STO $6.86, page-24

Agreed Ya. And I think one can extrapolate Q1 '18 similarly given the forward delivery price for spot cargoes. Their graph from Investor day shows it very well IMO



Question - you're using the STO reported realized oil price overall from past years - right? I'm thinking that may understate the effect of oil price recovery given the volume of LNG produced from GLNG?
Also a on a forward basis, Slide 4 of the Investor Day has footnote 2 that 2017 OCF using US$50 - $62.85 Bbl oil price achieved under 2017 collars has $300M of cash flow leverage for $10 movement in price. My interpretation of that is if price average is then US$60 - $72.85, then STO has additional $300M in FCF than their operating plan. Have I got that right??? I rather it be $300M more at $60 than when at $50Bbl.

Given their collar hedges, and noting they don't actually produce 11MmBO (actual 2017 forecast production is 55-60 MmBOE - so call it 10MmBO tops on an equivalency basis). So we don't want Brent to average much more than $62.85 in 2017 anyway. I hope (and I hate saying that) that they have some bodies with smarts (as opposed to just smart bodies) in O&G marketing that are closely watching forward movements of all their product futures curves and making the fine tuning required on a rolling basis. The worst thing you can do (IMO) after hedging is becoming a speculator with you hedges and the next worst thing is "set and forget" your hedging strategy.



STO was always going to be a FCF generating machine once the Capex for GLNG was done and oil price reverted to a more "normal" price (call it Brent at $65 +/- $5). It's always a massive risk for shareholders of companies which make big Capex investments for projects that can then produce for 40yrs (oil sands is similar in its financial profile). Always a shark circling waiting to scoop up a quality asset at a depressed price in a macro downturn. Opportunistic acquirer and the loser is common equity.



If would be sad if STO gets taken over for cheap. IMO the worst is behind STO for the macro fundamentals. Bad stuff can still happen (e.g. Aust Gov't for one and their policies may well be an under estimated threat to STO profitability), always be "stakeholders" looking for a free ride. If I were KG and BOD I might be seriously looking at putting together some anti-takeover provisions - make it as expensive as possible for the acquirer.

Good luck to us!