This is Mr Lincoln Augustus, first second cousin of Holymagimon.
I believe that there has been a little angst at the family’s comments on the sale of Hill Grove’s stake in Eastern Star to Santos.
Yaqona has commented “You seem to think Santos "saw HGO coming", and took them for absolute fools. You also lump in the Gastar and HGO transaction into one, as both being steals. My view is this: Santos have done very well out of BOTH transactions. But, because of HGO's top-up clause, so have HGO. And, so have ESG. I don't think you can have it both ways. You can't claim that ESG is likely to be taken over by either Shell, AGL, or Santos in the next 18 months, and believe that HGO was taken for a ride. - HGO, as recently as April, stated that they valued their holding of ESG at the $2.78KJ of 2P metric -( $2.70 per ESG share).”
I would therefore like to clarify our thoughts a little further.
1. We feel that HGO sold out of its stake in ESG at far too cheap a price, especially after listening to what Mr Knox had to say about the deal in the Santos Investor Conference Call.
2. So Santos got a foothold into Eastern Star at a price far far cheaper than they would have expected to pay.
3. Santos got hold of resources which it values at $0.74 a Gigajoule
4. This is an extremely low price to pay, based on recent market transactions.
5. And this is also a very low price if we add on the expected near term reserve upgrades
6. So, because of HGO’s precipitous sale to Santos, the share price of ESG is nowhere near what it should be today.
7. And it also puts a lower starting value on ESG in any bidding war
8. And while the end result may eventually be high, it is our opinion that the result is always higher if the starting point is higher.
Uncle Tobias always says that we have to use the ladder to pick all the mangos we want to sell in the local markets. Then, if anyone else wants to pick any more mangos they need to get a much longer ladder and expand more energy. Always made sense to me, always will.
9. If the above is set aside, then we will consent that HGO did a good deal for its shareholders IF Santos does a takeover within 18 months
10. However, if anyone else does a takeover, then HGO forfeits half the profits above $1.00
11. Yes, it would be brilliant if HGO could buy back the shares they sold to Santos at a sub one dollar price, and have the best of both worlds.
12. The sad fact is that HGO is cash strapped and that was the real reason for their sale at this ridiculous price(with an escalation clause) of this valuable asset
13. Settlement of the HGO's eastern Star holding by Santos is by 20 July 2009
14. I would expect that the share price of ESG would be well over $1.00 by 20 July 2009
15. So HGO will most probably not be able to buy in any more ESG at a price cheaper than what they sold
16. And remember, just remember, that Mr Knox said in the conference,not once, not twice, not five times, but many more times, that this is a huge, huge resource and that he couldn’t sit and let this fish swim by.
So, all in all, irrespective of what HGO holders may feel, we still think that it was their financial circumstances put HGO in a most compromised position where STO “saw them coming”.
These are just our thoughts, and they mean little, for we are just humble Jamaicans with at most little knowledge of little
Blessing of the Lord MLA
ESG Price at posting:
87.5¢ Sentiment: Buy Disclosure: Held
