reserves, metrics and gas prices, page-13

WARNING: This may Discomfit you so LOOK AWAY Now :)

Nothing like a sp Falling Off the Cliff to bring out the BRs

The Shell-AOE transaction Metric was :
For 2P $0.95/GJ ; For 3P $0.60/GJ

To argue that the Reserves at the time of that transaction were "inflated" is to argue that the certifiers were being inconsistent, as they were certifying across the industry for the likes of ORG , STO and so on. All of the QLD players were in the LNG ballpark.

In all the reserves there is and was included the likelihood of LNG development. The IER referred to LNG prices as the reserves are based on that. The domgas market at $3.50/GJ is too small and more gas powergen cant absorb all the gas either. The relatively high CSG variable cost would leave a very small contribution margin to the capital costs of development.


I agree that the ESG reserves probably dont include a LNG end use at this stage. With the NLNG feasibility study or a GSA with STO to supply GLNG that will bring LNG or "Oil linked" gas pricing into the picture. That would significantly increase the ESG share of the 2P/3P but not at some inflated metric.

If you look at $0.60/GJ for 3P as being , what it is, a recent market metric for a LNG market oriented company being taken-over, then ESG if a LNG market channel opened up would be valued similarly. The AOE acquisition was at a late stage compared to those in 2009 so development and reserves assessment were more mature. Hence the money paid divided by the 2P or 3P denominator resulted in a lower more realistic metric.

So the plausible metric for an LNG market orientation is $0.60/GJ for 3P. In this multiplication the quantum of the "P" will increase significantly IF the LNG market beckons. The Beckoning can be indirect via STO or via The ElectricLNG.



Cheers