FA & General Banter, page-4

@vmp
it's good to know that you are also very experienced in stock market because you re talking about QGC (Queensland Gas Company). That was back in 2008, in the stormy days of stock market, right in the middle of GFC. Nearly all stocks collapsed but we were all in buying coal seam gas company stocks. QGC was the first one amused us. I was late to buy QGC because I just started buying and researching stocks, and started self-studying geology at that year.

I want to share my experience on CSG sector and how the the "Rapid Consolidation" happens in a resources sector.

I have got a lot of lessons from those events at that time.

The main lesson was about the power of a rapid consolidation in a sector for a very much in-demand resource. If that's the case you need to do your homework very well because you will find limited investment opportunities going forward over the time.

I just go with the benchmark prices in the market and wait for the national and international majors to come to the scene.

Now Wesfarmers is the first one. RIO, BHP, FMG are all welcome. PLS, MIN, Albemarle, Tianqi are all takeover targets IMO.

MAIN ACTORS BEING QUICK BUT MAJORS BEING BRUTAL

In June 2008 BG Group made a US$13.1 billion bid to acquire Origin Energy, Australia's largest coal-seam gas producer, but were outmanoeuvred by ConocoPhillips, who offered to invest US$9.1 billion in a joint venture with Origin for 50% of Origin CSG assets.

After QGC bought Sunshine Gas, BG Group bought QGC for $4.8b in Oct. 2008.

Yes BG Group paid $4.8 billion for QGC a small company once was 30c. What we are talking for lithium resources from $300m-$1b is not much in comparison to those prices paid.

BG group was very aggressively trying to acquire the gas assets all around in QLD. (I tried to buy QGC shares one they before the bid and 10 minutes before closing of session on Friday, but a problem occurred on my brokers system and couldn't buy it. And Monday morning I saw BG's bid. That was big miss for me).

Then I made a good research and bought in Arrow Energy. Arrow was owning 30% of Pure Energy that time. Pure Energy didn't seem to be a gem to me. I was wrong, because I didn't have enough experience on CSG business and didn't aware of the Asia's energy demand that time. We were also going through the worst time of GFC at the end of 2008. But this CSG business was on fire.

I was waiting for Arrow, even trading Pure Energy shares while I was holding Arrow. I bought Pure shares at $1 and sold them at $1.15 two weeks later in Oct. 2008. Then Arrow put a bid on Pure Energy for $5.40 in Dec. 2008. Then BG Group came out and put a rival bid. Bidding war started. I Feb. 2008, BG increased the last bid and offered $8.25 per share (over $1b in total) and Arrow stopped bidding and accepted to sold its 30% shares to BG.

Then Shell acquired Arrow Energy for $3.4b in March 2010, then acquired BG Group for $70 billion in 2015.

This was a research note written by Paterson Securities in 7 Jan. 2009. (I couldn't find it's link because it's broken now).

2008 A Year of Rapid Consolidation in CSG Sector

-A rapid consolidation of the CSG sector was observed in 2008, resulting in more limited investment opportunities going forward. A multitude of transactions were executed during the year, from the formation of lucrative JV arrangements to takeovers of substantial CSG players and sale of highly prospective CSG acreage. This resulted in consolidation at both the upper and lower end of the sector, leaving more limited investment opportunities. At the larger end of the sector we saw the takeovers of SHG and QGC while transactions at the smaller end effectively removed AJL, SGL, and PES from the space. The question remains -Will there be further consolidation and who is best positioned in the sector?

- A multitude of transactions helped the CSG sector to outperform the market. The large number of ongoing transactions throughout the year provided support to this sector in an otherwise disappointing market and provided a minority group -where gains were realised during the year.

- 2008 was a year of increasingly high value transactions as Australian CSG players looked to increase their resource bases and international oil and gas companies looked to gain a foothold in this rapidly emerging sector. The value paid for CSG acreage substantially increased, given the additional economic incentive of a number of proposed CSG-based LNG developments. A rapid expansion in reserves, M&A activity and a better understanding of the value of CSG saw the price of many companies substantially increase - e.g. ORG from $8.70 in January to a high of $17.50.

This was the map I made in 2009.