letter to 6000 - received, page-17

Monsters,

If I were to take a stab at it...

The ESG share price is completely irrelevant because the ESG price is linked to the Santos share price. Santos goes up, ESG goes up; Santos goes down, ESG goes down. In the absence of another bidder, ESG's current share price is purely a function of Santos' price.

It is interesting that, despite the sterling efforts of Nervous and co.*, ESG is not trading at a discount to the SoA ratio. That says that the market is not factoring in a NO VOTE getting up and the price dropping.

So, the question is, how does Santos guarantee that the SoA gets over the line?

Well, giving the obvious link between the STO and ESG share prices, some suggestions are:

Santos throw every piece of good news they have at the market this week, which gets their own share price up considerably and then via arbitrage, ESG's price. OR, Santos and ESG have already planned another 'sweetener', and the current SoA is just a first step.

Either way, I wouldn't want to be owning any short dated put options on Santos at the moment!

Ths week, we may get:

- An Equity /Offtake Deal with the Japanese on a 3rd Train out of Gladstone
- A large Santos reserves upgrade from the Cooper Basin
- (Santos) Shorts are bought back

Santos' price surges, and so then does the effective merger price for ESG shareholders. Timed to happen just before the vote. That is what I would do if I were Santos.

Santos are a two-time loser when it comes to acquisitions. The buying in to ESG has been many years in the planning. Do we really think Santos are just going to let this deal fall over? I don't think so. And if ESG don't have any other options, then they are not going to want this deal to fall over either. If ESG have another bidder up their sleeve, we will see in a few days. If not, then ESG have bet the farm on this deal with Santos.

------------------------------------------------------------

I have spent over 2 years of my life investing in ESG. Almost everything that could have gone wrong to the CSG industry has gone wrong. Many of these externalities were completely out of ESG'c control. But in the end, if this is it, then it is not a tragic investment result. Disappointing, certainly. But successful investing is as much about preservation of capital as it is about the big wins. I can live with whatever happens next.

Let's hope and expect an 'interesting' week. Another bidder? A stream of Santos announcements pushing up the price and value of the scrip deal? A spoiler bidder? Time will tell.

Best wishes all,

Yaq

* I have the utmost respect for Nervous and others who have done what so many others in Australia do not do - get off their bums and take action when they see something they disagree with. I have no time for those who lob grenades from the safety off their pc's, but fail to either contact companies or turn up at AGM's. Nervous and his group have had the courage to take action. And whilst I have a different view to Nervous and the ESGSAG on the issue of the vote, he knows that I respect his position and his campaign highly. So, hats off to Nervous and his group, and I wish them well.