FAR LIMITED — Interim / Quarterly Report 2014

Jul 30, 2014

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01 Apr – 30 Jun 2014
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Highlights

• Drilling commenced on first well offshore Senegal targeting 900 mmbbls oil*

• Strong cash position of $42.7 million with no debt

• AGM conducted in May

• Successful raise of $8 million

Projects update

Offshore Senegal (FAR 15%)

On 17 April 2014 FAR announced commencement of drilling on the FAN-1 well offshore Senegal in partnership with Cairn (operator) and ConocoPhillips.

FAN-1 is the first of two back to back exploration wells that are targeting approximately 1.5 billion barrels (225 million net to FAR) of unrisked best estimate prospective resources. With approximately 900 million barrels (135 million net to FAR) to be tested in the deep water FAN-1 well and 600 million barrels (90 million net to FAR)* to be tested in the SNE-1 well (reference: ASX release 27/02/2013).

Under the terms of the ConocoPhillips agreement, ConocoPhillips will provide funding equivalent to a carry of FAR through the first exploration well to a cap of US$116 million in exchange for a 10% working interest in the Senegalese permits. This funding takes the form of cash payments and well carry cost payments. All cash payments to FAR have now been completed by ConocoPhillips (totalling US$10.4 million of which US$8.89 million was paid to FAR during this quarter).

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FAR permits offshore Senegal
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Cairn will fund 100% of FAR’s costs of the second exploration well offshore Senegal to an investment cap of US$80 million. In addition, Cairn has paid FAR US$9.82 million for past costs.

FAR retains a 15% working interest in the permits. ConocoPhillips and Cairn will hold 35% and 40% respectively. Petrosen, the Senegal National Oil Company, has a 10% carried interest through this exploration phase.

During the quarter, the FAN-1 drilling operations were suspended on 19 June 2014 by the necessity to undertake unscheduled rig maintenance during the period. The Company announced on 28 July that drilling had recommenced and at the time of writing, drilling towards the first of the targets is progressing. The unscheduled rig maintenance has resulted in a revision to the estimated cost of the two wells and currently FAR estimates that its future funding contribution for the drilling program from its existing cash reserves will be approximately $24.2 million (US$22.5 million). FAR’s cash balance at 30 June 2014 of $42.7 million includes cash payments totalling $22.2 million from its farm out deals with both Cairn and ConocoPhillips (reference: ASX release 30/6/2014).

• Refer to Cautionary Statement in this report (page 5) relating to estimates of prospective resources

Both prospects have significant follow-up drilling potential in the event of a discovery. FAR’s three contiguous Senegalese blocks – Rufisque, Sangomar and Sangomar Deep – cover 7,490km[2] . From 2,050km[2] of modern 3D seismic data acquired in the blocks, FAR mapped 11 potentially drillable prospects as well as numerous other leads, many supported by associated seismic amplitude responses in plays including the ‘fan’ and ‘shelf’. FAR has assessed its Senegal blocks to have prospective resources of 3.585 billion barrels of oil (538 million net to FAR) (reference: ASX release 27/02/2013) .

The drilling program has been designated as “tight” by the Operator and hence no information related to depth or formation will be provided during the drilling beyond what is required to meet ASX continuous disclosure obligations.

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SENEGAL
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Figures 1 and 2: Location of the two Senegalese wells in the FAR 3D seismic area, offshore Senegal

Rufisque, Sangomar, Sangomar Deep	Working Interest
FAR	15%
Cairn Energy	40% Operator
ConocoPhillips	35%
Petrosen	10%

Block L6, Kenya (FAR 60% offshore, 24% onshore and Operator)

In the previous quarter, FAR completed it’s third farmout to the Milio group of companies (reference: FAR ASX release 04/02/2014) . As a result, FAR is fully carried through an onshore well and an onshore 2D seismic survey and associated processing and interpretation. The seismic survey was due to commence in June. A number of recent security incidents in the northern coastal area of Kenya have delayed the start of these seismic operations and FAR is working with Milio and the Kenyan Ministry of Energy and Petroleum to monitor the situation and put in place appropriate risk mitigation strategies before commencing on ground operations.

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FAR permits Kenya
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• Refer to Cautionary Statement in this report (page 5) relating to estimates of prospective resources

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The farm out agreement with Milio and the associated carried work program relate to the onshore portion of Block L6 only.

An onshore discovery in L6 provides the potential for gas to be used as feedstock for domestic power generation in the near term.

FAR retains a 24% interest in the onshore part of the Block L6. In relation to the offshore portion of Block L6 where FAR has a 60% interest, FAR is currently progressing a farm out initiative for drilling an offshore well. The recent Sunbird-1 discovery well drilled by the BG Group in the nearby Kenya Block 10A targeted a Miocene reef structure. The Miocene reef play extends along the coast of Kenya and through both of FAR’s offshore blocks, L6 and L9. With the discovery of oil in the Sunbird-1 well at the southern extent of the Miocene reef play and evidence for oil in the Maridadi well drilled at the northern extent in L6, FAR anticipates strong industry interest in its L6 farm out opportunity.

Kenya Block L6	Paying Interest Onshore	Paying Interest Offshore
FAR	24% Operator	60% Operator
Pancontinental Oil and Gas	16%	40%
Milio Group	60%

Block L9, Kenya (FAR 30%)

FAR is awaiting unconditional Government approval for the Joint Venture agreements in relation to L9. Following unconditional Government approval, FAR will pay Ophir approximately US$11 million relating substantially to back costs on seismic surveys. FAR will also provide funding for a bank guarantee in favour of the Government of Kenya in relation to the Block L9 work commitment.

The Operator plans to drill the first exploration well on Block L9 at the end of 2015. During the quarter the Operator received a one year extension to the current exploration period. FAR intends to farm out part of its interest for drilling and has already received unsolicited expressions of interest.

FAR hold a 30% interest in L9.

Kenya Block L9	Paying Interest
FAR	30%
Ophir Energy	70% Operator

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 began on 26 November 2012 and has no work program obligations.

FAR and its Joint Venture partner Svenska Petroleum Exploration AB have been monitoring the political situation in Guinea Bissau following the Presidential elections in May. The Joint Venture delayed the execution of a rig contract until after the elections and at this date does not have a rig under contract for the planned drilling. As a result, the Joint Venture has amended the current work program for the remainder of 2014 to remove the one appraisal well and one contingent exploration well previously planned. It is anticipated that these wells will be now drilled in 2015.

The Sinapa appraisal well will be drilled into the Sinapa Oil field discovered by Premier in 2004. If this well is a commercial success then a further exploration well will be drilled. FAR has a 21.43% paying interest and 15% working interest in the Sinapa and Esperanca blocks offshore Guinea-Bissau. During the quarter FAR completed an internal assessment of the contingent and prospective resources in its Guinea-Bissau blocks ( reference: ASX release 05/02/2014 ).

• Refer to Cautionary Statement in this report (page 5) relating to estimates of prospective resources

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FAR continues to monitor the political situation in Guinea-Bissau very closely and is in discussions with the Operator on the Joint Venture’s future plans and expenditures in light of potential developments in country.

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

Svenska	78.57% Operator
AGC Profond (FAR 10%, Operated by Ophir Energy)
During the quarter the Joint Venture partners Ophir Energy and FAR
continued a technical evaluation of the prospectivity in the		AGC
Profond acreage. The current PSC period ends in September 2014.
FAR has an 8.8% beneficial interest in the permit.
AGC Profond	Paying Interest
FAR	10%
Ophir Energy	90% Operator			FAR permits Guinea-Bissau and AGC Profond

Australia (FAR 100%, and Operator)

Work continued on reprocessing existing 2D and 3D seismic data and planning a 3D seismic survey for later in 2014 and a farm out of the forward work program was initiated during the period.

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

Management comment

FAR has commenced the Senegal drilling program during the quarter and as announced on 30 June, has experienced delays in the drilling of the FAN-1 well due to unscheduled rig maintenance requirements.

To accommodate the rig maintenance the Operator modified the Senegal drilling program and as a result, the top section of the second well, SNE-1, was drilled to a depth of approximately 1,900 metres before moving the rig back to the FAN-1 site. The SNE-1 well will be re-entered on completion of the FAN-1 well and drilled to TD.

On 28 July, the Company announced that drilling had recommenced on FAN-1, and at the time of writing the drilling is progressing well. Whilst the cost and time implications of the necessary maintenance were being defined, FAR entered a trading halt between 19 and 23 June and then received ASX approval for a voluntary suspension from trading between 23 and 30 June.

FAR secured two major farm-out agreements on its acreage in Senegal for a total carry of approximately US$196 million and US$10 million paid in cash. On 30 June, FAR announced that the revised cost of the drilling program would exceed FAR’s funding cap. In the current, revised budget the Company will contribute up to $24.2 million to complete the two well program. The Company can comfortably cover these costs with their current cash reserves.

A third farm out to the Milio group of companies was completed for onshore portion of the Kenya L6 Block in the previous quarter. Security incidents are currently hampering the commencement of the seismic survey to

• Refer to Cautionary Statement in this report (page 5) relating to estimates of prospective resources

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be conducted by Milio and the seismic survey will be delayed until it is safe to enter the area.

A farm out is progressing to secure funding for the drilling of an offshore well on Block L6. The Company is actively seeking new opportunities in Kenya and the $8 million capital raising was to pursue these opportunities and support working capital requirements.

FAR plans to complete a seismic survey in 2014 to evaluate its WA-457-P and WA-458-P permits on the North West Shelf offshore Western Australia. In mid-July, the Company was awarded a 12 month extension to the current exploration period to allow it to acquire data in an optimum weather window and take advantage of vessels in the region. The Company is seeking a partner for these permits.

FAR enters this next quarter with a strong cash position of $42.7 million.

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Disclaimers

Prospective Resource Estimates Cautionary Statement -* With respect to the prospective resource estimates contained within this report, it should be noted that the estimated quantities of Petroleum that may potentially be recovered by the future application of a development project may relate to undiscovered accumulations. These estimates have an associated risk of discovery and risk of development. Further exploration and appraisal is required to determine the existence of a significant quantity of potentially moveable hydrocarbons_ _.**

Prospective Resources - All prospective resource estimates presented in this report are prepared as at 27/2/2013, 11/3/2014 and 5/2/2014. (Reference: FAR ASX releases of 27/02/2013, 11/3/2014, 5/2/2014) . The estimates have been prepared by the Company in accordance with the definitions and guidelines set forth in the Petroleum Resources Management System, 2007 approved by the Society of Petroleum Engineer and have been prepared using probabilistic methods. Unless otherwise stated the estimates provided in this report are Best Estimates and represent that there is a 50% probability that the actual resource volume will be in excess of the amounts reported. The estimates are unrisked and have not been adjusted for both an associated chance of discovery and a chance of development. The 100% basis and net to FAR prospective resource estimates include Government share of production applicable under the Production Sharing Contract .

Competent Person Statement Information - In this report relating to hydrocarbon resource estimates has been compiled by Peter Nicholls, the FAR Limited exploration manager. Mr Nicholls has over 30 years of experience in petroleum geophysics and geology and is a member of the American Association of Petroleum Geology, the Society of Petroleum Engineers and the Petroleum Exploration Society of Australia. Mr Nicholls consents to the inclusion of the information in this report relating to hydrocarbon Prospective Resources in the form and context in which it appears. The Prospective Resource estimates contained in this report are in accordance with the standard definitions set out by the Society of Petroleum Engineers, Petroleum Resource Management System.

Forward looking statements - This document may include forward looking statements. Forward looking statements include, are not necessarily limited to, statements concerning FAR’s planned operation program and other statements that are not historic facts. When used in this document, the words such as “could”, “plan”, “estimate”, “expect”, “intend”, “may”, “potential”, “should” and similar expressions are forward looking statements. Although FAR Ltd believes its expectations reflected in these are reasonable, such statements involve risks and uncertainties, and no assurance can be given that actual results will be consistent with these forward looking statements. The entity confirms that it is not aware of any new information or data that materially affects the information included in this announcement and that all material assumptions and technical parameters underpinning this announcement continue to apply and have not materially changed.

• Refer to Cautionary Statement in this report (page 5) relating to estimates of prospective resources

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Permit Table

Project and Location	Tenement	Beneficial Interest	Acquired during	Disposed during the quarter
		at end of quarter	the quarter
AGC Profond (offshore block in maritime area jointly administered by Senegal and Guinea Bissau)	AGC Profond	8.80%	N/A	N/A
Guinea-Bissau (offshore)	Sinapa Block 2	15.00%	N/A	N/A
	Esperanca Blocks 4A	15.00%	N/A	N/A
	& 5A
Senegal (offshore)	Rufisque,	15.00%	N/A	N/A
	Sangomar	15.00%	N/A	N/A
	Sangomar Deep	15.00%	N/A	N/A
Kenya (onshore)	Block L6	60.00%	N/A	N/A
Kenya (offshore)	Block L6	24.00%	N/A	N/A
Kenya (offshore)	Block L9	30.00%1	N/A	N/A
Australia (WA offshore)	WA-457-P	100.00%	N/A	N/A
	WA-458-P	100.00%	N/A	N/A
Australia (WA onshore)	EP104	8.89%	N/A	N/A
	R1	8.00%	N/A	N/A
	L15	12.00%	N/A	N/A

1Awaiting Kenyan Government approval

• Refer to Cautionary Statement in this report (page 5) relating to estimates of prospective resources

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