Survival of the Fittest, page-20

Unconventional's are making all the difference at the moment. But with rig utilisation rate falling off quite quickly (and massive capex cuts recently announced by a lot of US majors - the effect of which will only flow through later down the track), and combine that with the rapid decline in shale wells, give it a 12 months and we should see the start of decline in production from the unconventional's. All those sitting in the sweet spots will keep on hammering along, but all the marginal plays will drop off like flies. I believe tar sand in Canada has naked breakeven cost of US60-65, though no one in their right frame of mind will use that figure for planning their capex - they'd always inject a safety buffer into their costing. So if they use US70-75, are we about to see a sharp drop in tar sand oil production too?

This is one of the reasons why boom and bust cycles will never go away. No many companies willing to invest for the future by risking short term losses, and incurring the wrath of short term market punishments.

Anyway, in terms of who is a likely takeover target in times like this - anyone and everyone is. As Jac Nasser replied in response to analysts asking about future capital returns, if you have a weak balance sheet, you are just another cork in the ocean with your fate in other people's hands. For example, even the likes of STO may end up being acquired if they can't raise any money from the hybrids, which is a distinct possibility if their credit rating is downgraded based on their sharply lower earnings profile and massive fixed capex obligations for the development of their LNG project in Queensland. With Shell being a willing seller, even WPL is in play.

All these discussions have been interesting, but somewhat off topic as far as STX is concerned As far as STX is concerned, I don't really think it matters what the oil price does. There will be sufficient domestic and international demand (via CSG LNG) to underpin development if they can prove up the play. The sheer scale of the play means that all involved (now and future) will get to share the spoils - if we can prove it up Getting closer slowly.

618