esg and sto have been talking for months

That's what Baulderstone said in the ABC interview that MB posted. Lets think about that a little more and it might reveal what's going on and what the plan could be.

So several months ago STO approaches ESG. That's around the time that the Tintsfield pilot began operation. STO knows there's a large upgrade coming ... 18 months worth of data and a whole new seam. Now obviously STO and ESG have been co-operating thus far and STO wants to do any takeover likewise. Here's a scenario then .... Santos says to ESG we would like to acquire you but don't have lots of spare cash and we were criticised by the analysts when we bought into you 2 years ago .. we can't afford for that to happen again given all our funding requirements (and recent cash raisings) for GLNG. Here's what we are proposing. We will make an offer now .. ahead of your upgrade that will not be too dilutive for us. We will then have a few months to "sell" the deal to the market and that will be easy enough because it will be a low offer on good metrics (for us .. i.e. historic reserves). Then when your upgrade comes through we will agree to sweeten the deal (most likely with cash because otherwise it might not work as our shareprice may fall on a higher offer) paying the same metrics for the additional reserves. ESG says OK but we need a few months to get our ugrade happening so we will agree but only if its friendly and an SOA that gives us time (until September).

Its interesting to note that much to our dismay ESG has said NOTHING since May about Tintsfield, the other pilots, the upgrade or their prospects or commercial opportunities and have signed no deals .. despite lots of complaining from shareholders. May would have been when this deal was hatched. So .. ESG has been "co-operating" by not spruiking itself so that the above scenario can play out.

Then in early July, within (as it turns out) only a week or two of the offer from Santos, DC goes off to see JP Morgan and a VERY comprehensive 70 page report emerges that details a range of scenarios that value ESG at $1.50 (for a sale of their gas to a Qld operator) to $2.20 (for LNGN at final 4mtpa capacity). Does that sound like the actions of a company that expects to lie down, roll over and be stolen by STO at 90 cents?? ESG can do much better simply because a bid will de facto provide proof of a market for our gas.

I expect more to come .. either by way of an "agreed" increased offer from STO or another bidder or bidders emerging.

Comments?

H