What AZZ acquisition offer means for LONESTAR RESOURCES, page-12

SKM, I wasn't going to respond further but you put up a very good article to read - so thank you for doing that.

The narkiness in the "debate" as you call it stems from the condescending attitude and an insistence on proving others wrong.

I have absolutely no issue with the metrics such as EV & EBITDA & FFO ratios on BOEPD, 1P. I use them all the time to make choices and compare investments.

I highlighted 3 things that were "rubbish" (and remain so IMO) none of which were your metrics.

1. They are not close - the EFS and Permian Basins cannot be considered close (distance). They just are not close. They also are not close in terms of geology either as say the EFS and TMS would be.

2. The pricing is not the same - and you've lost me with your desire to prove another wrong here. As investors in LNR we would know that for our EFS product we get returns primarily based on LLS index. But even there, the price LNR receives varies whether we are talking about West/Central/East acreage.

You've then gone on to describe in a lot of detail, that AZZ (and again who cares about them) does not receive LLS - which I think makes my point that the pricing is not the same (your point - "Both areas receive the same pricing."). So why the argument?

3. The product mix is different - even inside of LNR with its properties in the EFS there is a difference. Then of course there is their Bakken product. If you're after a concession that because they both produce Light Oil/NGLs/Gas so therefore they are the same - then I concede - you are right. Not how I would evaluate a company but hey each of us are different - right?


The article BTW makes a couple of very interesting observations but this one would have a few financial models changing dramatically (bolding is mine)

"supplies from the new pipeline will add to the downward pressure on prices exerted by growing Gulf Coast inventories – up another 2.5 MMBbl last week (April 18, 2014) to a new record 209.6 MMBbl according to the Energy Information Administration (EIA). In fact it may very well be the case that WTI prices at Cushing trade higher than LLS at the Gulf Coast before the end of 2014 – increasing the incentive to ship WTI to Cushing over Houston."

Have a nice day.