what if..., page-22

Hi Buddy,

Good point about the AOE experience.

All the Gladstone players are still wondering whether consolidation or collaboration will save them some money , at least $1bn or even more if done early enough. It is funny that with al the examples of these LNG projects , the NWS in particular, that a consolidated JV is shown to be highly cost effective yet Hubris with these companies having over-paid for acquisitions in the last 2 years seems to make them determined to go it alone. No write offs for them ! Still very interesting to see what ORG will do. I punt for a 2 way consolidation (Shell+STO) and (BG+ORG) , but what do I know - just a gambler ! - and Hubris often wins out to the detriment of shareholders.

1. Back in mid 2009 when CSG was really hot STO took the opportunity to simultaneously tie up its 19%+ equity stake in ESG plus the 35% JV. That combined move took some planning so it was obviously done with strategic intent.
Whether it is a stranglehold is moot as we have debated it for some time already.

2. STO seems to regard the Gunnedah adventure as the next stage in their east coast LNG strategy. They have a lot of acreage themselves as well as their interest in ESG and the narrabri CSG JV.

3. I reckon that STO are preoccupied with GLNG and would want to get that close to up and running before turning their attention to Newcastle as the second outlet to market. This could be 2012-13 , before first gas from GLNG in 2014. That is assuming that the market is able to absorb all the LNG coming through in both East and West coast projects, at a profitable price. There maybe some project attrition.

4. ESG are moving along pretty well. While power MOUs are good LNG is best and that is the way they are heading. While things never go fast enough for shareholders, I see that progress is good-reasonable especially when you consider the competition to get buyers and investors lined up. Their progress is also consistent with the STO strategy. If ESG got STO to agree as JV partner to sell say 21% of the ESG share of the JV to marubeni for example, leaving ESG with 44%, STO 35% then that wouldnt be too far from the GLNG split where STO has 45%. Getting partners with final customers is critical and difficult to do.

5. There seems no doubt that STO would maintain its investment in ESG contributing to the JV costs and taking part in CRs. So if it came to a STO takeover then it would be acquiring some of its own investments anyway not just taking advantage of other shareholders contributions. While we all chant the chance of takeover or for some the inevitability of a takeover by STO or some other-bidders an obvious takeover often takes a longer time to eventuate than you would expect. Most takeovers happen when you least expect them. The fact that ESG has a large resource base makes it attractive.

My takeover expectation is after the hump of GLNG is out of the way , say 2012-13 unless ESG provokes STO in a way inconsistent with the STO strategy or one of the other-bidders has a go at ESG.

I realise that what I have written above is repetitive and I seek forgiveness. It makes me wonder whether I am guilty of a BR and should press delete. NO - I will carry the reputational risk?

My highly tuned Reticular Activator system has picked up:

- Holy has become Rational
- The BR crew have gone very quiet and some have become highly frustrated
- ESG significant news flow is very low
- Coal Seam Gas without Associated Water has been discovered
- Tony Burke is now a Goodfellow

I am looking forward to the AGM though I cant afford to attend - I dont know the cost of a webcast but you would think that for a company now approaching $1bn market cap with many interested shareholders that it would be worth the expenditure to keep us in the information loop.


Cheers