FAR LIMITED — Interim / Quarterly Report 2013

Jul 30, 2013

1 April 2013 to 30 June 2013

Highlights

• Government approval of Cairn farmin to Senegal acreage: finalises US$80M funding for a well and US$10M in cash due this quarter

• US$3 million from sale of Beibu Gulf project due this quarter

• AGM held 27 May

• Cash and term deposits at end of quarter of AU$18.6 million

Projects Update

Offshore Senegal (FAR 100% and Operator)

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FAR permits offshore Senegal, AGC and Guinea Bissau

During the quarter, the Government of Senegal formally approved the FAR farm out to Cairn Energy PLC, a UK listed oil and gas company (announced 19 March 2013).

Cairn has also secured a long term contract with Transocean for the “Cajun Express” drilling unit. The rig, which is on an initial one year contract, will be used on Cairn’s planned multi well frontier exploration program in Senegal, Morocco and potentially other areas.

Subject to obtaining the necessary approvals the rig will be mobilised to begin operations for Cairn, offshore Morocco in H2 2013 with an exploration well in Senegal planned early in 2014.

The terms of the farmin deal included:

• FAR being fully carried through first exploration well - expected early 2014

• FAR to be paid approximately US$10 million for back costs

• FAR and Cairn to enter into an alliance offshore Senegal

Cairn will assume its role as Operator of the Joint venture from 1 August 2013 and will acquire a 65% working interest (WI) by fully funding 100% of the costs of the exploration well and testing to an investment cap of US$80 million. In addition, Cairn will pay FAR US$9.8 million for past costs incurred on the block. FAR will retain a 25% WI.

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The well will be drilled on the offshore Sangomar Offshore Profond block into the “L” Prospect mapped by FAR as the Lupalupa Prospect carrying a prospective resource of 154 million barrels of oil (unrisked, best estimate, 100% basis as announced 27 February 2013). Success in this well would open the shelf plays where there is significant upside potential (as released 27 February 2013).

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Mapped prospects in the offshore Sangomar Profond 3D seismic area

Inventory of mapped prospects (as released 27 Feb)

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FAR’s three contiguous Senegalese blocks – Rufisque, Sangomar and Sangomar Deep – have significant exploration potential. The blocks cover an area of approximately 7,490km[2] within the productive MauritaniaSenegal-Guinea-Bissau Basin. From 2,050km[2] of modern 3D seismic data acquired in the blocks, FAR has identified a number of play types and has mapped 11 potentially drillable prospects as well as numerous other leads, many supported by associated seismic amplitude responses. In combination, the Senegal blocks have prospective resources of 3.585 billion barrels of oil (unrisked best estimate, 100% basis).

After the carried well, exploration costs will be apportioned Cairn 72.2% (WI 65%) and FAR 27.8% (WI 25%). Petrosen (the Senegal National Oil Company) will continue to hold a carried 10% WI through the exploration phase in accordance with the Production Sharing Contract.

Rufisque, Sangomar, Sangomar Deep	Working Interest
FAR	25%
Cairn Energy	65% Operator
Petrosen	10%

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Kenya Projects – L6 Block (60% operator interest), L9 Block (30% interest)

The L6 and L9 blocks lie in the Lamu Basin offshore Kenya, north of recent, world scale, natural gas discoveries totaling around 100 trillion cubic feet off the coasts of Mozambique and Tanzania. The first well in the Lamu Basin, the Mbawa-1 well was drilled in August 2012 by Apache in Block L8 (located between FAR’s L6 and L9 permits). The Mbawa-1 well, which encountered 52 metres of net gas pay and had possible indications of the presence of oil, has demonstrated the existence of a working hydrocarbon system in the Lamu Basin.

Growing interest in the Lamu Basin’s exploration potential is reflected in the fact that up to 9 wells are planned to be drilled over the next 12 to 18 months. Anadarko Corporation recently announced non commercial oil in the first of their two wells offshore Kenya. This discovery in the Kubwa Prospect, Block L7, is the first recorded oil discovery for offshore Kenya and highly encouraging for FAR’s L6 Block. Anadarko are expected to announce the results of the second well in the Kiboko Prospect, Block L11B, in the coming quarter. Further success in this well will be significant for FAR as the L6 and L9 blocks neighbour these Anadarko blocks as shown in the licence map below.

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Block L6, Kenya (FAR 60% and Operator)

The fast track results from the 3D processed data acquired over the L6 block offshore Kenya were received in October 2012. The results from the high quality fast track data are very encouraging and provide further technical support for the previously identified Tembo and Kifaru prospects. The delivery of the final 3D data was received at the end of April 2013. Extra processing was required over the newly identified carbonate reef play and to enhance the resolution over the Tembo prospect. The Joint Venture resumed its farm in initiative in May.

FAR has identified two key play types in the block, the Tembo structural play and the Kifaru reef play. Both of these plays will be tested at the end of the year by Apache in Block L8 (reportedly drilling the Tai prospect on the Mbawa/Tembo trend) and BG (drilling the reef play) in Block 10A or 10B.

Well planning activities for drilling on L6 have commenced for a well in 2014. The Environmental Impact Assessment (EIA) for drilling has been approved and detailed well planning will be progressed following the selection of the preferred well location.

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Image showing prospect inventory for the L6 block (as released 27 Feb)

Kenya Block L6	Paying Interest
FAR	60% Operator
Pancontinental Oil and Gas	40%

Block L9, Kenya (FAR 30%, Operated by Ophir Energy)

On the L9 block, negotiations are nearing completion on a Joint Operating Agreement and Deeds of Assignment. Ophir, the Operator of L9, has proposed a future work program that includes a 3D seismic survey and an exploration well.

FAR hold a 30% interest in L9.

Kenya Block L9	Paying Interest
FAR	30%
Ophir Energy	60% Operator
Vanoil Energy	10%

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Offshore Guinea Bissau (FAR 21.43%, Operated by Svenska)

In December 2012, the Government of Guinea Bissau approved a 3 year extension to the current exploration term. The extension period which begins on 26 November 2012 has no work program obligations.

FAR and its Joint Venture partner Svenska Petroleum Exploration AB has approved a work program and budget which includes one appraisal well and one exploration well. Svenska is making preparations to drill the first of the two wells in Q2 2014. The well will be drilled into the Sinapa Oil field discovered by Premier in 2008. FAR has a 21.43% paying interest and 15% working interest in the Sinapa and Esperanca blocks offshore Guinea Bissau.

FAR continues to monitor the political situation in country very closely and is planning its expenditures accordingly.

Sinapa (Block 2), Esperanca (Block 4A/5A)	Paying Interest
FAR	21.43%
Svenska	78.57% Operator

AGC Profond (FAR 10%, Operated by Ophir Energy)

During the quarter the Joint Venture partners Ophir Energy and FAR approved a firm work program and budget incorporating a full technical evaluation of the PSC’s prospectivity. On the completion of this phase of work, the Joint Venture will then determine an appropriate work program and budget.

AGC Profond	Paying Interest
FAR	10%
Ophir Energy	90% Operator

Australia (FAR 100%, and Operator)

Work continued on reprocessing existing 2D and 3D seismic data and planning a 3D seismic survey for later in 2013.

WA-457-P, WA-458-P	Paying Interest
FAR	100% Operator

China

FAR expects to receive a US$3 million payment in this current quarter in relation to the sale of the Beibu Gulf assets in 2009. This will be the third and final installment of the total US$8 million sale price. This final US$3 million will be receivable on satisfaction of conditions stipulated in the sale and purchase agreement, being the production of 1 million barrels of oil from the project. On 30 June 2013, the operator reported cumulative production had reached 929,303 barrels and production was at approximately 10,000 barrels of oil per day.

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Management comment

FAR continues into this next quarter with a strong cash position with cash and cash equivalents of AU$18.6 million. Additionally in this next quarter significant cash inflows of US$9.8 million are expected to be received from the Senegal farm in transaction and a further US$3 million to be received from the Beibu Gulf project sale.

In the last quarter, FAR announced that UK listed Cairn Energy will be partnering the company for its first exploration well in Senegal. This farm out has been the result of intensive reworking of the acreage prospectivity over the last 9 months and three months of negotiations with Cairn Energy. Cairn will be funding the first US$80 million towards the cost of the well (including testing). FAR expects to be fully carried through this drilling. In addition, Cairn Energy will be reimbursing US$9.8 million in cash to FAR for back costs. This payment is expected to be made this coming quarter.

Further, Cairn has secured a rig for drilling offshore Senegal and plans to spud early 2014.

Formal Government approval of the farm out to Cairn was received during the quarter.

Plans continue to identify a partner for drilling our Kenyan wells. The delay in delivery of the final seismic data delayed the timetable for farm out. However the additional L6 acreage secured during the quarter and the identification of the new carbonate reef play has had considerable positive impact on the prospectivity of the L6 block. The company will be continuing the farm in initiative over the forthcoming quarter following the receipt of the final 3D data. The two year extension to the drilling timetable has reduced near term forecast cash outflows and will enable the company to glean valuable information from the surrounding wells before selecting an L6 drill target. There are no expenditure commitments on Block L6.

In the current stock market turbulence, the company is in the fortunate position of having minimal financial commitments and a strong cash position that will be bolstered by the Cairn payment, due in the forthcoming quarter.

During the quarter, the company also held the AGM on 27 May in Melbourne.

For further information, please contact

Melbourne Office
Cath Norman
Managing Director
Phone	+61 3 9618 2550

Media Enquiries
Ian Howarth
Collins Street Media
Phone	+61 3 9223 2465

www.far.com.au info@far.com.au

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