STO - BUY IMO, page-41

Croasian,

concur - STO has sufficient reserves for short to medium term..........

reserves are not "production" .......


if they have to continue to buy on the spot market in east coast to fill their ACQ requirements - it is very very difficult for STO to generate a return from its investment in GLNG ........this is the crux of the problem.

there are really only 2 or 3 soln's:

1. STO spends a couple of bill on roma shelf - and tries to improve prod rates (compared to exsisting wells)
2. STO spends a couple of bill in Narabri CSM - and that fils nsw market - sto then diverts coope gas to GLNG....
3. STO does corporate deals (acquires production assets) to meet its commitments....
any / all of these would take 2-3 years to "build up" ....

no 4 - possible corporate action from shell or others - but this would only occur (imho) - if they had excess gas that could fill the plant (ie why would you take on a liability)

I basically agree re Joint Venture partners and operating at a loss - .... however the key point to understand is that if there was an arbitrage opportunity between JCC and east coast gas prices - then STO is the only that has to carry the inventory / carries the price risks....

the market understands all this - which is why STO is trading at a discount to break up valuations ........I hope management are smart enough to work their way throu this self-imposed problem....

if we assume - that STO is able to spend the $$$ and fix the prod capacity problem - the its rate of return FALLS ..............

that is why (imho) its a sitting duck ......sadly

rgds
V_H