big thanks to management, page-12

SF,

Accepting the bid puts a floor under the price. A nice position to be in. Only upside now.

ESG got a metric of (currently) $0.45 per GJ of 3P, which was more like $0.50 when Santos' share price was over $13. Now without detailed knowledge of BOW's full field economics, I am not in a position to say whether this offer at $0.19 per GJ of 3P is a good deal or not - the devil is in the detail. However, the metrics are a good place to start the discussion.

In ESG's IER, the Independent Expert puts quite a bit of reliance on the metric of similar transactions. That being the case, what will BOW's IER say? It becomes hard to justify a metric that is only 42% of the ESG/Santos merger, given that 'deal' is so recent and hence reflective of current market conditions.

Could the IER say that ESG deserves a much higher metric than BOW because NSW is a more mature and supportive regulatory environment for CSG? Hardly. Or that the infrastructure is better in NSW for ESG? Nope. Did ESG have better synergies with buyers or lower transportation costs than BOW? Nope. Is the environmental risk less for ESG than BOW because ESG is over the Great Artesian Basin? No. Is the competing land use more of a problem for BOW than for ESG. Again, I don't think so.

IMO, even if BOW's coals are not as prolific as ESG's, there is plenty of upside for other bidders such as BG. But 2P reserves are to some extent normalised such that they are comparable. They take into account flow rates and the like. 3P less so, which is more dependent on market alone.

It would be hard for the IER to justify this bid in terms of the metric being 'fair and reasonable'. The IER would have to come out with some pretty bad data to argue that BOW's 3P is worth only 42% of ESG's 3P.

With ESG looking like it is going to another party, from where else will Shell or BG or others get the gas to meet their requisite reserve ambitions?

Yaq