Ann: Appendix 3Y - D Wrench, page-39

The mid-caps - BPT, SXY, DLS - are too small. After any modicum of success, the STX share price will be multiples of what it already is. All of these company's would have to consume most or all of their cash reserves to take out STX. The question becomes, how would they (the hypothetical acquirer) then fund the hundreds of wells that need to be drilled. Which leads to the merger/scrip acquisition option, but then the question becomes, what can they offer us? Will they progress the project faster than a bigger player could, or we could ourselves with debt?

If we are talking about a hostile takeover, I'd be thinking about Santos, or some multinational. Chevron might walk away from the Beach joint venture in the Patchawarra, but might still want to increase its stake in the Oz unconventional space. We also had a multinational in Magnum Hunter after Ambassador recently, so these oz small caps are on the radar of international companies. Even BHP has invested in the unconventional space in the US.

All this is predicated on good flow rates, which we don't yet have, but if we are talking takeovers we should be thinking big, like those companies that took over the CSM companies along the east coast.