Ann: Production Update December Quarter, page-36

Let's talk about debt.

The update says net debt of $A62 million.

SBM had debt of $A340 million in 2014. It took over 3 years to wipe that debt off their balance sheet.

If things go according to plan RSG's debt will be smaller and wiped out quicker than SBM's debt IMO.

What's important is the FCF vs value picture.

If you look at slide 8 of SBM's 2018 annual general meeting presentation you'll see a chart of FCF vs Market Capitalistion.

You currently have RSG stilling by itself with the lowest FCF and lowest MC of <4% and <$1 billion respectively.

Then you have a group of companies; OGC, SAR, RRL and SBM sitting in the range FCF> 5% and <13% with MCs of between $2 billion and $3 billion.

Then you have NST and EVN with FCF>4% and <7% and MCs of between $5 billion and $6 billion.

NST and EVN actually have lower FCF percentages (as defined by Macquarie research in 2018) than the imtermediate group. NST has the lowest and EVN sits between and a little higher than SAR and OGC.

What differentiates NST and EVN on a market valuation basis is their production profile and then probably their claimed LOMs.

IMO as soon as RSG lifts its FCF percentage into the range of the "SBM group" it's market cap will move into the same range of between $2 and $3 billion. It's outstanding LOM metrics should propel it ahead of some of the others once all the cost savings have been made around 2020.

RSG is the one company in this whole group that has the easiest potential to sustainably double (or triple) it's market value IMO.Esh