FAR Limited (FAR) Earnings Call Transcript & Summary

Good morning, all. My name is Patrick O’Connor, the Chairman of FAR. It's my pleasure to welcome you to this Annual General Meeting of FAR Limited. The meeting is being held as a hybrid meeting. Those attending virtually may experience some time lag, and this could cause some delay in your questions or comments coming to our attention. At today's meeting, shareholders will be able to participate, ask questions, cast direct votes at the appropriate time while the meeting is in progress. The company secretary has advised that a quorum is present. As a time is now 11 a.m., I declare the meeting open. I'm joined through this webcast today by my fellow directors, Mr. Robert Kaye, our Non-Executive Director; and in the room, Mr. Garth Campbell-Cowan, Chief Financial Officer and Executive Director. I would like to welcome the Company Secretary, Claire Newstead-Sinclair; and Andrew Johnson who is in the room represent the company's office [ for ] Australia. Our share registry representatives are also in attendance. The notice of meeting has been given in accordance with the company's constitution, and copies are available for you on the company's website, the share registry online voting site and on the ASX announcement platform. I will take the notice of meeting and explanatory statement as read. As previously advised, this is a hybrid meeting and shareholders attending virtually are able to participate, view the live webcast of the meeting, ask questions and cast direct votes at the appropriate time while the meeting is in progress. The format of today's meeting will be a brief Chairman's presentation, consideration of the formal business on today's agenda with questions to be asked as and when resolutions are considered. And then we'll proceed to a final Q&A session of the general operations terms of business, following which shareholders will provide an additional minute to vote on the resolutions. Claire Newstead-Sinclair our company secretary will now outline the procedures for today's meeting.

Thank you, Patrick. Shareholders attending online can submit questions at any time. Written and verbal questions may be asked to do so, please follow the instructions set out on your screen. Questions which are of a similar nature will be amalgamated and answered as and when the item of business is being addressed. Please note, we may experience some time lag, and this may cause some delay in your written questions or comments coming to our attention. We encourage you to lodge them as early as you can. With regard to voting on today's resolutions, all shareholders, proxy holders and authorized corporate representatives and attorneys of shareholders who are entitled to vote will be able to do so via the Computershare meeting platform. For proxy holders, you will have a summary of proxy votes, which detail the voting instructions, if any, for the item of business. By completing the voting via the webcast when instructed to vote in a particular manner, you are deemed to have voted in accordance with those instructions. Once the poll is open, and select the vote icon and voting options will appear on your screen. To vote, select your voting direction a tick will appear to confirm receipt of your vote. To change your vote, select Click Here to change your vote and press a different option to override. Voting shareholders who are attending in person have been given a red voting part at the registration desk. Please complete your voting card according to the instructions outlined on the card, marking a box beside the resolution to indicate how you wish to cast your votes. Once completed, please submit your voting card to Computershare, our returning officer. Nonvoting shareholders will be issued with a blue card upon entering the venue. A blue card will not allow you to vote. However, you may still comment and ask questions. White cards indicate a visitor. Visitors and media are reminded that whilst we welcome you at this meeting, it is a shareholder meeting, and you may not make comments or ask questions. If you have any questions, please raise your red voting or blue nonvoting admission cards prior to speaking to identify yourself as a shareholder. If you are acting as a proxy, please state clearly who you are appointed to represent when introducing yourself to the meeting. I would ask that only questions relevant to the specific resolution be asked. With regard to proxies, we have engaged services of our share registry, Computershare to compile and report on the proxy voting. Computershare has provided its formal report disclosing the proxy votes received. Those votes will be displayed on the screen. As it's provided in the notice of meeting, where proxies have been properly nominated to be at the chair's discretion. Those proxy votes will be cast in favor of today's resolutions. Please note that once the poll results have been tallied by Computershare, we will later today announce the results on the ASX market announcements platform... To you, Patrick.

Thank you, Claire. I'd like to give a brief presentation. The 2022 year saw the company continue to execute against its strategy of delivering value to shareholders through a combination of cost reduction, capital returns, exploration and new business assessment. Key activities over the year included -- continue to pursue the realization of value from our investment in the Gambia, including obtaining 100% ownership of the asset, evaluating the data from the 2021 campaign and negotiating with the government of the Gambia to defer our drilling commitments. We returned capital of approximately $3.4 million via a buyback of unmarketable parcels and commenced an on-market share buyback. We assessed a range of business activities in the oil and gas and energy transition sector with the aim of creating shareholder value. We continue to reduce our corporate overhead such that the company's target corporate administration baseline costs for 2023 is approximately $1.7 million, excluding restructuring costs and share buyback payments. As we now meet in 2023, we do show with a position of financial strength via the potential receipt of the $55 million from the Woodside contingent payment and our cash balance at 31 March of $30.7 million. The directors of FAR continue to see considerable upside in our share price based on our assets and cash position, and we'll continue to advance strategies to seek to maximize the value of our share price. Turning to the Gambia. During the year, we continued to execute against our strategy of determining how to realize value from our investment in the Gambia. Key actions undertaken include completion of the evaluation of data from the 2021 drilling in offshore Gambia, obtained 100% ownership of Blocks A2 and A5 by acquiring the interest held by PETRONAS and negotiate the removal of the obligation to drill an exploration well in the next 2-year license period. We elected to enter the first exploration -- extension exploration period for Block A2 and A5, commencing on 1 October 2022 for a 2-year period on the revised work program. We undertook a market effort that included a data room open to suitably qualified parties to seek a joint venture to undertake a geoscience review and ultimately drill additional exploration wells. Subsequent to that marketing effort, the company is in discussions with the Government of Gambia to look to an extension of the permit term for an additional 12 months to 30 September 2025 for a substantial reduction in the annual fixed permit statutory costs and having no obligation for FAR to continue to incur expenditure and license for a 12-month period commencing 1 April 2023. Our actions have reduced the cost of maintaining our position in Gambia and maintain the optionality of delivering returns from the investment we have made in the region. It's expected in 2023, an additional $0.5 million will be incurred substantially related to statutory costs. We will continue to progress strategies to monetize the permit optionality and FAR plans to revisit the marking of the Gambia Block closer to the commencement of first production from the nearby Senegal Sangomar field in late 2023. Turning to the Woodside contingent payment. FAR retains a future contingent payment from Woodside of up to $55 million as part of the sale of Senegal RSSD project to Woodside in 2021. The size of the future payment is based on oil price and volumes from the Sangomar field. In their full year 2020 results, Woodside indicated the Sangomar field development Phase 1 was on target to start producing oil in late 2023. Based on the Woodside update, annual payments under the contingent payment are likely to commence in early 2025. And based on current oil prices, the Board expects the full $55 million will be received prior to the long stop date in 2027. It's the intention of the Board to consider opportunities for the monetization of the Woodside contingent payment near the commencement of first production from the Sangomar field in late 2024. Turning to overheads and capital management. Through 2022, the company continued to focus on cost-saving initiatives to preserve our cash balance and ensure we are rightsized for our strategy and outlook. We have substantially reduced the headcount. Corporate overheads have reduced such that the company's targeted corporate and administration baseline cost for '23 is approximately $1.7 million, excluding restructuring costs and share buyback payments. Corporate costs in the second half of '23 are expected to annualize baseline below $1.5 million. On capital management, we have continued to return capital to the market. Key initiatives have focused on in 2022, FAR undertook a buyback of unmarketable parcels of about 900,611 shares from 4,382 shareholders at a cost of $0.5 million. That represented 50% of the then shareholders, which has reduced FAR's administration cost. We've commenced an on-market share buyback, which today has acquired approximately 6% of the issued capital of company for a cost of $2.9 million. The buyback will continue until the earlier of acquiring the full 10% of the issued capital or 30 November 2023. The Board will continue to seek to have the value of the underlying financial assets ultimately reflected in the company's share price. We will continue to return capital to shareholders through prudent capital management strategies. Assessing new business opportunities. Since the 2022 Annual General Meeting, your Board has sought to explore a broad range of new business initiatives in both the oil and gas sector and across the energy transition sector. This effort has been undertaken on a cost-effective basis by using the Board and internal executive skills with only limited external consulting support when considered necessary and appropriate. The Board seeks to ensure that any significant new business initiative must have the potential to offer better returns to shareholders and share buybacks and capital returns. Today, no business initiative has matured to a stage that would require Board approval or a shareholder vote. Turning to the outlook and our strategy for the balance of 2023. The focus for FAR new Board will be maintain our financial and capital discipline, assessing the monetization of the Woodside contingent payment and seek the farm out of the Gambian blocks and evaluate the optimal way to return our surplus capital position to our shareholders in the most efficient manner in the absence of a new business opportunity being undertaken. The company will be in a position by the end of this year to have sought offers for its Woodside contingent payment and for the farm out of future work activities associated with the remaining assets in the Gambia. Dependent on the commercial consideration of both these matters, the return of excess capital will be a matter to be addressed at that time. Should any new business proposal being presented to the company will be evaluated on the basis that must show the potential to offer significantly better returns to shareholders and share buybacks and capital returns. I'll take this opportunity to thank Alan Stein, who in January 2020 resigned as a director for his valuable contribution towards restructuring the business and is the valuation of a number of the new business opportunities across the whole energy sector. Garth Campbell-Cowan was appointed a Director during the year, in addition to his continuing role as Chief Financial Officer. Both Garth and I are subject to reelection resolutions at today's meeting. I'd like to thank our shareholders for your support and patience as we remain committed to ensuring we maximize shareholder value from our asset base. We'll now turn to the business of this meeting. Before opening the poll, I wish to inform shareholders that a poll will remain open for a few minutes after the proposed resolutions have been addressed. I now declare the poll open. I'd like to remind you that shareholders are attending the meeting virtually can submit recent questions at any time in relation to those resolutions, and these will be addressed at the appropriate time during this meeting. For shareholders prepared to speak, you will have the opportunity to do so and reach the Q&A session for the formal part of this meeting. I now move to the first item of business. If you have a question on this item business, please follow the questions process has been previously outlined by the Company Secretary. We will address your questions at the appropriate resolution. The first item of business pertains to report and consideration of the financial report of the company and the related reports of the directors and the auditor for the year ended 31 December 2022. These items are containing the annual report. So I'll ask you that to be taken as read. The annual report is available on the ASX announcement platform or on the company's website, and there are copies available as you came into our own. The corporation's act requires the accounts and reports to be laid before shareholders at the Anna General Meeting. However, except as set out in Resolution 1 to be considered later, there is no requirement for a vote of members to be taken on them. No recent questions to the auditor were received by the cutoff date, 5 business days before this meeting. Questions may be directed through myself to our auditor in relation to the conduct of the audit, the audit report, the company's accounting policies or the independence of the auditor. Claire, have we received any questions?

No questions have been received.

Are there any questions from the room? Thank you. As this matter doesn't require a vote, we will now move on to the first resolution. I turn to Resolution 1 and today's notice of meeting, which pertains to the adoption of the remuneration report. I now propose that shareholders consider and, if thought fit, pass Resolution 1 as set out in the Notice of Meeting and as displayed on your screen. In respect to this item of business, the following proxies have been received as outlined in the presentation. I move that shareholders consider and, if thought fit, pass the ordinary resolution. We'll now go to shareholder questions. Claire, have we received any questions?

We have not received any questions on this resolution.

Thank you. Are there any questions from the room? Thank you. There being no questions, I now turn to Resolution 2 in today's Notice of Meeting, which pertains to the election of Mr. Garth Campbell-Cowan as a Director of the company. I now propose that shareholders consider and, if thought fit, pass Resolution 2, as set out in Notice of Meeting and as displayed on your screen. In respect to this item business, the following proxies have been received as outlined in the presentation. I move that shareholders consider and, if thought fit, pass the ordinary resolution. We'll now go to shareholder questions.

No shareholder questions have been received.

Thank you. Any questions from the room? Thank you. As the next resolution pertains to reelection of myself, I will temporarily hand over the chair to Garth Campbell-Cowan for the next resolution.

Thank you, Patrick. There be no further questions. We'll turn to Resolution 3 in today's Notice of Meeting, which pertains to the reelection of Mr. Patrick O’Connor as Director of the company. I now propose that shareholders consider and, if thought fit, pass the Resolution 3 as set out in the Notice of Meeting and as displayed on the screen. In respect of this item of business, the following proxies have been received as outlined in the presentation on the screen. I move that shareholders consider and, if thought fit, pass this ordinary resolution. We'll now go to questions. Claire, do you have received any questions?

No questions have been received.

Any questions from the room? I'll now hand back to Patrick.