the trading halt, page-31

Robert Gottliebsen wrote this in July 2009


"As often happens, last year the board of Santos decided they needed a different person to convert the wealth that Ellice-Flint had generated into a profit bonanza. They chose David Knox. His reign will be judged on his ability to convert these enormous reserves into profits.

To date, there has been very little understanding of the operation that Santos is putting together and Australia is in grave danger of losing a stake in these incredible hydrocarbon reserves because Santos is now a prime takeover target, just like Rio Tinto has been in the past and some believe will continue to be in the future.

However, just as there were risks in Bass Strait, the Pilbara and the gas fields of WA, there are also clear risks in the Santos grand plan.

But the potential is so huge that most long-term portfolios should have a stake in the company. Leaving aside takeover bids, I cant recommend it to those who are looking for short-term gain because for the next four years the Santos profit will be hostage to oil prices (for ideas on how to profit now see How to play the LNG boom). It is not until 2014 that this bonanza will begin to pump up Santos profits.

Lets look at what Santos has in the ground. Combining the Queensland and Gunnedah Basin coal gas fields, Santos calculates its likely reserves at about 70 trillion cubic feet of gas. If we talk about barrels of oil equivalent (or BOE) we reach a figure of about 11 billion barrels or more than twice the actual and inferred reserves of Woodside.