some facts about the value of esg's gas

Time for a review.

(Perhaps these have been trotted out too often and everyone knows them by heart... terrific. Old timers can ignore, and new holders can read. These metrics are THE most important way of measuring the value of a gas developer).

2P Reserve Metrics:

$4.91/GJ: The HIGHEST transaction in the CSG sector (Petronas/Santos)
$2.79/GJ: The MEAN transaction in the sector
$1.57/GJ: The LOWEST transaction in the sector (BG/QGC)

$0.83/GJ: ESG's current metric (based only on the imminent project 1,300PJ goal (845PJ to ESG), and fully diluted.


3P Reserve Metrics:

$3.03/GJ: The HIGHEST transaction in the sector (AGL/SGL)
$1.17/GJ: The MEAN transaction in the sector
$$0.40/GJ: The LOWEST transaction in the sector (BG/Pure)

$0.55/GJ: ESG's current metric (based solely on CURRENT 3P (no target included) and fully diluted.


Now, consider the volume of drilling and pilots taking place.

3 SEAMS - ONLY 1 BOOKED

There are 3 major seams of gas, and only one (Bohena) has any resources booked.

The Bibblewindi West Pilot (Namoi seam), and the Tintsfield Pilot (Hoskisson's Seam) have neither reserves NOR EVEN RESOURCES booked for their seams. So whatever ESG certifies will not only increase the reserves, but the resources also. What does it tell you about ESG's confidence (and corporate outlook) that they have fast-tracked these pilots?

THE NEAR-TERM 1,300PJ GOAL - TECHNICAL UPGRADE

Also consider that the Project 2P goal of 1,300PJ is only based on results from Bibblewindi and Dewhurst pilots. Results from BW West and Tintsfield are ON TOP OF the 1,300PJ target. ESG already have a market for this gas.

2C > 2P - COMMERCIAL UPGRADE

The 1,300PJ goal assumes NO FURTHER COMMERCIALISATION AGREEMENTS. There is over 3,000PJ of 2C (contingent resource) that is technically viable, but just awaiting a market. 2C > 2P, just waiting on an MOU...

MARKET CONSTRAINED, AND STILL DRILLING

ESG have 5,200PJ of 3C gas or higher. The vast majority of this (almost 4,000PJ to ESG) they do not have a market for. So what does it imply when they are running pilots at BW West and Tintsfield, to add further resources? Why keep drilling if you do not have a market? It either means they are confidence of finding a MARKET (move that resource to reserve), OR, they are confident of finding a BUYER FOR THE WHOLE COMPANY who will value the extra resource.

Then consider the value metric increase, at the stroke of a pen, if another MOU was signed, and some of that 2C is moved to 2P...


In summary, we have a company trading at a fraction of all prior transactions (based on only one of three coal seams). They are continue to drill and test, beyond their current markets. They have a large amount of gas awaiting a market and therefore immediate upgrade.

I will leave for another day discussions on current large shareholders and their intentions, NSW Electricity privatisation, the movement away from coal and to gas-fired power, LNG out of Gladstone (gas-swap, or direct supply), and LNG out of Newcastle.

For all these reasons, this is why I am a buyer and holder of ESG.

Y