Over the far too many decades that I have beeninvesting - the...

Over the far too many decades that I have beeninvesting - the one thing that has become blindingly obvious is that withforesight there are many opinions – none of which can be confirmed as beingcorrect until they are looked at with the gift of hindsight.

IMO – Santos wants 100% of the Mahalos – notjust the Mahalo main block but total control/ownership of the whole of COI’sMahalo interests - this is why they increased their percentage in the Mahalomain block to 43% when it came up for grabs from COI after the APLNG deal.

However Santos being a commercial animal - isunderstandably strategically positioning itself to take full advantage of whatthey conclude is COI’s financial weakness – making a move only when they feelthat the end result will be to their maximum financial advantage. That’s justbusiness and I expect no less.

COI however - continues to increase‘in-ground’ value – believing that a tipping-point will arise when the amountof gas they can add to the reserve figure/s will ultimately lead to approachesfrom interested third parties who want to get involved taking the gas toproduction at a time when the market has a gas shortfall. At that time – STOhas no option other than to snaffle the lot or miss the opportunity on whichthey have been hoping would always come their way.

That’s the size of it – a ‘cat and mouse’ gamewhere neither party wants to ‘show their hand’ – with each party keeping closeto each other and moving forward with mutual respect so as not to ‘burnbridges’.

I’d be astonished if there haven’t beenongoing discussions behind closed doors with the inevitable hurdle being theamount STO wants to pay and what COI management feels is a fair price – thusCOI continuing down the path of adding reserves and STO watching – waiting andbiding their time.

What will bring this to a conclusion ratherthan dragging on for many more years?

· COIruns out of money/funding.

· STOand COI management thrash out a deal that both parties feel will be palatableto their respective shareholding majority.

· Athird-party with ‘clout’ and funding enters the frame with the ability andtrack-record to fast-track reserve/s to production.

If I was to take a ‘best guess’ - I’d hopethat our management are doing what they can to introduce and get on-board asuitable third-party to fast-track Mahalo North to production after increasingreserve figures demonstrate that it’s a ‘goer’. If there is a sniff of such adeal being contemplated – then it’s decision time for STO.

That’s my take on how the land lies.

Then again – I know no more than you guys.

Good luck