Drilling/Development Schedule, page-439

Took me a while to find this conversation regarding OH. Just to refresh our memories... While I was crunching the NPV for the possible policy change, I also had to work out what was contracted to domestic customers and assuming a 50% reservation, what STX could export from its portfolio. The most obvious candidate was OH. I had questioned their order of priorities and JD made the good point that the limiting factor for OH in terms of timelines was the seismic rather than drill slot.

From the recent announcement (can't recall which one), it is good to see that OH is now on the radar and has a contingent drill slot booked in for later this year. Beside the key upcoming SE2 flow test, which should be positive enough to enable FID for SE phase 1, I think the next 2 big catalysts are the potential policy change as well as OH drilling.

SE2 success and reserve certification should see some price recovery as the market gets a clearer picture of a commercial development pathway for SE. That will improve the cashflow profile with SE revenue starting next year. Successful drilling of ED1 and SWE1 will obviously add some incremental value as whatever value is being priced in for the 2C will be revised upwards to 2P valuation. However, with WE field production only scheduled for late 2026, it will have a lesser impact of DCF valuation.

It goes without saying that a policy change will obviously see a significant rerating of STX. If this is to happen, it will not surprise me (and I hope the company shares the same view) if OH goes straight up the priority list, especially if the seismic confirms the prospectivity and some drillable candidates are firmed up. Given OH's large, uncontracted potential resource base of 300BCF and expected low cost, fast development, the gas can go straight into export market. By the time OH come online (late 2025 at the earliest, maybe early 2026) and assuming SE phase 1 is online, we'd have domestic production of around 75-80TJ/d, implying we have export capacity of 75-80TJ/d from OH assuming 50% reservation.

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