** org merger **, page-8

re: ** market thumbs down ** Good discussion.

I too am dissapointed with ARQ at present, but do not believe it due to poor management, rather bad short term luck. IMHO it's failures have been DESPITE doing the right things.

I do agree that it would have been better if ARQ had picked up some decent acreage, as I also agree it is unlikely to get much cheaper in a shakeout, also I believe many companies holding acreage are going to waste a lot of money, getting nowhere with poor expertise and self serving management (but Qantas and the West Perth restuarants will do fine).

ARQ has been an aquirer, quite an agressive one, but has done it all within the Perth basin. Look at the acreage aquisitions over the past 2 1/2 years. It's sp would really be in the sh*te today if it hadn't. Much of this acquired acreage has yet to be systematically explored.

It has also aquired undervalued gas infrastructure (at a small% of replacement cost), in the sure knowledge they can find more gas, and that the Perth gas price has to rise (drastically). WA is the only place in WA with a significant gas price linkage to the USA and Europe (via LNG) and therefore IMHO will inevitably soon have the most expensive gas in Australia.

I am a little suprised ARQ hasn't picked off NWE yet. It could retain the WA bits and refloat the rest, perhaps as "Frequent Flyer Energy".

Eric clearly sees the value in focus, basin expertise etc, hence the latest basin study. This is big picture thinking from a big picture MD.

I have recently sold nearly half my holding (which didn't have much CGT liability), as I now see no shortterm sp driver. I intend holding the rest longterm, perhaps buying back some. I consider ARQ a lonterm buy, but belatedly see better short term value elsewhere.

Entropylord