FAR LIMITED — Interim / Quarterly Report 2013

Jan 30, 2014

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01 October – 31 December 2013
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Highlights

• ConocoPhillips and Cairn Energy farm-ins to FAR’s Senegal exploration permits concluded

• Full funding secured for two offshore Senegal exploration wells, an investment of approximately US$200 million (100% basis, FAR estimate)

• Two Senegal wells to test combined prospective resources of approximately 1.5 billion barrels of oil, 225 million net to FAR (Reference ASX release 27 February 2013)

• Rig mobilised, first Senegal well to test a deep water fan play expected to spud in Q1 2014

• Planning for Guinea-Bissau exploration well scheduled to spud late 2014

• Strong cash position of AU$23.5 million with no debt and further US$5million to be received from Cairn Energy Q1 2014

Projects update

Offshore Senegal (FAR 15% – post farm-out)

During the year, FAR announced two major farm-in agreements in relation to its offshore Senegal exploration permits with ConocoPhillips and Cairn Energy (a UK listed oil and gas company). Both farm-in agreements have received Senegalese Ministerial approval.

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Under the terms of the ConocoPhillips agreement, ConocoPhillips will provide funding equivalent to a full carry of FAR through the first exploration well in exchange for a 10% working interest in the Senegalese permits. This funding will take the form of cash payments and well carry cost payments. 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 agreed to pay FAR US$9.82 million in two tranches for past costs, of which US$4.82 million has already been received.

As a result of the two farm-in deals with ConocoPhillips and Cairn, FAR has secured full funding for its share of two FAR permits offshore Senegal exploration wells totalling approximately US$200 million (100% basis, FAR estimate) and net cash payments of approximately US$10 million (of which $4.82 million has been received by FAR to date). 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.

*=Refer to Cautionary Statement in this report (Page 7) relating to estimates of prospective resources

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FAR transferred operatorship of the Senegal blocks to Cairn in August 2013 and well preparations have progressed satisfactorily. The Transocean owned drilling rig, the Cajun Express, has commenced a multi joint venture African drilling campaign, operated by Cairn, which includes FAR’s two high impact Senegal exploration wells. Cairn is currently drilling the second well in the campaign and FAR’s two Senegal wells will follow this.

The two back to back exploration wells, the first of which is expected to start drilling in Q1 2014, will target approximately 1.5 billion barrels (225 million net to FAR) of unrisked best estimate prospective resources (Reference ASX release 27 February 2013) . With approximately 900 million barrels (135 million net to FAR) to be tested in the deep water ‘fan’ play and 600 million barrels (90 million net to FAR) to be tested in the ‘shelf’ play or ‘L’ Prospect[*] . (Reference ASX release 27 February 2013).

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 February 2013).

Prospect	Play	*Oil(mmbbls) **
Lufti	Buried Hill	203
Sabar	Buried Hill	304
Lamb-Ji	Buried Hill	136
Ramatou	Buried Hill	58
Lupalupa	Albian Shelf edge1	154
Boabab	Aptian1	491
Alhamdulillah North	Salt anticline	252
Sth Canyon	Slope Fans	439
Central Canyon	Slope Fans	612
North Canyon	Slope Fans2	304
Beer	Early Fans2	632
Total – Gross		3,585
Total – Net to FAR		538

Prospects in the offshore Sangomar Profond 3D seismic area

1 ‘L’ Prospects

2 ‘Fan’ Prospects

(Reference: ASX release 27 February 2013)

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

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*=Refer to Cautionary Statement in this report (Page 7) relating to estimates of prospective resources

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

The L6 and L9 blocks lie in the Lamu Basin offshore Kenya, north of recent, world scale, natural gas discoveries totalling around 100 trillion cubic feet off the coasts of Mozambique and Tanzania.

Growing interest in the Lamu Basin’s exploration potential is reflected in the fact that up to 7 wells are planned to be drilled over the next 12 to 18 months. During the year Anadarko Corporation announced a non-commercial oil discovery in the Kubwa Prospect in Block L7. This is the first recorded oil discovery for offshore Kenya and is highly encouraging for FAR’s Block L6.

BG Group commenced drilling the Sunbird-1 well in offshore Block L10A in January 2014 and the offshore Block L8 Joint Venture is considering a second well on a deeper oil play in 2014 (Reference PCL ASX announcement 24 June 2013). In addition, Afren Plc is currently completing seismic processing in preparation for a two well drilling program in Blocks L17 and L18 (Reference Afren Plc update 11 September 2013).

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FAR permits Kenya
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Block L9, Kenya (FAR 30%)

During the year, FAR concluded agreements on joint venture terms for Block L9. These Joint Venture agreements formalise FAR’s 30% participating interest in the highly prospective offshore Block L9.

Block L9 contains a number of play types with numerous large oil and gas prospects and leads identified from a series of 2D and 3D seismic surveys. FAR has assessed several large leads, each with the potential to contain commercially recoverable hydrocarbons.

Ophir Energy, as Operator of the Joint Venture, is advancing the necessary government approvals of the Joint Venture agreements. Following receipt of Government approval for the Joint Venture agreements, FAR will pay Ophir approximately US$11 million relating substantially to back costs on seismic surveys. FAR will 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 2014. 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	60% Operator
Vanoil Energy	10%

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*=Refer to Cautionary Statement in this report (Page 7) relating to estimates of prospective resources

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Block L6, Kenya (FAR 60% and Operator)

The final results from the 3D processed data acquired over Block L6 offshore Kenya were received in late April 2013. Results from the high quality seismic dataset are very encouraging and provide technical support for the previously identified Tembo and Kifaru prospects. The Joint Venture resumed its farm-in initiative in June and is well progressed in negotiations.

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 in 2014 by the Block L8 Joint Venture (reportedly drilling the Tai prospect on the Mbawa/Tembo trend) and BG Group (currently drilling the reef play with the Sunbird-1 well) in Block L10A.

During the quarter further technical and commercial studies were completed on the onshore part of Block L6 which has yielded positive results. FAR is currently reviewing options to further advance the evaluation of the onshore exploration potential.

Well planning activities for drilling on L6 have commenced for a well in late 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 by a farm-in partner.

The table below summarises FAR’s assessment of Block L6 prospective resources (unrisked Best Estimates) as at 27 February 2013 (Reference ASX release 27 February 2013). The estimates are reported in both oil equivalent and gas equivalent. The oil and gas equivalent estimates reported should not be added together.

Prospect	Play	*Oil(mmbo) **	Gas (bcf)*
3D seismic
Kifaru	Miocene reef	178	517
Kifaru West	Miocene reef	130	388
Tembo	Eocene clastics	327	807
2D seismic
13 Prospects	Eocene clastics	1,743	4,515
6 Prospects	Late Cretaceous	126	547
11 Prospects	Slope Fans	1,249	3,461
Total – Gross		3,754	10,235
Total – Net to FAR		2,252	6,141

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Prospect inventory for the L6 block (as announced 27
February 2013)
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Kenya Block L6	Paying Interest
FAR	60% Operator
Pancontinental Oil and Gas	40%

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*=Refer to Cautionary Statement in this report (Page 7) relating to estimates of prospective resources

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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 began on 26 November 2012 and 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 firm appraisal well and one contingent exploration well. Svenska is making preparations to drill in late 2014. 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 commenced an internal assessment of the contingent and prospective resources in its GuineaBissau blocks. To this end FAR is reviewing, interpreting and assimilating extensive existing well, seismic and regional data obtained from the Operator and elsewhere. FAR expects to complete its resource assessment in early 2014.

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. Democratic elections have been scheduled for March 2014. The international community has committed to supporting the electoral process and nation building initiatives afterwards.

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 determine an appropriate way forward for the permit. Discussions have started with the Regulator on possible options for the permit. The current PSC period ends in September 2014. FAR has an 8.8% beneficial interest in the permit.

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FAR permits Guinea-Bissau and AGC Profond
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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 2014.

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

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*=Refer to Cautionary Statement in this report (Page 7) relating to estimates of prospective resources

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Management comment

FAR has concluded two major farm-out agreements on its acreage in Senegal securing two fully carried wells based on current well cost estimates with a total drilling investment of approximately US$200million. A rig has been mobilised for a multi Joint Venture North African drilling campaign and based on its current schedule we expect the first Senegal well to spud in Q1 2014.

FAR is completing further technical studies on its Guinea-Bissau block and is well advanced with well planning for an appraisal well to be drilled on the Sinapa discovery due to spud in late 2014.

Commercial negotiations are progressing for a partner for drilling on our Block L6, Kenya. With a two year extension on L6 secured, the Company can readily manage the drilling timetable and reduced near term forecast cash outflows that will enable the company to leverage the results of surrounding wells including BG Group’s Sunbird-1 well in Block L10A on the carbonate reef play.

FAR has confirmed its entry into the highly prospective Block L9 offshore Kenya and is awaiting Government approval of its interest in the block. Ophir, the Operator of L9, plans to drill the first exploration well on the block in 2014.

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.

FAR continues into this next quarter with a strong cash position of AU$23.5 million. Additionally, in this next quarter FAR expects to receive significant cash inflows of US$5.0 million from the Senegal farm-in transaction. With its strong cash position, successful farm out transactions and minimal financial commitments, FAR has been investigating opportunities to expand its portfolio and is reviewing various opportunities including new acreage awards, farm-ins and corporate transactions.

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*=Refer to Cautionary Statement in this report (Page 7) relating to estimates of prospective resources

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Disclaimers

Cautionary Statement for Prospective Resource Estimates -* 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 Resource Estimates – All prospective resource estimates presented in this report are prepared at as at 27 February 2013. (Reference: FAR ASX release of 27 February 2013) . 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 . 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 .

Competent Person Statement Information – In this report information 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, 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.

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.

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*=Refer to Cautionary Statement in this report (Page 7) relating to estimates of prospective resources

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Permit Table

Project and Location	Tenement	Beneficial Interest	Acquired during	Disposed during
		at end of quarter	the quarter	the quarter
AGC Profond (offshore	AGC Profond	8.80%	N/A	N/A
block in maritime area
jointly administered by
Senegal and Guinea
Bissau)
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	10.00%1
	Sangomar	15.00%	N/A	10.00%1
	Sangomar Deep	15.00%	N/A	10.00%1
Kenya (onshore and	Block L6	60.00%	N/A	N/A
offshore)
Kenya (offshore)	Block L9	30.00%2	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	15.67%	N/A	N/A
	R1	8.00%	N/A	N/A
Australia (WA onshore)	L15	12.00%	N/A	N/A

1 Farm-out to ConocoPhillips

2 Awaiting Kenyan Government approval

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*=Refer to Cautionary Statement in this report (Page 7) relating to estimates of prospective resources