Quarterly Conference Summary

ID opened with “it has been an active, successful quarter”

Financing – all on track, financial close expected shortly

• term sheet has been turned into fully documented facility agreement
• independent expert reports
• financial model audit
• workplan audit
• first agreement not backed by LNG
• outlook will be released with financing
• 6%, 7-year tenure, no early repayment
• Financing will be used to fund capex to achieve production of 16TJ from WSGP + 32TJ from Atlas

2 oil discoveries (Cooper Basin)

• 3 wells drilled, 2 oil discoveries (which will be brought into production later this quarter – follow up appraisal)
• They are on the 4^th welling – with next 6 wells being drilled back to back (over the rest of the financial year)

Free carry for $43M from BPT in Cooper Basin – no cash spent on 60% share owned by SXY

Production

• Up 4% to 281k
• Continuing ramp up with Roma North (WSGP)
  • 4.5 TJ/day
  • longer term expectations remain unchanged
  • Number of wells offline
  • Optimization process

WSGP – all approvals received to produce

Capex of $24M ($5M free carry) - $19M spent predominantly in Surat Basin

Atlas tracking in line with timetable

SXY engaging with gas customers over the next couple of months, foundation contract relating to Atlas sales volumes – formal engagement will occur next year

ID mentioned Labor / Bill Shorten wants to cap prices – but he doesn’t think this is feasible as it would stifle further investment, thereby pushing prices even higher

My take on what this all means

1. Given WSGP is at 4.5TJ/day (and the average production of 4TJ/day included some wells being offline), and ID re-iterated the longer term expectations remain unchanged – I am comfortable this can achieve the 10TJ SXY previously disclosed. ID has made several references to the long term expectations, and good sub-surface performance.
2. Financing – they outlined some of the conditions precedent (Independent Expert reports, financial model audits, workplan audits etc etc.) They were hoping financial close would occur by today, but they see it imminent – again, no issues with this, given we aren’t planning to spend until Q4 of FY19. The financial outlook will be provided to market following financial close of the financing solution
3. Drilling has started in the Cooper, and there are 7 more wells being drilled back to back (they are currently drilling the 4^th – 2/3 wells were success) – Great news here, as we are actually drilling again.

I think the market sell off is on the back of ID’s comments about what Bill Shorten said (about capping gas prices) – which is why the sell off is across the board – look at BPT etc. etc.

For me, there was nothing distressing in that announcement (apart from Bill Shorten wanting to cap the prices if Labor get in), and I think there is a lot to look forward too as it does seem that financing is imminent, with the outlook for FY19 to follow, plus the results from drilling the next 7 wells.

Labor don’t really through the economics of some of their policies (think MRRT – mining tax), so I agree with ID’s view that it isn’t feasible to just cap gas prices, or investment will drop away – then supply would be reduced even further, making the problem worse.

On this basis, and this overselling, I am back to a Buy sentiment.