Ann: Exploration Update, page-112

I agree with a lot of points you made, but disagree on two key fronts.

Progress have been made at OH with the seismic data interpretation and firming up of a drillable candidate. That process takes a lot of time and effort to make sure they maximise the chance of success with the appraisal drill. It is absolutely essential that we have a hit first up. A failed appraisal first up won't kill the project, but it will set it back many months cos they will need to incorporate the drill data into their existing modelling and re-interpret the data to determine where they went wrong. Plus it will put serious doubts into the working theory that OH is an analogous appraisal type play to Walyering.

I also don't agree that the BOD and SN differed on GAS, which is a perfectly sound strategy. The only major setback has been SE appraisal, which has led to the peaker plant commercialisation path as opposed to gas development... and the resulting reduction in expected total annual revenue of about 70mn (assuming SE long term production at 60TJ/d). That aside, the four pillar production is still in progress, barring a major delay at WE due to Hancock. Judging by JH's repeated comments about improving JV relationship, and that AFR reported at the time of SN's departure that he was perceived to be abrasive and can rub people the wrong way in his defense of the company, I suspect he probably got Hancock offside and led to stalemate in JV negotiation for WE FID. That's my conjecture anyway

@khopchai your frustration is clearly getting the better of you if you are seriously comparing STX today to where it was pre-WE2 drill. First of all, the MC today is c.475mn even at 17c, with a 2P of 285PJ and 2C of 400PJ (some of this will convert to 2P once ED is recertified), and an annual revenue of 80mn going to 130mn by end of next year. From recollection, our MC pre-WE2 drill was less than 100mn with no reserve or revenue.

@minumcove ideally we should keep it if it is going to be developed in a timely manner. However, with our tight capital constraints to pursue other growth options, and a JV partner who is seemingly not in a hurry to develop WE for the foreseeable future, we may be end up with a scenario where WE becomes a stranded gas asset if Hancock decides to develop their own gas first and choose to treat WE as backfill later on down the track (ie. much much later like mid-2030s or later). Time is money in the market. There is no commercial value in having in ground gas if it is going to stay undeveloped for many years. In the mean time, STX will continue to be financially hamstrung. Also, I am by no means advocating for the sale of WE at any price. It has to reflect market value for the gas based on recent transactions, so around $2/GJ of reserves.

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