short sighted?, page-11

Stumpy ,

While there are some synergies for STO taking over MEL rather than ESG , for these reasons I think it will be the other way:

1. MEL is definitely a couple of years behind with development and also less proven flowrate wise. Pel 238 already has 1500 2p with impressive flowrates available now. Add to that the anticipated reserve upgrade before the end of the year . The GLNG start up date of 2014 suggests to me that it would be too risky to go with the unknown in MEL.

2. ESG is cashed up ready to start development work now. MEL is a lttle short cash wise and has been trying to find a partner for quite a while.

3. A quick look at the STO website in the Gunnedah section suggests how committed they are to that area and remember , they already own 35% of Pel 238 so the synergies there are pretty obvious.

4. A pipeline from Gunnedah will be financed by others so I don't see a problem there. Given the other companies in the Gunnedah area , I think a pipeline ( possibly running north and south ) will be well utilised.


Whether STO has the ability to buyout ESG is the question for me. As previously stated , Knoxy couldn't resist the opportunity when it came up although maybe the timing wasn't ideal given their other commitments , state of the market etc. Yes , it appears STO needs more gas however they already have 500 2p in pel 238 and who knows how much more next door in the Gunnedah ? It might not be the ideal situation but it's a way of staying in the game. As PP said , once they are selling LNG out of Gladdie and PNG , Knoxy is going to look pretty clever. They've just got to get there . Not to mention the income they will be generating then which may then fund further aquisitions.