Ann: Sole Orbost Update 19 June 2020, page-63

Hi @Freighter32

Well done on a different way of looking at COE and an interesting post. All kinds of methods you can employ and its always a challenge to come up with the metrics that meaningfully measure what is going on with your investment.

I totally agree COE is undervalued by the way. But don't forget the level of risk has gone up recently (apart from COVID-19 and recessions we have the plant under performing and potentially some adjustments coming to our supply agreements and financials). When risk goes up and all else is equal then SP likely to come down.

All that aside, your post was focused on production rate being reflected in the market cap. So just speaking generally for a moment, the variable that (statistically) explains most of the variability in an oil company's stock is the oil price. For some oil companies the R squared on a regression model using just oil price could be 70%-80%.

What we have in COE, with our long term GSA, is a very predictable and stable price for our product. The price "variability" is limited. The production amount however is less predictable (presently) ... but it shouldn't be.

Now I'm thinking you might be thinking ... but the middle part of the graph shows a rising share price as the production rises (makes sense to me) ... and then the right hand half of the graph shows a sinking share price while production is again rising.

That rationalizes to me simply as risk (~20%) being added and being confirmed by COE with the latest update. When that risk is removed, there will be a re-rate ... no question of that for my line of thinking ... (whether its $1 is dependent on future development of other assets IMO). Also I think that the risk will gradually be removed ... so when COE repeats multiple quarters (say at least 3) hitting those production targets, building cash and getting ready to develop Otway and having 2 East Coast Gas Production hubs ... that's a valuable company IMO.