reflections on where we are at with esg

Just a few thoughts:

I'm stuck in ESH despite a scary market simply because i have been in so long I have to see this out to its conclusion (part of me would rather be totally out of this market otherwise!).

Bundalee suggests that ESG needs to book more reserves before it is a target. This agrees with Yaq's comments about the size of QGC and AOE's reserves before they were taken over.

I reckon the reserves upgrade is key BUT it will be a lot bigger and more meaningful if there is also some sort of commercial deal beforehand.

Who might sign a sizeable MOU with ESG? Or for that matter who would ESG want to sign an MOU with? For my money the candidates are, in order of likelihood:

1) The Japanese (the feasibility study is due soon so an MOU could coincide with that perhaps?),

2) BG who have ambitions for and are marketing for train 3.

3) STO/GLNG. Its my feeling this is less likely at this stage than the above because ESG has more to gain from 1 and 2 and less to lose in terms of "optionality".

ESG's strategy has been so far not to sign deals so as to not "pick a fight" with potential suitors (like STO) until they ESG is ready. With the carbon tax more certain, and once an MOU for off-take of significance is signed and reserves are upgraded (substantially as suggested by JPM) then if ESG is ever to be taken over then it has to be game on. The next few months could be interesting and potentially rewarding particularly if the sector heats up with the long-expected consolidation as the majors lock in reserves at source (rather than be exposed to rising input gas prices that would squeeze their LNG margins).

Thoughts anyone?

H