TestPilot,These are the two important paragraphs:• Acquisition...

TestPilot,

These are the two important paragraphs:

• Acquisition of strategic stake provides immediate seethrough
upside for ESG share price. STO acquired Hillgrove
Resources’ 19.99% interest in ESG for $176m in a move to align the
interests of the newly formed JV partners. The deal equates to
$0.95/GJ of 3P reserves and an ESG share price of $1.00/sh. STO
has also agreed to make additional payments to HGO if any party
acquires more than 50% of ESG for a price in excess of $1.00/sh.
• Multilateral Campaign to drive growth. While the HGO
transaction directly supports our current valuation we believe that
ESG offers substantial upside with current reserves a fraction of the
enormous resource potential. ESG look certain to meet 2009 reserve
targets of 1300PJ of 2P reserves from its initial 2 wells alone, with
an additional 4 x production pilots to drive reserves growth into
2010. Hence, we maintain our BUY recommendation and will
look to review our price target of $1.00/sh.

***Substantial upside indeed.