FAR : Quarterly Activities / Appendix 5B Cashflow report

28 April 2022

March 2022 Quarterly Activities Report

FAR Limited (ASX: FAR) an independent, Africa focused, oil & gas exploration company, is pleased to provide its quarterly activities report for the quarter ended 31 March 2022.

Highlights

•  Changes to the Board and management with Non-Executive Chairman, Mr Patrick O'Connor, assuming the responsibilities of the chief executive, Mr Garth Campbell-Cowan appointed as Chief Financial Officer and Dr Alan Stein joining the Board as a Non-Executive Director.

•  A program of cost saving measures is ongoing.

•  Analysis of data collected following completion of the Bambo-1 well suggests that the well may have encountered the edge of two oil columns.

•  The Panthera prospect is located up-dip from one of these oil columns and is now the best ranked feature in The Gambia portfolio.

•  FAR is considering transaction strategies to maximise the value from its drilling investment in The Gambia.

•  It was determined that retaining the Woodside Contingent Payment of up to US$55 million within FAR as more effective than demerging the payment into a new entity.

•  Cash at period end of US$39.9 million

•  The new Board and management team are focused on a wide range of strategies to ensure that the share price better reflects the underlying asset value.

Commenting on the activities during the quarter, Independent Chairman Patrick O'Connor said:

"This was a transformational quarter for the company with changes to the Board and management and a commitment to fully explore all pathways to create shareholder value whilst simultaneously seeking to capitalise on our investment in drilling offshore The Gambia.

Although the recent Bambo-1 well did not result in a commercial oil discovery, our post well analysis and the results of laboratory studies suggests that we may have encountered the edge of an oil column in two of our reservoir objectives. Based on this analysis we have determined to secure a transaction with a suitably qualified third party to enable the Company to progress with its efforts in The Gambia.

After detailed investigation we will retain the Woodside Contingent Payment of up to US$55 million within FAR rather than demerging the payment into a new entity. This will allow the Company to more efficiently explore every opportunity to seek to reflect the underlying asset value in the FAR share price."

Board and management

Ms Catherine Norman was given notice of termination on 23 March 2022 from her role as Managing Director, effective immediately and has resigned as a director of the Company. Ms Norman will be available during the remainder of her 12-month notice period to assist with any transitional matters as required, in accordance with her employment contract.

Independent Chairman Patrick O'Connor has assumed the responsibilities of the chief executive during a period of transition.

During the quarter, Victoria McLellan resigned as Chief Financial Officer and Garth Campbell-Cowan has been appointed Chief Financial Officer. Ms McLellan will finish with the Company at the end of April following a hand-over period with Mr Campbell-Cowan. Mr Campbell-Cowan has been appointed on a contract basis for the period of transition of the Company.

During the quarter, Dr Alan Stein was appointed a Non-Executive Director.

The Gambia - Blocks A2/A5 (FAR 50% working interest and operator)

FAR has completed a review of the prospectivity of the A2 and A5 blocks offshore The Gambia, following the Bambo drilling campaign in late 2021.

The drilling and logging data obtained on the main well (Bambo-1) and the side-track well (Bambo-ST1) confirmed the presence of a prolific oil source in the area and that oil shows encountered whilst drilling were persistent over several hundred metres, confirming key reservoirs had access to this oil-generative kitchen.

Figure 1. Panthera Prospect S390 Depth Map

The primary reservoir in the Bambo-1 well (S440) is the lateral equivalent of the oil-bearing reservoir in the Sangomar Field in Senegal. Analysis of the data collected while drilling suggests that the well may have encountered the edge of the Sangomar oil column at this level however because the reservoir was of poor quality, samples could not be collected, and the result was considered uneconomic.

Oil shows in some of the shallower reservoirs in the vicinity of the S390 sands have demonstrated that an oil charge can reach reservoirs sitting above the oil-bearing levels in the Sangomar Field which broadens the vertical extent of the working petroleum system.

Analysis of the well results and laboratory data suggest that Bambo-1 penetrated the S390 package of sands within a transition zone close to an oil-water contact. The well was located on the down-dip edge of a large structural closure. If the reservoir sands encountered in Bambo-1 are within a transition zone close to an oil-water-contact then this large area of up-dip closure, now named the Panthera prospect is an attractive exploration objective.

There were also shows at this level in the Samo-1 well which also lies on the edge of structural closure. Both wells were located to test deeper reservoir objectives which is why they didn't test the Panthera prospect.

The valuable data collected from Bambo-1 and Bambo-ST1 wells has also high-graded the prospectivity of Jobo, Jatto and Malo prospects. The location and size of these prospects are shown in Figure 2.

Figure 2. Updated Block A2 and A5 prospects map

Table 1. Gambia Block A2 and A5 Prospective Resource volumes (unrisked, recoverable resources, 100% equity basis)

Low estimate	Best estimate	High estimate
Prospect	P90	P50	P10
(mmbbl)	(mmbbl)	(mmbbl)
Panthera	209	459	864
Jatto	249	464	811
Malo	128	389	885
Jobo	135	282	505
TOTAL PROSPECTS	721	1,594	3,065

Notes: The total volume for each prospect has been calculated as the arithmetic sum of the volumes for each target level. These volumes have been derived by FAR and are undergoing review within the Joint Venture.

Refer to disclaimer and notes to Prospective Resource estimates on page 7 of this Announcement.

The Gambia exploration assets strategy

The results of FAR's investments in The Gambia have thus far not delivered commercial success. As is often the case when drilling exploration wells in frontier basins, it can take several dry holes to find the sweet spots. Each of the wells drilled in The Gambia have provided valuable information which has improved our understanding of the petroleum system and assists in de-risking future exploration efforts.

The Board's strategy for 2022 is to ensure that shareholders can capitalise on the valuable data so far acquired without drawing down on existing capital. The Company will seek to secure a transaction with a suitably qualified party to ensure that this strategy can be enacted.

Depending on the nature of any transaction that might be secured the Board will consider the separation of the oil and gas assets by way of a demerger into a separate stand-alone listed entity. The Board considers that this should occur following achievement of a farm-out, which would have the effect of reducing FAR's exposure to the cost of the next exploration well. Any separate stand-alone entity would need to be sufficient in size and operations to justify such a listing.

Guinea-Bissau (FAR Nil WI)

During the quarter the Company advised that it had commenced steps to withdraw from its interests in the Esperanca Blocks 4A & 5A and Sinapa Block 2 offshore Guinea-Bissau. FAR has provided its notices of withdrawal to the Government of Guinea-Bissau and operator PetroNor in accordance with the relevant agreements. Joint efforts by FAR and operator PetroNor to collaboratively farm-down were unsuccessful.

FAR has already met the minimum financial commitments associated with the license, and there are no 2022 commitments in place. FAR does not expect to incur any new material expenses related to these interests.

FAR has previously disclosed a contingent liability of up to US$13 million payable in the event of production, and a contingent withholding tax liability of US$568k in the event of development, relating to the Guinea-Bissau interests. In the event of withdrawal FAR will not participate in any future development and production relating to these interests and therefore the contingent liabilities would no longer exist.

NW Shelf (Australia 100% WI and operator)

Through its wholly owned subsidiary, Lightmark Enterprises Pty Ltd, FAR has a 100% interest in Petroleum Exploration Permit WA-458-P, which is in the prolific oil-producing Dampier Sub-basin along Australia's North West Shelf.

Divestment activities for some or all of FAR's interest in WA-458-P are ongoing. FAR has a "drill or drop" obligation on the licence in early 2023.

Woodside Contingent Payment

The Woodside Contingent Payment entitlements are associated with the sale of FAR's entire interest in the Senegal RSSD Project to Woodside completed in July 2021. FAR received US$126 million in cash from Woodside as well as rights to the Contingent Payment as consideration for the sale. Following shareholder approval, FAR made a capital return to shareholders of 80 cents per share in September 2021.

The Woodside RSSD Sale Agreement contemplates a potential future Contingent Payment by Woodside to FAR of up to US$55 million payable dependent on oil price and production. The Operator's most recent estimate for commencement of oil production is 2023 calendar year. The Operator may update timelines to first oil and production targets from time to time.

Based on current statements by the Operator and current oil prices, your Board believes it is likely that the full US$55 million will be received by FAR over time.

As announced on 23 February 2022, the Woodside Contingent Payment was assessed by an independent valuation expert engaged by FAR at a mid-point valuation of US$39 million using a discount rate of between 9% and 10%. This assessed fair market value was based on the net present value of future projected cash flows and this value will increase with the expiry of time keeping all key valuation assumptions constant.

After careful consideration the Board has determined that retaining the Contingent Payment within the existing corporate structure of FAR is preferable to demerging it into a new entity.

The tax losses and capital structure of FAR may allow, when the proceeds of the Contingent Payment are received, for the consideration of a capital return to shareholders in a similar way as was done in September 2021, subject to the customary tax considerations at that time and obtaining an ATO class ruling.

Corporate matters

The Samuel Terry Asset Management off-market takeover offer for FAR at 45 cents per share, which was not recommended by the FAR Board, closed on 14 March 2022 without the offer conditions being satisfied or waived. Notwithstanding the closing of the takeover offer and the rerating of the FAR share price to its current level, the Board is conscious that the current FAR share price represents a discount to the Directors' assessed value of a FAR share.

FAR had US$39.9M cash at the end of the period (including US$1.1M in restricted cash held in The Gambia Joint Venture account). During the March 2022 quarter expenditure totalled US$1.5M in addition to the payment of outstanding Bambo drilling costs of US$14.2M noted in the December 2021 quarterly report.

A summary of the cash movements in the March 2022 quarter is set out in the table below.

31 March 2022 Quarter	US$M
Opening cash balance	55.6
Corporate and administration	(0.8)
Exploration	(0.7)
Total expenditure	(1.5)
Bambo drilling payments	(14.2)
Closing cash balance	39.9

US$6.8 million is presently budgeted to be spent during the year ending 31 December 2022 on FAR's project interest's, Gambia farm down and corporate and administration costs. The Board continues to review costs in the business with a view to reducing costs wherever practical.

The 2022 Annual General Meeting (AGM) is to be held on Tuesday 31 May 2022 at 11am (AEST). Further details relating to the meeting will be advised in the Notice of Meeting which will be distributed to shareholders shortly.