is now a great time to buy?

the directors buying was a result of the share placement I believe.

in my opinion, this is a great opportunity. is it the best? there is a lot of value that I would expect to be underpinned in ESG resulting from a reserves upgrade; and a moderate amount of value actually created from it.

I can say that technically, the results that they have achieved, and when combined in a production scenario should produce some very profitable wells. In a saturated market, only the strong survive.

ESG have a significantly scaleable resource and I think they could power NSW for many many many years to come.

We dont have carbon legislation yet, but even if we dont get it this year, how many years til we do. what 2-3 years. And when it is in place, do you think that it is going to loosen up after a while, or tighten carbon pollution further. naturally you would have to say it is going to get 'worse' and never better. of course the worse the laws are the better they are for natural gas (to a point).

ESGs continued delays and breaking the promise of making the NSW Government apporve their plans (joke) will continue to hurt them. With these plans approved, you can then begin to see the bigger picture and watch the company advance their plans for production to support bigger and bigger projects. Wilga park is a nothing project in the scheme of things.

The labor government in NSW looks to be advancing their plans on privatisation. I see this as another key catalyst in value creation for ESG. The reason being that I think the market will be a little more savage in its approach to securing the best resources to power NSW in the future. If you are an electricity producer who also controls a major energy source, you will have a massive advantage over your competitors. More so, if you control a carbon lite resource that can supply baseload power to NSW, then you have a significant advantage over your competitors. What are their other options, wind - which is site specific and can only achieve so much market penetration, solar - which is costly because it cannot load match demand, tidal etc.. etc... Anyway, hopefully you get my point on privatisation.

So back to the strong surviving. There is a future domestic and international gas glut. The higher cost producers will be priced out of the market. Australias higher cost of gas compared to somewhere like Qatar is offset by our low geo-political risk and close distance to Asia. But how much of a gas glut is there really going to be? Because companies wont put down production fields unless they have a market to send it to. So what there is, is actually a glut of potential projects and it is completly conceivable to think that many of them will go ahead, but perhaps just in a reduced form - or perhaps as combined projects.

Gas demand will increase locally and internationally. I think price will fluctuate with the market and projects getting turned on, but generally trending higher for east australia.

If I can pull some stats from the ABARE energy reports in 09, net energy consumption across australia in 07/08 was ~5700PJ. Natural gas production in the same year was 1800PJ - though most of this was export (~50%). The biggest consumption growth area was electricity which was spurred on by NSW black coal electriciy generation.

Of Australias net energy consumption, NSW makes up around +25% or 1500PJ. Across all states in Oct 09 - black and brown coal account for aournd 80% of electricity generation. 80% !!!! The biggest thing here though, is how gas (CSG in particular) has eroded away at coals elec generation market share. 6 months before they had 85% of the market.

That large slice of coal generated electricity will be massively affected by any carbon taxation - because there are large sunken capital costs associated with those stations and they cannot switch supply over night. But we are getting there. In the 12 months from Nov08-09 6 major projects were completed in NSW 2 gas, 2 biomass and 2 wind. The biomass projects (60MW) are dwarfed by the +1GW of added gas capcity. On a capacity $/W basis the capital cost of gas ($1m to 1MW) to biomass ($3.4m to 1MW); gas smashes its alternative competition. Wind still runs just under $2m to 1MW. So gas is the clear capacity winner here right - it delivers peaking power on time, it delivers baseload when you want it to and on scale as well?

All the major electricity projects for CSG are based in QLD (Darling Downs(630)/Spring Gully(1000)/Braemar(450)/Condamine(140)). It wont be long till CSG capacity is added to NSW and CSG becomes a supplier to the many exisiting and future gas plants there. If demand is there, there is no reason once the QLD-NSW pipeline is in place that plants like Colongra will switch to being baseload suppliers instead of a peaking waste gas facility.

AGL has several plans to build gas power gen facilities near several major cities in NSW/ACT.

So the long and short of it is, that ESG proespects look great because there is a massive budding NSW power industry that they can contribute supply to over a very long period of time. We have both Origin and AGL who are cashed up and developing these stations left right and centre around NSW and SQLD.

So it is clearly a great opportunity in my opinion?
DJIA tanked today and there is a certain element of fear in the air when people talk of rotating out into defensive stocks. You cant but help slip into a down trend though, so the best opportunity could well be immediately ahead of us. The OB was a clear warning shot though, we are around 10-20 working days from a large resource upgrade. Throw the dice.

Me - I am sticking with my accumulated portfolio of ESG. They have some great fundamentals and you wont see ESGs plans arrive or any of the other majors coming. They will just arrive and I will be here when they do.

Cheers,

SF