FAR LIMITED — Interim / Quarterly Report 2016

Jan 30, 2017

01 October – 31 December 2016

Highlights

• Contracted the Stena DrillMAX deep water drill ship to undertake a new firm two well, plus multiple option, drilling program offshore Senegal

• SNE-5 commenced drilling 21 January 2017

• 3D seismic products received allowing FAR to further mature its offshore Senegal prospect inventory

• SNE project pre-FEED conceptual development studies continued

• Cash and term deposits at the end of the quarter totalled $46.98 million

Projects update

Offshore Senegal

During the period, FAR Ltd (ASX:FAR) and its joint venture partners continued to undertake detailed pre-FEED (Front End Engineering and Design) studies of the SNE development, plus evaluate the comprehensive suite of data obtained from it’s highly successful appraisal drilling campaign completed over 2015/2016 in preparation for a third phase of drilling.

This activity resulted in an agreement over the December quarter to contract the Stena DrillMAX deep water drill ship to undertake a new drilling and evaluation program commencing early 1Q 2017 that consists of two wells (SNE-5 and SNE-6) located in the southern area of the SNE oil field.

These new wells have been designed to provide important information with respect to the SNE oil field upper reservoir units that will help optimise the SNE field project development plan, before submission to the Government of Senegal for approval.

FAR also further matured its offshore Senegal exploration prospect inventory incorporating 3D seismic products received in the December quarter from the 2,400km² survey over the RSSD (Rufisque, Sangomar and Sangomar Deep) blocks and the 400km² survey over the Djiffere block.

2017 Drilling Program

Two further appraisal wells are to be drilled over the SNE oil field with drilling operations having started in January 2017. The location of the SNE-5 and SNE-6 wells is shown in Figure 2.

The first well, SNE-5, is being drilled to evaluate the upper series sands and a flow test is expected will be completed. The well will also be used to form an interference test pattern with SNE-6.

The second well, SNE-6, is expected to be drilled immediately after SNE-5, and is to undergo an extended flow test and interference test. The results from these tests in conjunction with the SNE-5 results will be used to better understand the production characteristics of these reservoirs and will be important in optimising a development plan and capital expenditure for the SNE field development.

==> picture [596 x 84] intentionally omitted <==

==> picture [195 x 210] intentionally omitted <==

==> picture [231 x 209] intentionally omitted <==

Figure 2. SNE field outline with SNE-5 & 6 locations

Figure 1. SNE field location and 3D seismic coverage

Stena DrillMAX

During the quarter the Senegal joint venture completed an extensive rig tender evaluation process and executed contracts for the use of the Stena DrillMAX drillship for the two well firm drilling program, plus multiple option wells.

The Stena DrillMAX is a state of the art, six generation, dual mast, dynamically positioned, deep water drill ship with a rig crew that has extensive international and regional West African experience.

==> picture [203 x 136] intentionally omitted <==

Figure 3: Stena DrillMAX drill ship

• DP Class 3 drillship

• Capacity up to 3,000m water depth and 10,700m in drilling depth

• Length: 228m, Width: 42m

• Accommodation 180 persons

• Dual hoisting mast and drilling tower

• Two BOP systems with hopping experience

• 85,000 barrels of crude storage capability

ConocoPhillips Senegal proposed asset sale

As reported in prior public statements by ConocoPhillips and Woodside, completion of the proposed sale of ConocoPhillips Senegal assets is subject to the rights of partners to pre-empt and Senegal Government approval.

As previously reported to the Australian Securities Exchange (ASX), FAR believes a valid pre-emptive rights notice has not been issued to the Senegal joint venture partners by ConocoPhillips, and FAR has invoked its right to resolve this dispute in accordance with the Joint Operating Agreement.

At the date of this report, the matter remains unresolved.

Page 2

• Refer to Cautionary Statement in this report (page 6) relating to estimates of prospective and contingent resources

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

*The proposed sale to Woodside is subject to the rights of partners to pre-empt and Senegal Government approval

Djiffere block option

FAR has an option agreement with Trace Atlantic Offshore Limited to earn a 75% interest in the Djiffere block, offshore Senegal (subject to Senegal Government approvals).

Processed seismic products have been received during the December quarter and FAR expects to be ready to make a final decision regarding its option once final processed data has been received and interpreted.

FAR’s obligations under its agreements with Trace Atlantic Offshore Limited were met by acquiring a new 3D seismic data over the Djiffere block in late 2015 (refer Figure 1 – FAR Djiffere 3D Seismic).

Offshore Guinea-Bissau

The underlying exploration potential of offshore Guinea-Bissau has long been recognised given the functioning hydrocarbon system, good potential reservoirs and multiple drillable prospects in a wide shallow water shelf setting.

The joint venture acquired additional 3D seismic data to evaluate the western shelf edge margin of the large Atum prospect that was previously only partially covered by 3D seismic. Atum is potentially analogous to the SNE Oil discovery.

The data has been acquired, processed and interpreted and joint venture technical meetings are taking place.

Discussions are progressing with the regulator in relation to an amendment of the current licence.

Block 2, 4A, and 5A	Paying Interest
FAR	21.43%
Svenska	78.57%Operator

==> picture [230 x 239] intentionally omitted <==

Figure 4: Location of FAR blocks offshore Guinea-Bissau

Kenya

During the quarter, FAR continued discussions with the Government of Kenya to secure suitable arrangements pursuant to the Petroleum Sharing Contract to allow exploration activity that has been hindered by past security incidents and land access issues, to commence. FAR is planning for a 2D seismic survey to commence as soon as possible.

Page 3

• Refer to Cautionary Statement in this report (page 6) relating to estimates of prospective and contingent resources

Under the terms of the Joint Operating Agreement, FAR’s partner in the L6 Joint Venture (Pancontinental Oil and Gas) has been issued with default notices for non-payment of two cash calls in February 2015 and remains in default.

During the quarter, Ophir Energy, the Operator of the L9 permit, informed FAR that it had relinquished the L9 permit.

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

(i) Subject to the completion of the farm-out agreement with Milio. (Refer to (i) of Project table on page 7 for further information

Australia

FAR participated in a speculative 3D seismic survey acquired over 62% of the WA-458-P permit that commenced in Q2 2015. FAR has received final processed 3D seismic data over the majority of the WA-458-P block and is planning to acquire new 3D seismic over the remainder. Following the success of FAR’s Senegal program, FAR intends to farm-down its high interest in WA-458-P to focus on delivering shareholder value through continued work in Senegal. FAR has submitted a relinquishment request to the regulator of WA-457-P and intends to leave the permit in good standing. WA-457-P, WA-458-P Paying Interest FAR 100% Operator Figure 5: Location of WA-457-P and WA-458-P	FAR participated in a speculative 3D seismic survey acquired over 62% of the WA-458-P permit that commenced in Q2 2015. FAR has received final processed 3D seismic data over the majority of the WA-458-P block and is planning to acquire new 3D seismic over the remainder. Following the success of FAR’s Senegal program, FAR intends to farm-down its high interest in WA-458-P to focus on delivering shareholder value through continued work in Senegal. FAR has submitted a relinquishment request to the regulator of WA-457-P and intends to leave the permit in good standing. WA-457-P, WA-458-P Paying Interest FAR 100% Operator Figure 5: Location of WA-457-P and WA-458-P
WA-457-P, WA-458-P	Paying Interest
FAR	100% Operator

FAR participated in a speculative 3D seismic survey acquired over 62% of the WA-458-P permit that commenced in Q2 2015. FAR has received final processed 3D seismic data over the majority of the WA-458-P block and is planning to acquire new 3D seismic over the remainder. Following the success of FAR’s Senegal program, FAR intends to farm-down its high interest in WA-458-P to focus on delivering shareholder value through continued work in Senegal. FAR has submitted a relinquishment request to the regulator of WA-457-P and intends to leave the permit in good standing.

Management comment and events post end 2016

The drilling program which began in late January is the latest step in the process to prove that the SNE oil field discovery is one of the world’s best discoveries of recent years.

The two well SNE appraisal drilling is designed to demonstrate commercial oil deliverability and to improve our understanding of the connectivity of the upper reservoir units in order to optimise the SNE development.

The Stena DrillMAX, has been contracted for two firm wells, plus multiple option wells, at a very competitive day rate, substantially lower, than our two previous Senegal drilling campaigns.

FAR has also begun maturing its offshore Senegal prospect inventory. This is vital to the future discovery of new oil which could, potentially, provide valuable additional revenue to a future SNE development and production project. FAR plans to update its prospective resources inventory in the first quarter of 2017 on conclusion of the audit being undertaken by RISC Advisory Services.

FAR finished the December quarter with $47M in cash and no debt easily covering the estimated

Page 4

• Refer to Cautionary Statement in this report (page 6) relating to estimates of prospective and contingent resources

A$25M-$30M of costs to complete the two firm well drilling program and evaluation. This cash balance exceeds our forecast at the end of Q3 primarily due to the delay in expected start-up of drilling operations and favourable foreign exchange movements. FAR holds the majority of its cash is US$’s – the currency in which the substantial majority of costs are incurred.

FAR has identified an extensive portfolio of high quality prospects offshore Senegal, and is keen to further progress the evaluation of the full Senegal PSC licence area now that we have a commercially viable project at SNE. A FAR prospective resource update is to be provided in 1Q 2017.

As at the date of writing, there is no update for shareholders regarding FAR’s right to pre-empt the sale of the ConocoPhillips 35% share of the Senegal RSSD project via sale of the ConocoPhillips Senegal BV entity. Government approval for the sale has not been advised and FAR remains ready to consider its pre-emptive rights as provided for under the Joint Operating Agreement and the preemptive rights notice issued to partners by ConocoPhillips.

• Refer to Cautionary Statement in this report (page 6) relating to estimates of prospective and contingent resources

Page 5

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 and Contingent Resources - All contingent and prospective resource estimates presented in this report are prepared as at 27/2/2013, 11/3/2014, 5/2/2014, 13/04/2015, 13/4/2016 and 23/08/2016 (Reference: FAR ASX releases of the same dates). 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. The contingent resource estimates provided in this report are those quantities of petroleum to be potentially recoverable from known accumulations, but the project is not considered mature enough for commercial development due to one or more contingencies. The prospective resource 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 contingent and prospective resource estimates include Government share of production applicable under the Production Sharing Contract.

Competent Person Statement Information - The hydrocarbon resource estimates in this report have 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 Contingent and Prospective Resources in the form and context in which it appears. The Contingent and 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.

Page 6

• Refer to Cautionary Statement in this report (page 6) relating to estimates of prospective and contingent resources

==> picture [596 x 84] intentionally omitted <==

Project table

Project and Location	Tenement	Beneficial Interest	Acquired during	Disposed during the quarter
		at end of quarter	the quarter
Guinea-Bissau (offshore)	Sinapa Block 2	15.00%	–	–
	Esperanca Blocks 4A	15.00%	–	–
	& 5A
Senegal (offshore)	Rufisque,	15.00%	–	–
	Sangomar	15.00%	–	–
	Sangomar Deep	15.00%	–	–
Kenya (offshore)	Block L6	60.00%	–	–
Kenya (onshore)	Block L6	24.00%(i)	–	–
Australia (WA offshore)	WA-457-P	100.00%	–	–
	WA-458-P	100.00%	–	–

(i) Subject to the completion of the farm-out agreement with Milio. Current paying and beneficial interest is 60%. Since executing the farm-out agreement, the agreed farm-out work program to be completed by Milio has suffered delays due to civil upheaval and security incidents in the region that arose during 2014. As a result of these incidents, the Ministry of Energy and Petroleum of Kenya awarded the Block L6 joint operation a 12 month extension and is working with the Block L6 joint operation to ensure appropriate access for petroleum operations is established. Due to these circumstances the above mentioned farm out agreement could not be completed between the L6 Parties and Milio International because Milio International was not in a position to fulfil its portion of the obligations in relation to the farm-out agreement and, as such the Conditions Precedents were not completed as required pursuant to the terms of the farm out agreement. As a consequence of these circumstances, Milio International does not currently have a participating interest or any rights in relation to Block L6 and the current Block L6 participants are FAR Ltd (60%) and Pancontinental Oil & Gas NL (40%). The farm-out parties are in discussions in relation to a revised farm-out agreement to reflect the above mentioned changed circumstances. (For further information, refer to Note 18 (ii) of the Notes to the Financial Statements in the FAR 2015 Annual Report).

Page 7

• Refer to Cautionary Statement in this report (page 6) relating to estimates of prospective and contingent resources

==> picture [596 x 84] intentionally omitted <==

Top 10 shareholders (as at 25 January 2017)

	Shareholder	Units	%
1.	FARJOY PTY LTD	451,963,236	10.13
2.	J P MORGAN NOMINEES AUSTRALIA LIMITED	388,962,329	8.72
3.	HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED	326,973,608	7.33
4.	BNP PARIBAS NOMS PTY LTD	226,215,780	5.07
5.	CITICORP NOMINEES PTY LIMITED	171,346,780	3.84
6.	NATIONAL NOMINEES LIMITED	90,569,234	2.03
7.	MR OLIVER LENNOX-KING	75,647,869	1.70
8.	TOAD FACILITIES PTY LIMITED	67,528,589	1.51
9.	FOUNTAIN OAKS PTY LIMITED	34,200,366	0.77
10.	FLOTECK CONSULTANTS LIMITED	28,000,000	0.63
	TOTAL	1,861,407,791	41.73

Page 8

• Refer to Cautionary Statement in this report (page 6) relating to estimates of prospective and contingent resources

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

+Rule 5.5

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Introduced 01/07/96 Origin Appendix 8 Amended 01/07/97, 01/07/98, 30/09/01, 01/06/10, 17/12/10, 01/05/13, 01/09/16

Name of entity

FAR Ltd ABN Quarter ended (“current quarter”) 41 009 117 293 31 December 2016

Consolidated statement of cash flows	Current quarter $A’000	Year to date (12 months) $A’000
1. Cash flows from operating activities 1.1 Receipts from customers 1.2 Payments for (a) exploration & evaluation (b) development (c) production (d) staff costs (e) administration and corporate costs 1.3 Dividends received (see note 3) 1.4 Interest received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Research and development refunds 1.8 Other (provide details if material) 1.9 Net cash from / (used in) operating activities	- (3,096) - - (782) (343) - 41 - - - -	- (15,814) - - (3,065) (1,679) - 154 - - - -
	(4,180)	(20,404)
2. Cash flows from investing activities 2.1 Payments to acquire: (a) property, plant and equipment (b) tenements (see item 10) (c) investments (d) exploration and evaluation	(11) - - (1,483)	(56) - - (54,023)

• See chapter 19 for defined terms

1 September 2016

Page 1

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

Consolidated statement of cash flows	Current quarter $A’000	Year to date (12 months) $A’000
2.2 Proceeds from the disposal of: (a) property, plant and equipment (b) tenements (see item 10) (c) investments (d) other non-current assets 2.3 Cash flows from loans to other entities 2.4 Dividends received (see note 3) 2.5 Other – payment for performance bond 2.6 Net cash from / (used in) investing activities	- - - - 20 - -	- - - - - - -
	(1,474)	(54,079)
3. Cash flows from financing activities 3.1 Proceeds from issues of shares 3.2 Proceeds from issue of convertible notes 3.3 Proceeds from exercise of share options 3.4 Transaction costs related to issues of shares, convertible notes or options 3.5 Proceeds from borrowings 3.6 Repayment of borrowings 3.7 Transaction costs related to loans and borrowings 3.8 Dividends paid 3.9 Other (provide details if material) 3.10 Net cash from / (used in) financing activities	- - - - - - - - -	60,000 - 2,728 (2,601) - - - - -
	-	(60,127)
4. Net increase / (decrease) in cash and cash equivalents for the period 4.1 Cash and cash equivalents at beginning of period 4.2 Net cash from / (used in) operating activities (item 1.9 above) 4.3 Net cash from / (used in) investing activities (item 2.6 above) 4.4 Net cash from / (used in) financing activities (item 3.10 above) 4.5 Effect of movement in exchange rates on cash held 4.6 Cash and cash equivalents at end of period	50,508 (4,180) (1,474) - 2,124	60,671 (20,404) (54,079) 60,127 663
	46,978	46,978

• See chapter 19 for defined terms

1 September 2016

Page 2

Appendix 5B Mining exploration entity and oil and gas exploration entity quarterly report

5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts	Current quarter $A’000	Previous quarter $A’000
5.1 Bank balances 5.2 Call deposits 5.3 Bank overdrafts 5.4 Other – Term deposits 5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above)	41,036 142 - 5,800	42,404 104 - 8,000
	46,978	50,508

6.	Payments to directors of the entity and their associates	Current quarter
		$A'000
6.1	Aggregate amount of payments to these parties included in item 1.2	329
6.2	Aggregate amount of cash flow from loans to these parties included
	in item 2.3
6.3	Include below any explanation necessary to understand the transactions included in
	items 6.1 and 6.2

7.	Payments to related entities of the entity and their	Current quarter
	associates	$A'000
7.1	Aggregate amount of payments to these parties included in item 1.2
7.2	Aggregate amount of cash flow from loans to these parties included
	in item 2.3
7.3	Include below any explanation necessary to understand the transactions included in
	items 7.1 and 7.2

• See chapter 19 for defined terms 1 September 2016

Page 3

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

	8. Financing facilities available Add notes as necessary for an understanding of the position Total facility amount at quarter end $A’000 Amount drawn at quarter end $A’000 8.1 Loan facilities - - 8.2 Credit standby arrangements - - 8.3 Other (please specify) - - 8.4 Include below a description of each facility above, including the lender, interest rate and whether it is secured or unsecured. If any additional facilities have been entered into or are proposed to be entered into after quarter end, include details of those facilities as well.	Total facility amount at quarter end $A’000	Amount drawn at quarter end $A’000
		-	-
		-	-
		-	-

9. Estimated cash outflows for next quarter	$A’000
9.1 Exploration and evaluation 9.2 Development 9.3 Production 9.4 Staff costs 9.5 Administration and corporate costs 9.6 Other (provide details if material) 9.7 Total estimated cash outflows	14,000 - - 750 250 -
	15,000

10. Changes in tenements (items 2.1(b) and 2.2(b) above)	Tenement reference and location	Nature of interest	Interest at beginning of quarter	Interest at end of quarter
10.1 Interests in mining tenements and petroleum tenements lapsed, relinquished or reduced	Kenya L9	Production Sharing Contract	30%(i)	-
10.2 Interests in mining tenements and petroleum tenements acquired or increased

(i) The agreement with Ophir, the Operator terminated during the 2014 year, discussions were ongoing to resolve FAR’s equity transfer

• See chapter 19 for defined terms 1 September 2016

Page 4

Appendix 5B

Mining exploration entity and oil and gas exploration entity quarterly report

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

Sign here: ............................................................ (Company secretary)

Date: 31 January 2016

Print name: Peter Thiessen

Notes

1. The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2. If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 6: Exploration for and Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standards apply to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. See chapter 19 for defined terms 1 September 2016

Page 5