity teams have been thrown out of the big end of town for suggesting micro M&A. Big oil hates 1) public stoushes with minnows, 2) dealing with foreign regulators (ASX, FIRB, ASIC, courts), 3) dealing with small mum's and dad shareholders, 4) dealing with dominant major shareholders (Farjoy?), 5) having to deal with the minutia of the non-core assets, 6) Big Oil directors liability from compulsory acquisition to finalisation (can be 2-6 months), 7) the uncertainty of the process/outcome.

When really all they usually ever want is just a specific asset.

It is nearly almost always more efficient and practical to deal at the asset/project level. The exception to this is if there are substantial negatives to dealing at the project level which could include tax liabilities for the vendor of the asset, first right clauses for existing project parties, or project sovereign issues.

Big Oil will undertake corporate M&A but only at a material/meaningful level (usually a minimum of 10-15% of their MC). You simply wont see COP (MC A$66B) bothering to lift its skirt in public to take on FAR (A$0.36B). They just wont go through the hassle for what is a rounding error.

So the first port of call is to try it at the project level, COP would be doing as much as it can to get close to FAR. Oh, you can bet their internal corporate teams know the numbers on FAR inside and out and will be looking at all possible options to get FAR beholding to them at the project level.

This could include offering 'special' financing type packages to FID or beyond.

But my second point is very valid at the moment. COP (with US$23B of debt) and almost all of the other majors are almost completely shut down in being able to even consider a cash bid for anything that does not immediately improve their cash flow or balance sheet metrics. Any oil executive that puts up a proposal that does otherwise had better have steel cajones or an early retirement plan.

I'm not saying it wont happen at all....In fact I believe there's a much better chance of something happening from outside the JV....

But not until the timing is right...sometime within 6-9 months following DoC is my best guestimate for now.

The probability of the above being completely wrong is statistically quite high! (= waffle)

Cheers