Say what you want about delays etc.. but that is a rip snorter...

Say what you want about delays etc.. but that is a rip snorter of a bullish brief on the future of ESGs gas.

If Santos want it, they are going to have to fight for it.

Wellhead revenue for the first year from a stacked multi-lateral I would estimate to the tune of $7.5m per year. There is a large number of unknowns with respect to when the well would peak and what kind of decline profile it would take; however I would be my assumption that an ESG well would take much longer to peak (than a typical vertical well~3-6 mths), have a much lower decline in production (typical vertical might see 10-20% with most decline happening after peak then flattening out) and a longer well life (typical vertical wells, while very dependent on prices achieved, can run from 7-14 years in life).

Those assumptions are somewhat validated by the reports from the wells with high water production, high flow rates, and excusing logistics delays - substantial ramp to peak times. The lower drop in flow is associated with a 'lagging effect' in the wells as the drawdown area is very substantial and the permeability only low/moderatd - so it takes a long time for a lot of gas to migrate through the coal, which contains a substantial amount of gas.

From these sorts of flows, I believe that they could quickly pay back the well construction costs and also still be profitable, despite substantial water production and moderate well operating costs. I would not be using Caseys estimate on water costs from the AGM, as it seems exorbitantly low and is very arbitrary as it is cited on a per/GJ basis... which makes me assume some creative maths (such as net water production to gas produced over the WHOLE life of the well) to arrive at the number. What we care about, is how much you produce in the initial years when your production is highest - because this is when it hits your revenue the most.

Long term, things are pretty bullish for ESG. I would still ascertain that there is some more short term weakness, but sentiment on this will flip like a dime.

The acreage to own, the acreage to envy - 988PJ 2P gas is the most ANY junior has got thus far. To me this means that ESG is headed for the big time.


SF