FAR 1.23% 40.0¢ far limited

Blue sky? Or aqua?

  1. 2,961 Posts.
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    Morning All

    One of the positive signs in an uplifting week just gone was the re-emergence of several of the old hands on this forum. What a pity, then, the Malcy's Update thread deteriorated this morning as we head towards another trading session. Obviously this was coincidental. It did, though, prompt me to start another thread after speaking to another old hand who used to carry the water bag on here.

    He remains fully invested and fully engaged with the stock. He also keeps his ear to the ground and likes what he hears about FAR's medium term prospects.

    The greybeards here will recall this bloke used to cop a bit of flak for his bullish predictions, so I thought it worthwhile revisiting some of them to see how they are tracking two years on.


    > SNE would top out at a billion barrels plus recoverable. We are about to find out how close that guesstimate was, but Cairn's geo recently talked in a public forum about "a billion barrels recoverable", so let's give our man a tick for that one.

    > SNE was but part of a 'giant SNEball' that would likely produce a multi-billion barrel field. We don't know the outcome yet, but we do know oil has been found in a lower target at SNE North and that Sama has been mapped as a 500m barrel prospect compared with the original 150m barrels mapped at SNE. A tentative tick, then.

    > While the low oil price would suppress the share price, it would enable FAR to appraise SNE at low cost. Huge tick. The appraisal is compete and Malcy tells us every well exceeded expectations. In my view, this means the 'dilution' in our shares has been more than compensated by increased value. Huge tick.

    > The exploration slash-and-burn engendered by low oil prices would create supply issues leading to a sharp spike in oil prices as FAR brought SNE to market. Okay, so the short-term spike has been artificially created by the Saudi-led production quotas, but the forward price curve now suggests those exploration cutbacks are likely to lead to a sustainable price increase in the medium term. We're not quite able to tick this prediction yet, but it is looking to be on track.

    The current price spike has certainly - in his view and mine - created an environment in which FAR is suddenly coming into play as a 'target'. He thinks takeover; I am less bullish on that because of the oft-discussed PE issue and the lack of certainty about the size of the elephant lurking under the A2 waters. (Not to mention A5, SNE North and Guinea Bissau.) I think it more likely that FAR will sell SNE and punt on The Gambia delivering another mammoth, but, again, the uncertainty about PE makes this challenging in the short term. I can't even see how you could draw up a prospective sales document, given a favorable arbitration would (I think) simply restart the PE process and its consequent uncertainties. (Might Cairn, for example, throw its hat back into the ring despite having lifted the bat first time around?)

    This new round of speculation is based on Malcy's assertion that Cairn is likely to sell SNE - at the right price - and that negotiations to do so might now be underway. A 'boom time' price - unlikely but maybe now possible with oil at $62 and rising - for Cairn's 40 per cent would put a cat amongst the pigeons and bring FAR's share into play. With the RISC report imminent, it would certainly see FAR shorters scrambling to cover and put a rocket of sorts under our share price.

    ... speaking of which ...

    Our man was widely derided for his bullish price prognostications, and there was perhaps a little too much aqua sky built into some of them. But his base forecast of a dollar, whilst seemingly still fanciful at seven cents, is suddenly less wild than at any time over the past three years. Rising oil price, rising SNE numbers, enthusiasm from all who have looked at the Sama prospect, remapping at SNE North, PE, talk of Cairn selling out, CNOOC's inscrutability ... it all adds up to a heady brew of intrigue.

    Work it back. A dollar means a market cap of $AUD5.5 billion, or 550m barrels averaged at $AUD10 ($US7). With 84m barrels in the kick as we speak, it seems a pipe dream. But then if SNE doubles, we're at 170-odd. And if Sama is as big as most believe (Malcy talks to people), and we own 30 per cent of it, then we're nearing the target. Who knows, if oil continues its march we might even attract a premium for our other assets.

    And if your grandmother had agates ... yes, yes, I get it, but the same bloke who is now again speculating about a dollar party thus far has a pretty good track record. I'm not ruling it out.

    OOO
 
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Last trade - 16.10pm 29/03/2024 (20 minute delay) ?
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