an unpopular dose of industry perspective

I have a problem with a number of things that ESG have said, and not said, in the last 18 months. And I also have a problem with the timing of this deal, especially after ESG said (in late May) they would wait until the right price signals were in the market.

However, I don't see many people talking about the metrics, and how unreasonable they are. The reason for that is that our deal is not that unreasonable, on the basis of our current reserves. In industry terms, our metrics are probably on the high side. I am sorry if you don't want to hear or accept that, but that is what the numbers say. Our deal is comparatively high, based on current reserves.

People won't thumb this post up, because it is not what they want to hear. But take the complaints about the price of this deal over to the BOW thread, or the MEL thread, and tell them how hard done by you are at $0.50 per GJ of 3P. You will get no sympathy. BOW and MEL holders will tell you they DREAM about getting such a metric for their reserves. These shareholders would KILL for such metrics. BOW, prima facie, have agreed to a deal at less than $0.20 per GJ of 3P. And poor old MEL is trading at a metric far below that.

Then, after you have done that, come back and look at the ESG/Santos deal with fresh eyes. A large dose of perspective does wonders, if you are prepared to challenge your own views honestly and openly.

The problem here is the lack of reserves growth in the l;ast 18 months, not the price per the reserves we have. And the problem going forward is that our reserves growth will continue to be stifled by extreme regulatory barriers. This isn't an excuse for anyone, it is simply the reality in NSW.

We are where we are. If we want more money, then we need to certify more reserves. We may get a little more out of Tintsfield in the coming months. But with the moratorium on drilling, how much more reserves progress is their likely to be in the next 6-12 months? Probably a little, but not that much really.

The hardest thing to do as an investor is to integrate new information and change your view. But sometimes, once we realise that the last 18 months has achieved virtually nothing in terms of reserves growth, that is what we have to accept.

By all means, get angry and take action if you believe you have been misled and misinformed - that is your right as a shareholder. But in terms of what ESG can reasonably expect, take a step back, have a look at how the industry has changed, look at BOW and MEL, and then consider whether you are being 'ripped off' or not.

Yaq ('The Unpopular').