In November ConocoPhillips discussed possible divestment of its early-stage deep water portfolio, which could include its 35% interest in Senegal.

RBC says selling out could be difficult in the current market, but a sale could trigger pre-emptive rights for the JV partners (FAR 15%, Cairn Energy 40% operator and state oil company Petrosen 10%), a process which may reveal a valuation for what is one of the biggest oil discoveries in years.

African explorer FAR is one of RBC's preferred picks in the Australian exploration and production space, and the recent successful appraisal of the SNE discovery offshore Senegal has only served to cement that belief.

The three-well appraisal program has so far producing high side outcomes and affirmed oil in place and deliverability.

"We see the Senegal asset as one of the few deep water oil plays that will be advanced in the current oil environment," the firm said last week in an equity briefing.

RBC said the recent strong flow test results from the SNE-2 and SNE-3 appraisal wells that FAR drilled with Cairn and ConocoPhillips had materially increased confidence in the deliverability of what is shaping up to be a very large in place oil resource in the SNE field.

SNE-2 flowed 8000 barrels of oil per day from the thick basal sands and a surprise 1,000bopd from the overlying thin sands.

SNE-3, targeting the southern part of the structure hit reservoir high to prognosis and flowed 4500bopd from the thin sands which comfortably exceeded predrill estimates of 1000-2000bopd.

The next announcement should the results of the BEL-1 exploration well, targeting the Bellatrix prospect, and then the prognosed northern extent of SNE.

While FAR says it needs about 200 million barrels to proceed with a development, so far the suggestion is that SNE will provide that, with the 168MMbbl prognosed in Bellatrix the icing on the cake.

Current estimates for SNE are for between 240MMbbl (1C) and up to 940MMbbl (3C), which make a development likely.

At the moment RBC is valuing FAR, the smallest company in the JV, on a combination of probabilistic net present value, based on a proposed development scenario for a Senegal Shelf play project, risked.

RBC maintains an outperform rating, and while admitting FAR is a speculative, risky stock, it has set a price target of 15 cents with upside to 30cps with continued success.

A possible fourth well may be drilled using the Ocean Rig Athena on which the JV has an option of a further three wells on top of the firm three-well appraisal commitment.

RBC says FAR gas sufficient funds for four wells, but is likely to need further equity funding if the appraisal program extends beyond a fourth well or to fund further analysis or feasibility studies

Its downside case is 0.04cps assuming the drilling and appraisal activity in Senegal fail to deliver any significant de-risking and reduces the commercial potential, which is possible given the early stage nature of the play.

FAR was trading at 10c this morning.