Good afternoon Pete01 May I respectfully refer you to the COI...

Good afternoon Pete01

May I respectfully refer you to the COI March 2022 Quarterly Activities Report in which under ‘APLNG acquisition update: Section’ – the following is stated:

‘APLNG acquisition update Comet Ridge entered into a binding agreement to acquire APLNG’s 30% interest in the Mahalo Gas Project, announced on 3 August 2021, taking Comet Ridge’s interest from 40% to 70% on completion (Acquisition). At the same time, Comet Ridge executed a funding and option agreement with continuing Mahalo Gas Project partner, Santos, whereby Santos may increase its equity interest in Mahalo from 30% to 50% and acquire 50% interests in Mahalo North (ATP 2048) and Mahalo East (ATP 2061).’

I take this as meaning that Santos has the option to acquire a 50% interest in Mahalo North and Mahalo East – at a price to be hammered out between Santos and COI – which in turn means that there is indeed an option in place that extends beyond the main Mahalo Block. Santos also has the right to increase it’s holding in the Mahalo Gas Project from 42.86% to 50%.

The above was part of the ‘Terms and Conditions’ of the funding agreement that COI entered into with Santos when Santos agreed to loan $13.15 million to COI for the purpose of COI buying out APLNG’s 30% share of the main Mahalo Block.

Reading between the lines – I think that APLNG would never have sold their 30% share of the Mahalo Gas Project direct to Santos – thus Santos financially facilitating COI with fund availability to enable APLNG’s 30% to be bought by COI. Clearly Santos would have liked some if not all of APLNG’s 30% share – but for whatever reason they were unable to negotiate this with APLNG – thus the next best thing being Santos making the funds available for COI to buy out APLNG 30% share.

Santos again have been clever in that this funding offered to COI came with ‘strings attached’: Santos has the option to ‘up’ their 30% holding in the Mahalo Gas Project from 30% to 42.86% for the exact same pro-rata price that COI paid for that percentage from APLNG. Santos has an option to ‘up’ their percentage in the Mahalo Gas Project from 42.86% to 50% (at a price to be negotiated).Santos has the option to buy 50% of both Mahalo North and Mahalo East from COI (at a price to be negotiated). That’s why I feel that Santos are the most likely party to either end up with 50% of all the Mahalo Blocks (which is their right – at a price to be agreed) or indeed are the prime candidate to buy us out.

That was the point I was attempting to make.

I remember back to the dizzy days when as an investor in Sunshine Gas (Senior management member duplication within both BOD’s) – a deal was negotiated whereby Sunshine Gas was sold to Queensland Gas – then almost directly thereafter Queensland Gas was sold to the BG Group. This begs the question as to why the BG Group did not buy out Sunshine Gas directly. Isn’t this exactly what Santos have done in financially facilitating COI to acquire APLNG’s share of the Mahalo Gas Project only to leave the door open for Santos to buy a further 20% of the Mahalo Gas Project plus 50% of Mahalo North and 50% of Mahalo East should they so desire direct from COI?

Santos wanted a percentage of APLNG’s 30% but had to go through COI to achieve this – plus they have the added bonus of options to buy 50% of all the Mahalo Fields. IMO Santos have played a clever game from Day 1 in the COI journey.

The big question is whether Santos will exercise their option by 22nd December to increase their holding in the Main Mahalo Block from 30% to 42.86% - which IMO is a ‘no brainer’ for Santos as that percentage comes to them at cost-price – thereafter how long it will be before they make a bid for our company or at the very least for our percentages in all the Mahalo Blocks.

I think that the likelihood of Santos wanting to go into joint production with COI whether that be from the main Mahalo Block or Mahalo North or possibly Mahalo East in the future is not an angle Santos will want to pursue.

I may of course be reading this situation incorrectly and always am happy to stand corrected as the situation unfolds – but as a very long term investor in the COI journey – this is my ‘take’ on how the land lies and the reasoning behind my thoughts.

Good luck…