This lack of resolution of the Fermat drilling costs and the...

This lack of resolution of the Fermat drilling costs and the constant extensions to the trading halt are extremely frustrating to all holders. From our prospective it seems like nothing is happening and it doesn't flatter the skills of management.

I have also been surprised in the past about what has appeared to be disinterest in EPR's VICP/50 permit by other O & G exploration coys. The permit in the Discovery Bay High area is adjacent to the Pecten High and in the Otway Basin which is a proven hydrocarbon fairway. Until a farminee can be attracted the SP will struggle and EPR will be unable to attract any capital. I hope management have got some ideas on resolving this.

Whilst management's performance is under a cloud there are a few aspects of this situation that are worth taking a closer look at. The drilling of the Fermat well occurred earlier than had been planned due to BPT's drilling program being reorganised. Their inability to jack up at the Spikey Beach target brought the Fermat well forward. We don't know whether this had any impact on EPR's ability to farm out their share of the drilling costs in time. This is not an excuse but could be a factor. If so, management could easily have explained this to holders after the event but may have been reluctant to do this so as not to prejudice EPR's negotiating position.

The more important issue at hand is the current negotiations taking place with BPT & presumably Mitsui regarding the Fermat costs. Putting ourselves in managements position, BPT will be attempting to screw the best possible outcome they can and IMO it can only involve VICP/50 because we have no other assets. If EPR goes under, BPT will get nothing so EPR holding out for the best possible deal is IMO the most appropriate strategy. The popular saying that came out of the early 90's applies here. If you owe someone $10,000 u have a problem, if u owe them $10 mill they have a problem.

If BPT are happy to write off the $10mill Fermat drilling costs for no consideration, then they could simply wind up EPR. The fact that they haven't done it suggests to me that they are after a bigger slice of VICP/50 than EPR is prepared to forego. (There maybe other things in play here but ATM I don't know what they could be.)

Much of this is based on speculation but if I'm right then the only thing management should be doing is to ask for longer trading halts.

If you have an alternative or more plausible take on what is happening, happy to hear it as this is all guess work. Hoping for an early resolution but not optimistic!

ANZ