"I suspect that you are just messing around and trying to deflect me from my grand quest.
No, I am not (just) baiting you, db. I came upon some very interesting insights about what I think ESG and Santos are up to. Let's just say that when I look at the whole picture, the final end-to-end result with Santos will work out okay. I will not be circling the wagons and running a NO VOTE campaign against this merger.
What I am expecting is this: (and I will be very specific with my predictions, so you can throw them back in my face if they do not come to pass).
(1) The IER will be released. It will contain a solid reserves upgrade from the Bohena and Namoi seams (it has to, as ESG have already said so to the ASX). To pull a figure out of the air, let's say +40%, so around 1,300-1,400PJ of 2P. The 3P may well have increased also, and NSAI may well recognise that the market for ESG's gas is now bigger.
(2) As a result of the above, Santos will sweeten their bid. They may throw in extra cash, on the basis that the reserves upgrade justifies a higher price. Not a huge increase, but a sweetener so that the YES vote definitely gets up. (As they have found in the past, being too stingey isn't worth the risk).
(3) There is no way in the world Santos could sell the idea of a 3rd Train to Asian buyers without the gas. No one is suggesting they have the reserves for this without ESG. That being the case, Santos had to simultaneously line up the buyers for the 3rd Train and the gas - in short, they had to work with ESG to line up the ducks. So, the additional bonus for ESG holders, who have already had their bid sweetened, will be Santos scrip, which will rise upon announcing the 3rd Train deal. And who would this be with? Well, the Japanese, probably. Goodness knows they need the gas. And you know how we were wondering why Marubeni were happy to talk to ESG (who were so obviously a takeover target) - because the Japanese had an understanding with ESG and Santos that Santos would work with them in the event of a change of control. So, the Santos merger with ESG didn't mean the Japanese has wasted their time. And probably, Santos and Marubeni have decided that a 3rd Train out of Gladstone is a better option than LNGN, so the Kooragang Land will be sold.
So, does that help explain my position, db? Note that none of this assumes any third party intervention - that is all a bonus if and when it happens.
ESG gets their reserves upgrade. They get a sweetened deal from Santos. They get Santos scrip. Santos then adds further value by signing a large equity/offtake deal with Marubeni (and 'other countries'), thus adding further value to the ESG-cum-Santos scrip. And ESG-cum-Santos holders can then decide, at any point, whether to exchange their Santos shares for CASH and then other investments (in CSG or elsewhere). or keep Santos shares. But there is more value there than the current 'deal' suggests.
Would I like ORG or BG to force 'the Santo' to pay more? Yes, of course I would, db. But ESG clearly has a plan with Santos and a deal they can live with. And if they can live with it, so can I.
As for Origin and BG? They, quite frankly, are not my problem. Where ORG will source the gas for gas-fired power in NSW, I don't know. I guess they will make do being a price taker and buy off Santos. And if BG don't get their 3rd or 4th Train and their project remains the size it is, with all the risks associated with lack of a diverse supply etc., that again isn't my problem either. BG will just have to accept a lower rate of return, a smaller project, whilst Santos and partners benefit from a larger project, diverse supply, less land access problems, economies of scale and better returns. Again, BG's problems are their own.
So, there is plan there db. Origin isn't part of it. And it is my belief that a sweetened deal with Santos WILL go through, with my support.
Yaq
ESG Price at posting:
80.5¢ Sentiment: Buy Disclosure: Held
