Trading on Good News, page-218

Valid points made. Each to their own in terms of investment timeframes. I've made it clear I don't want a corporate transaction, especially around current prices. The term "old" is relative. A 50yo may feel much "older" than another 50yo. Personally, I would ideally like to hold this till we appraise and bring on OH because I think that would be the height of my investment window for STX (I'm looking to exit around 2030). It would be nice if they stick a hole into Arrino and Kadathinni before then but based on the board's decisions around Walyering wells, it is clear they are prioritising low cost, high margin cashflow generation asset for the immediate future. So it wouldn't surprise me if they spend next few years in development phase to bring SE peaker plant and WE online while trying to optimise/increase cashflow from Walyering. Any spare capital will be directed towards OH appraisal, with Arrino/Kadathinni exploration being sidelined till 2027 in my opinion.

However, if we sell WE, it will serve to (1) remove the capital constraints on the company, thus allowing them to expedite appraisal of OH, Arrino and Kadathinni (2) highlight the value of our asset to the market and the cash holding would lead to an instant rerate (3) permanently remove the risk of any immediate cap raise as well as balance sheet leverage risk.

Not sure what numbers you have in mind, or how you derived it. On a $/2P+2C basis, Hancock's purchase of WGO (at$2/GJ) gave us the closest benchmark reference pricing. If they prove up ED1 and bring the field 2P+2C up to 700PJ, our share is 350PJ. At $2, that's 700mn.

On an NPV basis, using an 11% discount rate and assuming average realised gas sale price of 5.5/GJ and 10mn annual opex, it would generate an annual FCF of about 70mn. That gives an NPV of c.500mn. Of course, if one assumes a much higher gas sale price for the uncontracted portion of the gas, then the NPV would be higher. My point is that a figure of around 600-700mn isn't underselling WE at all.


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