eastern star gas in talks with potential asian, page-68

Jump.

Thanks for your very comprehensive reply

Some facts I know about the formation of the JV:

8/10/03 ESG acquires Farm-in for 65% of coalbed methane rights in pel238 for $12M from Canadian listed company Gastar Exploration Inc. (TSX:YGA delisted; NYSE amex:GST) Gastar had conducted extensive exploration over the last 5yrs

27/1/04 HGO-ESG JV Farm-in for 32.5% each of PEL238 CBM
from Gastar (Read the ASX Ann 27/1/04)

28/8/06 HGO sells its 32.5% of PRL238 to ESG for ESG shares 19.99% so ESG has 65%. HGO Chairman David Archer invited to join ESG Board.

2/7/09 STO buys the Gastar JV share 35%
STO buys the HGO 19.99% of ESG but does not receive an invitation to join ESG Board.
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the original Farm-in agreement probably would have an amendment history:

Original 8/10/03: Gastar - ESG
Amdt 1 27/1/04 : Gastar - ESG - HGO
Amdt2 28/8/06 : Gastar - ESG
Amdt 3 2/7/09 : ESG - STO
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The Farm-in phases where there is defined % Earn-in return for defined expenditure seems to have ended by the 28/8/06

I find your contention that the Operator(ESG) now has to pay for all proving up , hard to accept but when you look at the ESG annual report "Statements of Cash Flows" for YE 30/6/10 there is a "Payments for Exploration and evaluation" of about $44M and no corresponding Receipt (unless the $44M has been netted out to reflect the STO contribution)

If STO doesnt have to make any ongoing contribution it is a surprise to me. I assume that ESG recovers its costs as an on-charge/GJ delivered.


Cheers