short sighted?, page-7

I think a Shell acq of Santos is definitely a possibility.

Santos acquiring ESG still makes a lot of sense. In fact, they could use that as a defence against an acquisition by a bigger fish.

A Santos acquisition of MEL does not add up imo.

Santos are already fairly capital constrained in that they have both a clear need to raise debt as well as a new share issue so they can fund their development ambitions. While I think the risk to this debt/equity issue is only very moderate in the long run and can create significant value for their holders, it would be very questionable if Santos started stretching beyond their reach. A MEL acq does that. I am sure they want to maintain their credit rating as well.

Too acquire ESG, at a low to high estimate of $1.50 to $2.50 per share, they are looking at costs of up to $1.2-$2B in either cash or scrip for the remaining effective 50%. Considering the market reaction to Santos change in % ownership of GLNG, if things continue to degrade, a pitch at ESG might even be put off further into the future or scrapped all together. Who knows. I think it is highly unlikely, but a possibility nonetheless. Especially is ESG starts to slip on them.

STO would romp it in if one of their downstream partners was to make a joint bid with them on the asset

The chart I put up yesterday shows the potential certainty that ESG could bring STO in its development of train 2 and 3. Santos are going for it and I couldnt but hope, as an aussie, that they succeed.


I noticed The Weekend Australian article today looked more like a marketing letter. General theme was begging investors to please have another look at the value and certainty in the deal, not too mention to look elsewhere like the cooper (and not NSW) for their additional gas.

I am pretty suspicious of that. By my numbers, cranking out a $400-500m pipeline from North NSW to QLD makes a lot more sense than trying to produce marginally economic gas from a few thousand miles away. ESG has to still be on the cards.

I agree the loss of $500m is relatively insignificant over the certainty of the deal, and good on Petronas for demanding that.

When you consider that they have effectively brought in an EXTRA customer that gets the close to closure on Train#2 (assuming the asian buyers still step up) then it is a massive deal.

Can we assume that they will step up. Well The Australian who spoke to Knoxy about it wrote:
Environmental approval is due by October 11, which is expected to clear the way for announcements of further equity and LNG sales agreements with Korea Gas and Sinopec.

That sounds pretty positive to me.

I do agree with Knoxy that the market reaction is both overdone on the deal and their might be value.

I reckon STO gets chucked on the LT BUY pile.

However, the big thing he (Knox) seems to be (naturally) overlooking is the market smells a rat, which comes in the double form of a potential acquisition and also an equity raising. This means short term weakness and there is nothing but time that can cure the condition of the market. Well, that or the the suspicions of the market allayed.

Cheers and ave a good weekend ESGers,

SF