That option isn't possible IMHO. Gas reservoirs aren't like a bottle of LPG gas where the exact quantity of gas is known. I can't imagine Hancock agreeing for STX to produce its share of the gas upfront. Bear in mind that even the 2P is based on 50% confidence level. The current 2P for WE is 422PJ. So what happens if STX produces 211PJ and the reservoir stops producing? Also, the cheapest gas are those produced upfront because of strong reservoir pressure, which will deplete over time and require additional opex for workovers etc.
The cleanest solution is either for the WE JV to proceed with FID, or for Hancock to buy out STX's 50%. The other clean-ish option is for both parties to agree to sell their gas into an existing processing hub.
From STX's perspective, we really need the cashflow from WE since it makes up such a large part of our gas reserves and future cashflow. So it makes sense for us to either force Hancock into a decision soon as the operator, or persuade Hancock to buy out the gas reserves at a mutually beneficial price.
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STX Price at posting:
16.5¢ Sentiment: Buy Disclosure: Held
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