STO $6.86, page-25

CA,
the way they've set their hedging policy for 2017's sale of 11 mmbbls is through zero cost 3way collars (Annual report pg 23). According to this there r 4 price tiers :

1) when Brent is above USD62.85/bbl then STO gets USD62.5/bbl
2) Brent is between 50-62.85/bbl, then they receive the actual Brent price
3) when Brent is betwn 40-50/bbl, then STO gets USD50/bbl
4) when Brent is less then 40/bbl, then STO gets actual Brent price plus USD10/bbl

Now, so far this year their avrg. oil price is about USD54.26/bbl for 7.36 mmbbls & LNG is USD7.31/mmbtu for 2227.2 tons.

So as long as they keep their cost under control, the breakeven margin should improve. Without any doubt LNG should now b the value creator in their portfolio, well north of USD 1 bil this year followed by Domestic gas sales etc.

They r also pursuing buyers for Barossa & Caldita gas. So that in due course (post FID etc) will boost their overall LNG sales & FCF. Till then they can focus on reducing debt from existing FCF.

One way to work to assess their true worth is from their Free Cash Flw for say 5 yrs timeframe plus Terminal value minus debt divided by Shares (assuming no dilution).

Eg: just for arguments sake project a simplistic number of USD 800 bil as FCF this year with 4 or 5% perpetuity growth over 5 or 10 year period & 10% discount/WACC. There in lies the true answer.

And to draw a bottom line in the sand, their Net assets were worth USD 7080 mil in 2016. That's the price range LC & her Lenders will look at valuing Santos. Old addage about book value vs DCF model. So its entirely upto KG and the board to show how much future organic growth is there.  

I think with most M&A's its best that an Independent Expert report work out the actual value rather then us folks on HC. I still remember the WPL one from November 2000 when Shell offered $14.80/share & Grant Samuel had WPL valued betwn AUD 6.3 to 7.3bil & Deloitte's worked out the offer to b unfair and thought $16/sh was better with oil in the US35/bbl range. All that is history now.

PS: AWE just got interesting, as expected.