Oslo,there are still plenty of options for Santos. They need to...

Oslo,
there are still plenty of options for Santos. They need to assess which one is going to give the best value, flexibility and control for their current and future business plans.

You could consider the following (take a breath):

Queensland

BOW - excellent resource. In a basin they (Santos) have no existing tenements or expertise in. It is close to Gladstone and fairly substantial.

BUL- BUL also have a similar resource to BOW in terms of basin analogies. They also have KOGAS as a 10% holder who have a first right of refusal for farmin to the 814 and 813 tenements. Expires in about Jan11? Considering that KOGAS are a potential partner on GLNG this is a tye up that cannot be overlooked.

COI - still a fringe player. I see more synergies with these guys tying up with someone like BUL because of the tenements in the Galilee and management links.


WCL - they have some of the closest acreage to Gladstone and also a big partner in NHC. Its possible they could also supply gas through a GSA. Again they are a smaller player and dont offer the flexibility and upside that STO would be seeking for GLNG#2, 3, 4 and 5.


VPE - their big future producer should be from PL171, but they are all but wrapped up over a barrell by BG with management being almost exclusively ex-QGC and their prime tenements 'shared' with who else but BG. They also have the Don Juan area adjacent to lacerta, that is owned by BG. Too much BG smell there for there to be anything for STO involvement.


ORG - this is the real phantom elephant in the room. I have no mental clarity on where and what they might do. They have the BEST acreage of all the companies, yet are trucking along with no obvious end point. It is entirely possible that if STO were over a barrell they could tap ORG for some supply. This would be more negative for ORG than it would for STO - indicative that ORG couldnt find a buyer for their gas. Very embarassing. I dont think ORG and Conoco would like to be embarassed like this.

New South Wales

MEL - still need to be connected to the market. I think they are unlikely to be a target of Santos for GLNG supply because of the substantial distance and margins on their CSG gas. This could turn on a dime if their unconventional testing in the Gatton comes up aces. They also have a good quality reservoir in the ripley road sandstone. Maybe a sleeper at this stage.


AZO - its a foregone completion that STO are interested in this considering they are farmed in to their tenement at PEL 456. The source of interest in this from DTE is pretty obvious and considering STO interest in ESG, there is no reason why they would also not be very very interested in AZO.

Consider PEL464, this is on the Eastern adjacent section of PEL238. The Black Jack and Maules groups extend well into this area. I might have to check my notes but I believe it is the lachlan fold belt that runs right through this area in 464 all the way from eaast of narrabri down past boggabri to gunnedah. You can see the potential extension visually if you pull up any of the ESG BiMonthly drilling reports that show the Hoskisons fairway extending into the Western portion of PEL464 (not to mention the NorthEasterly extension of the both the Maules and BlackJack formations into AZOs 100% owned PEL459). It is also confirmed on page 6 of Appollos Latest Quarterly. This is one of the lines of seismic that DTE has shot over the 464 area and you can bet this is a component of their source of interest. The Santos Cuan-1 and Turill drill results in 456 are pretty exciting.


The PEL 458 results are pretty interesting, but not as interesting as the utter absence of reporting on 464 - which was supposed to have been in this current quarter - maybe there is still time to announce those results by Thursday (last day of quarter).


ESG - While there are plenty of others opportunities, there are probably few with a resource as significant and as proven as ESGs. This still remains the obvious option for maximum upside by STO
I think that both MEL and AZO offer substantial value, but also come with the respective risk.


South Australia
Cooper Basin. I just don?t see this as a credible threat to STO having to do a deal or select a partner for more gas. Maybe more information could convince the market otherwise.

Cheers,

SF

(Disclosure: holding and trading ALL of the above mentioned stocks)