could hilcorp buy adi, page-8

Hi redal,

the 'lower figure' of 188c is from Hartleys March broker's sheet, on the back of just Kennedy and Weston.

For the reserves calculations, they were looking at Petrohawk's 5.5 BCFGe/well (rounded down to 5) and 100 acre spacings, rounded down to 200 wells. Last night, AUT again reminded people that our wells are flowing 50% greater than Petrohawk. So, adopting the same simplistic arithmetic, which seems to be conservative with roundings down, reserves should be 50% greater than previously estimated. Apply the same to their short-term target price for ADI of 45 cents, and you get 67.5cents.

AWE was taking the p!$$ putting in an offer 5 cents lower than Hartleys' out of date short-term price target.

If the arithmetic is followed through by Hartleys, they will come up with a revised short-term target of 70cents.

This is just based on what has been said.

It's not the fault of the ADI directors that the market was under-valuing the company. They are bound in to confidentiality with Hilcorp. They raised capital to meet calls for the next stage of the drilling campaign - not confirmed but EME did similarly. They couldn't dally about. The best interests of shareholders are to remain part of the JVP. If they needed cash to secure that, as seems likely, I don't see what other option they had. If the posters talking about debt finance are serious, why did they not line it up for the company? But, secure it on what? What term would a bank agree to? It shouldn't be a problem to sell 3 - 6 (possibly) months receivables, but Hilcorp has first claim until its expenditure is repaid.

I shall be disappointed if Hartleys cannot come back with a figure of 70 cents and not particularly surprised if it is more. Perhaps I am mis-reading the messages but why else emphasise the improvement over Petrohawk flows?

So, sit tight and enjoy, as they say.

I have to take some tactical decisions to make because of the UK's forthcoming budget (22 June) in which we are promised a doubling of CGT rates or more. It would make sense for me to switch into the other JVPs and raise my tax basis at the cost of advancing the tax liability, though at the lower rates. But for that, I'd be happy to sit tight and wait for the ADI defence document - I may do that anyway though I'm watching the other JVPs closely. But, that's for tax reasons not investment reasons. So, if I sell stock it will be to re-invest in the other JVPs and reduce the likely tax bill - a thoroughly worthy objective that I feel most of you will agree with.