why , page-8

TBE,
Some Sunday ramblings before Australia beats SA and the AB's knock over the Argy Bargy's.

I suppose I am a bit biased towards BOW. Ever since I came across RP I was impressed by his attitude to getting things done. He hated management. He was best using his vision and putting plans into action.

As I have said before it was a masterstroke getting those 3 permits. He outbid them all,..... including Arrow.

You have asked me to put a value on BOW. I will pretend I am the Independent expert. So I have to consider

BOW's current gas reserves 238 2P and 2752 3P
BOW's planned/target gas reserves 1250 2P and 6200 3P
Its Location and its neighbours
Its 100% ownership
Past sales
Plus a host of other things

And, as we have passed Peak Oil, we must assume that the price of oil will increase over time. (33 0f the top 45 producing oil countries are in decline. World crude oil production is decling by 6.7% per annum.)

As so with the price of crude rising ( forget these temporary dips ), the World must fill the gap if it wants to improve its standard of living at an economic price. And that is why we are entering the Golden Age of Gas. The same energy at half the cost.

The other reason ( aside from falling oil production ) that we are turning to gas is that the Middle East is in TURMOIL. We don't get a smidgen of the news of what is happening there. Believe me it is bad news. The Saudi's are ruling by brute force and the Shiites have just about had enough. With a little help from Iran this situation could explode into one of the world's worst nightmares.

So the Major oil and gas companys are turning their attention to stable energy plays and this is where Australia is brilliantly placed. It is near to the major emerging asian markets and it has gas in spades. CSG and Shale Gas. And of course they are prepared to pay world prices.

On the 18th of July this year Santos offered to buy ESG's 3P reserves at 50 cents per GJ. That is only a few months ago. Using that same value for BOW's 3P reserves then the value of BOW as per page 21 of their preso dated 16th August 2011 is

98cents x 50 cents x 2752 GJ divided by 350.5 million shares.

Which equals $3.85 per share.

And just think what it might be worth next year. $8.67.

The CSG industry has been worked over by floods, Rudds, Farmers, GFC's..you name it, it has been really marked down. But, at the end of the day the Majors will pay the going price for Energy. And if they have a LNG plant that is more efficient through operating more trains then you can bet the Board will tick off a paltry billion or two to secure long term stable supplies of gas.

There is nothing clearer in my mind. Australia will become a global gas player of significance.

And, based on the above, BOW will not be sold at $1.52.