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Buddy,

You and I have differed on many issues, and had a personality clash over the years. But I do agree with your post.

There are two quite distinct issues at play here:

(1) the ESG Boards communication, disclosure and expectation-setting about reserves and commercial deals, not to mention their desire to 'wait' until the signals are right. That is one issue.

(2) The other is the deal, the metrics, and the reserves upside going forward. That issue is quite distinct from the above.

If people want to vote NO, that is absolutely fine by be. I am not compaigning behind the scenes for a YES vote. But my view changed the day the IER came out, which had buried within it the complete lack of reserves progress. Many of us believed that there was substantial upside in the reserves, based on numerous factors (including what the company had us believe). But it just didn't happen.

Put yourselves in the shoes of ERM Power. Or Marubeni. Or one of the QLD projects. What would give you confidence that ESG could deliver, such that you would commit yourself to a GSA? Strong reserves progress? A favourable regulatory environment? Increasing flow rates? A supportive State Government? NONE of these things happened.

Changing views is always unpopular. Going against the flow is always unpopular. But when you consider what hasn't happened at ESG over the past 18 months and what has happened to the industry both nationally and in NSW, don't be surprised that ESG sold out for less than what you were expecting.

I was as shocked and angry as anyone when I found out about the reserves. More so. But I am separating that anger from integrating that new information into a view about 'where to from here'? And I am not going to let that anger influence what my analysis tells me. And that is that our metric, our price, is high. It is the bloody lack of reserves progress that has stuffed us up.

I changed my view because the information changed. Perhaps we all should have been more reactive to events as they unfolded. But, IMO, this is 2011, not 2007. Metrics are not the same. We have a Mining Tax and a strong A$. We have a NSW Government putting moratoria on CSG drilling. We have one party (the Greens) in coalition with the Federal Government who are against CSG altogether. And even the Federal Opposition says miners should only be able to act with farmers' consent. Things have changed.

I am sorry that I have disappointed you all by changing my view. I could be leading the charge against this deal and be Mr Popular. But, that would be being false. The reserves progress is stuffed. The outlook for further reserves growth independently of Santos is poor. We need this deal as a fallback position.

There is still time for another bidder. But if we didn't have this deal, with would be trading in the 30s or 40s. I thank my lucky stars we got out of this potential disaster with the deal we did.

Yaq