what does esg's behaviour suggest to you?

So, Santos joins the ESG register almost 12 months ago. It does nothing to either promote ESG, or help commercialise their gas. So, ESG know that Santos' intentions are to acquire them as cheaply as possible, and have known this for over 12 months.

So, what does ESG do?

(1) They get their resources and reserves up as fast as possible. If they can demonstrate the size and commerciality of their resource (to everyone), they will get more for it in the event of an auction. And, it gives them commercial options in their own right.

(2) They speak to everyone EXCEPT Santos. Santos' interest is a given. What ESG need are other commercial options independent of Santos, and if it does transpire that ESG will go up the food chain, they need an UNDERBIDDER. One bidder does not make an auction; two or more does.

(3) ESG wait. They hold off on signing up any new MOU's for 2 years until they are ready. Why would they want to start a fight before they were ready? So now ESG is out there, signing deals with parties independently of Santos, and with parties other than Santos.


Q: What does all this suggest to you about the likelihood of a multi-party auction? Why would ESG start a fight with Santos by signing MOU with third parties now, unless they knew there was at least one other party to go up against Santos?

A: They wouldn't. They would be keeping their head down, and still working on finding other interested parties

Q: If Santos was the only likely bidder, wouldn't ESG be throwing every piece of news at the market for the last 5 months to get their base price up?

A: Yes, of course they would have. The fact that ESG had no need to promote forward reserve and resource targets, to publish their high flow rates, and to generally 'spruik' the value in the company say they are not threatened by Santos, they do not fear a takeover, and they have other commercial options and interested parties.

Silence for the last 5 months indicates strength of position, and multi-party interest.

Q: Do ESG have a genuine option to go it alone?

A: Absolutely. Clearly with the signing of the deal with Hitachi, there must be parallel discussions, probably with Japanese buyers, for gas offtakes. These heavy-weights also open up a world of financing/equity deals for funding - ESG supplies the gas, the other parties supply the capex and the customers. No dilution for ESG holders. No need to be taken over. No need for Santos.


I think many people are realising that ESG can go it alone. They have access to domestic markets,; they have a first-mover advantage to exports out of Newcastle without any bottle-necks; they clearly have customers lined up and access to capital-offtake deals; they have the plan to get their gas to market in a scaled approach. And, they have the massive and growing reserves, and commercial flow rates.


And if Santos think all these deals are just a bluff to get their price up, TELL THEM THEY ARE DREAMING.

ESG doesn't need Santos.

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