10 December 2014

Q and A: FAR's Discoveries in Senegal

Question and answer session with Cath Norman, Managing Director of FAR Limited (ASX: FAR)

regarding the recent successes in Senegal.

Q: The Senegal exploration program reads like a Cinderella story for FAR Ltd. What was the magic ingredient behind these two discoveries?

A: There is no magic in the Senegal exploration success. These discoveries are the result of strong technical work by the FAR technical team to identify and map the opportunities which we

immediately saw as enormous. In addition our commercial team then worked on securing high quality partners (Cairn Energy and ConocoPhillips) to further explore the various opportunities. These commercial deals allowed FAR to access "best in class" drilling expertise and secure funding for
drilling two exploration wells while retaining a significant equity ownership interest in the Senegal
blocks. Our partners shared our assessment of the exploration potential and bought into the project by funding the first $200 million of drilling costs for the first two wells.
For FAR shareholders this has been hugely successful, with around $22 million of our company's money invested in Senegal exploration while FAR was free-carried for over $200 million in net exploration costs resulting in two significant oil discoveries. This has resulted in very substantial value creation for shareholders.

Q: And yet these were the first wells drilled in 20 years in the country. Why the reluctance to explore offshore in Senegal?

A: There are a number of geological factors that need to be present for oil exploration to be successful. The prospect sizes that we have mapped offshore Senegal are large and hence require a large volume of oil being produced to fill them. As an industry, the understanding of the deep water source rock offshore West Africa is only beginning to be understood. Until the Jubilee field was discovered offshore Ghana in 2007, very few wells had been drilled offshore Africa in deep water fan plays such as FAN-1. While the potential of frontier exploration can be substantial, the risks are high.

Q: What is the significance of the discoveries for FAR?

A: Prior to drilling, FAR had mapped prospects in its offshore Senegal blocks with prospective resources totalling about 3.5 billion barrels of oil*. Clearly, if this potential is realised, then FAR's 15% interest in the project is highly significant to our company.

Key to realising anything like this enormous volume of oil being trapped was the existence of an extensive, working source rock. The discovery of a 500 metre interval of oil in the first well, FAN-1, proved there are very large volumes of oil being produced and, if our migration model is correct, then there could be enough oil being generated to fill all of our prospects. The presence of oil in SNE-1

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went a long way to proving this migration model so we are one step closer to unlocking the 3.5 billion barrels.
With respect to the two discoveries themselves, they appear to be of a scale that will support a stand - alone development on each. To have made two potentially commercially viable discoveries from two frontier wells is significant in itself and a very rare occurrence in our industry. For FAR shareholders this will mean the company has two standalone developments, both of which appear to offer significant value creation potential.
FAR's discovery in the SNE-1 well is ranked number 1 by size on IHS's list of top ten global discoveries
for 2014 (IHS is an industry leader in the analysis of global oil and gas data).

Q: Is the SNE-1 discovery more meaningful to FAR than the FAN-1 discovery?

A: From the information we have obtained so far - the answer is potentially yes. The reservoir in SNE-

1 is excellent and the structure is very well defined and we expect the path to project sanction and a commercial development is relatively clear and straight forward for SNE-1. Even on highly conservative recoverable oil volume estimates SNE-1 will be an attractive project capable of generating substantial value for shareholders. If there are 330mmbbls of recoverable oil* as estimated by the Operator this will clearly be a commercial project. The value of each barrel of oil will be relatively high due to the moderate capital costs and the attractive fiscal terms that FAR has secured in Senegal.
The FAN-1 discovery is a relatively more complex geological story at present. The fact that we have assessed to date 29 metres of net pay over a very large area resulted in the Operator announcing an estimate of 950 million barrels of oil in place on a P50 basis. As a joint venture, we are yet to finalise our assessment of the net reservoir, but if we apply a 30% recovery factor to this oil in place estimate then we have another large discovery in FAN-1. What is particularly exciting about FAN-1 is that we did not reach the oil-water contact in the well. This means that the size of the potential pool of oil could be much larger than we have estimated and significantly larger than the SNE-1 discovery. We won't know how big the FAN-1 discovery is until we have completed our analysis of the FAN-1 well data and drilled at least one appraisal well.
It would be fair to say that FAN-1 is more complex to understand given there is evidence that a number of hydrocarbon columns exist within the well. This is evidenced by the range of pressure regimes and the different oils sampled in the FAN-1 well (ranging from 28 - 42 degrees API).

Q: The SNE-1 was targeting two prospects, the upper sand and the lower carbonates, why was there only oil in the upper sand?

A: The upper Albian sand was the section in which we discovered gas, oil and saw the oil-water contact indicating the base of the hydrocarbon column. In our ASX release, we stated that the amount of oil discovered in this level more than compensated for the lack of oil in the lower carbonates - in fact, on an unrisked basis, we discovered more than twice our pre-drill estimate and on a risked basis, nearly ten times our pre-drill estimate.

Q: What about the remaining potential of Senegal?

A: As stated previously, our ultimate aim is to realise the multi-billion barrel potential of the basin. Our team will be reviewing the prospective resources inventory from the undrilled prospects and, in light of the discoveries, re-assessing the volumes and geological chance of success for each prospect. We expect we will release a revised assessment of our prospective resource inventory in the first quarter 2015.

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Prior to drilling, we gave the fan play a one in six chance of success and the shelf play a one i n four chance of success, so the risked numbers will change for these plays as we incorporate the success and report contingent resources for the discoveries and the prospective resources for the inventory of prospects yet to be drilled.
We expect these resources will increase as we now understand the plays in much greater detail. There are three main, broad play types offshore Senegal: the fans, the shelf edge and the buried hills. Both the fan and shelf edge plays have been tested through drilling and have been proven to be successful and we would hope to drill the buried hills play in the future.

Q: What will the next 12 months entail?

A: We have enjoyed two fantastic successes and now we face a new set of challenges. The completion of the two wells has satisfied our work program obligations to the Government of Senegal until early February 2016. We have now handed the rig to the next operator. We are aiming to finalise our analysis of the well results and release updated contingent resource estimates for both FAN-1 and

SNE-1 in the first quarter of 2015.
The formal declaration of the two discoveries to the Government means that we have six months to reach agreement on an appraisal program. The finalisation of the appraisal program and the preparations for appraisal and further exploration will dominate this year's activities.

Q: Is the company sufficiently funded for this period?

A: We were successful in raising A$47 million through a placement at 11cps on the news of the first oil discovery in FAN-1, resulting in A$88m of cash on hand and the company is now amply funded for its current commitments. We expect any Senegal appraisal program will be conducted over the next three years, providing FAR and its shareholders ample time to fund the entire program.

The company is already evaluating its various strategic options to fund any appraisal program. We expect we will be able to fund the next several years of the program with future funding likely to come from a combination of asset sales, equity raisings or other forms of financing.

Q: Why has the stock price barely reacted to the drilling success?

A: The FAR share price has declined through the course of the last few weeks despite FAR announcing a second discovery in the SNE-1 well, adding approximately 50mmbbl of net contingent resources to FAR*. As mentioned above we believe this is a high quality discovery and will likely result in a commercial standalone development in due course.

The timing of the discoveries could not have been worse due to the rapidly falling global oil price. The significance of the exploration results is taking some time to be absorbed given the highly techni cal nature of these discoveries. The size of the discoveries, the upside potential, the attractive fiscal terms in Senegal and the desire by the joint venture partners to drive forward into appraisal and potentially a development means that the market should quickly begin to understand the value proposition these discoveries offer to FAR.
We believe FAR offers a unique opportunity as it provides shareholders with exposure to two significant oil discoveries, each of which is likely to offer sizeable standalone developments in Senegal. In addition, the discoveries of the Shelf and Fan wells, de-risk several geological prospects and leads, which in due course will be unlocked in this frontier basin.

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Some points to note:

 The oil price has suffered a significant correction with the OPEC decision resulting in the capitulation of the oil price from around $80 to $65 per barrel during the period in which we have made our discoveries, a decline of 20%. The forecast for the forthcoming 6 - 12 months is for the oil price to remain around these levels with the longer term showing a forecast strength in oil prices;

 Investor sentiment is very weak, with limited buying support seen across the sector and significant retail selling;

 The energy sector has been hit particularly hard over the last two weeks with our peers down similar levels; and

 There is limited apparent investor understanding of the quality of the SNE-1 well result, which

we believe today's Q and A should help to resolve.

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*Disclaimers

Contingent Resources - All contingent resource estimates presented in this report have been prepared by Cairn Energy, the Operator of FAR's Senegalese blocks on 7 November 2014. In the Company's view the estimates have been prepared 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 and the analysis of well, seismic and other subsurface data. The estimates provided in this report are P90, P50 and P10 which respectively represent that there is a 90%, 50% and 10% probability that the actual resource volume will be in excess of the amounts reported. The estimates are unrisked and have not been adjusted for an associated chance of development. The 100% basis and net to FAR contingent resource estimates include Government share of production applicable under the Production Sharing Contract .

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 February 2013. (Reference: FAR ASX release of 27/02/2013). 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.

Competent Person Statement Information - The hydrocarbon resource estimates contained in this report have been compiled or reviewed 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 resources in the form and context in which it appears. The 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.

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