Ann: South Erregulla Foundation Gas Sales, page-17

Thanks - appreciate your sentiment As I have said before, when I first started out cutting my teeth in O&G investment, I learned a lot from a group of amazingly knowledgeable posters on the Motley Fools UK forum. This is just a way for me to pay it back so to speak.

Just because I am not overly concerned about it doesn't mean I don't recognise it as a risk. It is definitely a potential risk given all the corporate activities around the basin in recent times. It is without much doubt that STX's gas reserve/resource position is one that many other companies will kill for, especially in a very favourable supply/demand outlook for further price rise. Logic would suggest that having three separate processing plants in close proximity to each other makes very little commercial sense. Therefore, STX is definitely a potential target. That said, I personally didn't think it made any sense to have 3 separate LNG processing plants in Gladstone but that's exactly what ended up taking place there.

There are several reasons why I am not too concerned about it...

(1) The gap between current price (38c) and what I believe to be its true intrinsic value (>90c) is more than 100%. Even if a so-called "low ball bid" is to come, I believe it will need to be north of 70cps to have any remote chance of success. So existing shareholders will be offered a chance to crystallise most of the potential value upfront while the potential suitor will enjoy 20cps of value that they won't pay for as well as any other synergy-related benefits.

(2) Our current and past board members as well as strategic investors (such as Mark Carnegie) consists of some heavy-hitters with a substantial collective holding between them. I do not know of another small to mid cap O&G where there is such a high level of inside holdings. I believe this is because they recognise the immense value of what STX has managed to unlock. I personally cannot see them fold cheaply.

(3) As mentioned in Point 1, there is widespread recognition within the industry as well as the wider industrial/mining sector of the importance of gas in WA as well as our dominant position in terms of reserves/resources and landholding. If a low ball bid is to come, I would be staggered if no competing bid is to come through.

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