doctorj
Hatchet Moderator
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- 3 January 2005
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Re: FAR - First Australian Resources
Back in April, FAR MD Michael Evans announced in Resource Stocks mag that his aim was to replicate Hardman in being bought out as a result of their African acreage. It so happens that Baker McKenzie was one of the top legal advisers on M&A in Australia and the UK-based firm promotes heavily in the oil/gas market. Also, Merrill Lynch was the bank acting on behalf of Tullow in their T/O of HDR. So the conclusion I have come to (and looking at the market, so have others) is that someone's making a move on FAR or atleast building up a strategic stake in preparation for one. They would have motive to obscure the ownership through nominees and different brokers to reduce takeover speculation and make the eventual move cheaper. Essentially Baker McKenzie stuffed up by releasing the 603 - it should never have seen the light of day.
It may not be Tullow either. The likes of Dana (Tullow's partner in a neighbouring block) or BG who both were rumoured to be sniffing around HDR and missed out. Dana have also done a stack of work on large oil accumulation in a block in the south of the basin.
So what do "they" get for the $60mill odd it would cost to buy FAR at the moment?
The Senegal acreage is in the same basin as Hardman and the blocks (FAR 30%) had previously had 1bbo (1 billion barrels) of oil defined by Shell in the 70s by 2d seismic. FAR have just completed advanced 3d seismic over many of the larger targets and are in the process of generating drilling targets. Based on comparable blocks in the area that have completed 3d seismic and have a 2-3 200MBO+ recoverable targets mapped, you could argue a valuation of $500M for the Senegal blocks. In the last round, similar blocks went for ~$1b signing bonus only which would value FAR's 30% stake in the block at least at $300M.
They also have a 5% in the Beibu Gulf project with the likes of ROC, PSA & HZN which will be developed in the next year. This will most likely reduce to 2.5% stake when CNOOC exercise their option to farm in, but even then and using ROC's typically conservative figures for oil recoverable, it's not too hard to arrive at a valuation of $20M.
So, starting with a $60M cap, take out $20M for Beibu $10M for the cash balances. Their producing assets bring in about $4Mpa (worth $20M on a PE of 5), leaving just $10M for their acreage at South Gross Tette, all of the Suncor Canada acreage, Waller, Eagle and their drilling in Arc's EP104 next month, worth up to a combined $0.59cps if successful ($230M) to FAR as per the latest StockAnalysis report by Peter Strachan.
Essentially, this leaves a value of 0 for EV and Senegal - to my mind they're getting a bargain.
This is all speculation. As YT has found out, there are many companies out there where you can argue that it should be worth much more. Whether or not that happens is another thing. Whether or not FAR realises much of that value now or not is up to Mr Market to decide, but for the moment, the significant holder notice and takeover speculation has set things on their way.
Technically we're seeing a break of the triangle with a gap up and about 9-10x the long term average volume. Close today was a little unconvincing, but course of sales shows the sell down was on very small volume. EW suggests it seems to have traced out ABC and is now beginning a wave 1 and a larger order wave 3. I make out the target for the break of the triangle to be about 18.5, but with large numbers of stale holders from the May 06 highs, I think that might be tough in the near term.
Disc: I own a stack of FAR shares.
Remember this is where fact begins to blur with speculation.
Back in April, FAR MD Michael Evans announced in Resource Stocks mag that his aim was to replicate Hardman in being bought out as a result of their African acreage. It so happens that Baker McKenzie was one of the top legal advisers on M&A in Australia and the UK-based firm promotes heavily in the oil/gas market. Also, Merrill Lynch was the bank acting on behalf of Tullow in their T/O of HDR. So the conclusion I have come to (and looking at the market, so have others) is that someone's making a move on FAR or atleast building up a strategic stake in preparation for one. They would have motive to obscure the ownership through nominees and different brokers to reduce takeover speculation and make the eventual move cheaper. Essentially Baker McKenzie stuffed up by releasing the 603 - it should never have seen the light of day.
It may not be Tullow either. The likes of Dana (Tullow's partner in a neighbouring block) or BG who both were rumoured to be sniffing around HDR and missed out. Dana have also done a stack of work on large oil accumulation in a block in the south of the basin.
So what do "they" get for the $60mill odd it would cost to buy FAR at the moment?
The Senegal acreage is in the same basin as Hardman and the blocks (FAR 30%) had previously had 1bbo (1 billion barrels) of oil defined by Shell in the 70s by 2d seismic. FAR have just completed advanced 3d seismic over many of the larger targets and are in the process of generating drilling targets. Based on comparable blocks in the area that have completed 3d seismic and have a 2-3 200MBO+ recoverable targets mapped, you could argue a valuation of $500M for the Senegal blocks. In the last round, similar blocks went for ~$1b signing bonus only which would value FAR's 30% stake in the block at least at $300M.
They also have a 5% in the Beibu Gulf project with the likes of ROC, PSA & HZN which will be developed in the next year. This will most likely reduce to 2.5% stake when CNOOC exercise their option to farm in, but even then and using ROC's typically conservative figures for oil recoverable, it's not too hard to arrive at a valuation of $20M.
So, starting with a $60M cap, take out $20M for Beibu $10M for the cash balances. Their producing assets bring in about $4Mpa (worth $20M on a PE of 5), leaving just $10M for their acreage at South Gross Tette, all of the Suncor Canada acreage, Waller, Eagle and their drilling in Arc's EP104 next month, worth up to a combined $0.59cps if successful ($230M) to FAR as per the latest StockAnalysis report by Peter Strachan.
Essentially, this leaves a value of 0 for EV and Senegal - to my mind they're getting a bargain.
This is all speculation. As YT has found out, there are many companies out there where you can argue that it should be worth much more. Whether or not that happens is another thing. Whether or not FAR realises much of that value now or not is up to Mr Market to decide, but for the moment, the significant holder notice and takeover speculation has set things on their way.
Technically we're seeing a break of the triangle with a gap up and about 9-10x the long term average volume. Close today was a little unconvincing, but course of sales shows the sell down was on very small volume. EW suggests it seems to have traced out ABC and is now beginning a wave 1 and a larger order wave 3. I make out the target for the break of the triangle to be about 18.5, but with large numbers of stale holders from the May 06 highs, I think that might be tough in the near term.
Disc: I own a stack of FAR shares.
