Why Smart Money Is Buying Energy Chaos (Saul Kavonic)

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And I think, you know, when you
look at the market taking an

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overly kind of pessimistic view,
what is clear is demand seems to

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be holding up a lot more than
many anticipated.

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And that's actually sign that
the market is structurally

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tighter than people thought for
quite a number of years.

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You've you've watched Breaking
Bad?

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No.
I have indeed.

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You are pretty familiar with the
characters in Breaking Bad?

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Somewhat, yeah.
Do you know where I'm going with

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this?
I have no idea how, I just.

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Keep that thought in mind.
Anyway, we, we're continuing our

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journey to talk about what to
learn about the, the many

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different oil and gas players
out there.

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We're interested in the, the
value opportunities, the

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dynamics, the, the potential
winners and losers in, in what

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seems to be a pretty interesting
landscape.

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And to help us figure that out,
we've had to call someone.

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You know what they you know.
You know where I'm going yet?

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Better cold.
Better cold SO.

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It's a bad joke.
So we've called soul, not soul

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is like, but soul soul canonic
from that soul is a, is a, is a

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tremendously well informed
energy analyst for for MST

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financial.
You've probably read his many

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comments in in in the
publications out there because

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he provides a lot of commentary
and it was a delight to speak

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with.
Him, yeah.

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In his words, he's not short of
a high conviction pick.

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So here are some high conviction
perspectives on Someone Like You

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said, deeply well versed in the
Australian energy landscape.

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Better call us all.
Travis, we continue our journey

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to learn about the world of
energy.

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And today's guest, Sol Kovanik
is an expert.

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We're going a bit more in the
weeds than we have in previous

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episodes here.
We're going to be talking a lot

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about the Aussie equities out
there.

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So thanks for joining us.
So I want to start this

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conversation with the kind of
big picture where you think we

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are.
So I think we need to start with

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the macro kind of oil and LNG
outlook because then it all

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comes flowing back to Australia
from there.

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So oil prices have been kind of
trading in the 60s over much of

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the last 6 or so months.
There was a lot of bearishness

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last year.
You'll remember we had a big up

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cycle in the wake of the Ukraine
war.

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And then what we saw last year
was for the first time we're

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starting to see supply growth
starting to outpace demand

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growth.
That saw also saw OPEC start to

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unleash their barrels and unwind
their cuts that they're made

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from COVID era, start unwinding
those very quickly.

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And that saw a lot of pessimism
take hold in the oil market.

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Now, today, that pessimism has
at least proven overblown.

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And what we've seen over the
last few months is geopolitical

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risks, first in Venezuela.
There's also a lot of attacks

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going on in energy
infrastructure, including

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Russia's crude export
infrastructure by Ukraine, and

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most recently is obviously the
big build up of US and allied

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military assets in the Middle
East.

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Potential strike on Iran, But
you're seeing geopolitical risk

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groups like Eurasia Group
talking about a 65% or higher

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chance of a direct strike on
Iran, which accounts for up to

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about 2 million barrels a day of
oil supply.

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But all about about 1/4 of the
world's oil and oil products

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flow right next to Iran for the
strain of Hormuz, which if it

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was interest, it was if that was
the impact, it would cause a

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global energy crisis and send
prices higher than we've ever

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seen in the history of the
market.

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So that's oil.
And I think, you know, when you

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look at the market taking an
overly kind of pessimistic view,

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what is clear is demand seems to
be holding up a lot more than

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many anticipated.
And that's actually a sign that

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the market is structurally
tight.

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And then people thought for
quite a number of years, I can

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make the same case when you look
at LNG.

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So LNG has been very high
against the Ukraine war where

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Russia did actually turn off the
tax of gas to Europe.

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Prices have come back down to
the kind of 10 to $12.00 mark at

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the moment.
What's very interesting here is

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again consensus forecasts of
massive oversupply over the next

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few years is the ramp up of LNG
from Qatar in the US comes in.

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But if you look at what that
actually remains to the pricing,

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those really bearish forecasts
are still saying you'll get a

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$7.00 LNG price, for example, as
a low in on average in 2028 to

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2029.
So if I just rewind 5 years,

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five years ago, the long term
forecast for LNG was 7 to $9.

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Now we're saying the worst
oversupply scenario in the

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industry's history is going to
be $7.00.

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So what does that mean for the
the long term mid case?

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And you know, there's a very
good case to be made that the

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long term LNG price is going to
be the 10 to $13 in MMBT range

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rather than consensus 9, which
portends quite a lot of upside,

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not just to the big LNG names
like Woodside, but also to our

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domestic gas market because
there is that linkage there, at

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least on the East Coast for the
time being.

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So I think you know, when you
see investors being positioned

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in energy in a very pessimistic
way, that's where there's

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opportunity to pick things up at
attractive prices.

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And if you look at equities
today on our models, the

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equities are pricing in a long
term 60 to $62.00 a barrel of

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oil.
Now, while the oil price can go

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below that for a period of time,
structurally that should be a

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floor on a sustaining basis.
Because if you look for example

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at supply in the US, which is a
big source of supply growth, as

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soon as oil prices start going
down below $60.00 in brands,

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which is about $55 in the US for
WTI, they start pulling off the

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rigs supply plateau as you'll
see decline.

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And so if you could pick up an
energy equity, which is pricing

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in what essentially is a
structural flaw, that's

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reasonably good pickings in my
view.

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So I'm I'm so excited that we've
we've got you here because I've

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I've never seen someone quoted
in in the Australian and and the

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AFR so much on, on, on every on
every bit of energy news.

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You it's it's a delight to
actually speak with you in and

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and hear your voice.
I feel like I've read so many of

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your comments and before we can
like peel into that, like

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Australian landscape
specifically, I want to like tie

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in that macro.
I feel like a lot of mining guys

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and I'll throw myself in this
bucket.

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We, we, we, we get mining, but
sort of put oil and gas in the

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too hard basket and it and then,
and then you've got this, you

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know, the, the East Coast
market, the West Coast market,

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Dom gas policy, a whole bunch of
things that influence the

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economics for the actual
producers.

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It's not as, it's not as simple
as like, you know, mining gold

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and selling it for a very well
defined global price.

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Can you just help me make sense
of the the the different parts

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of the market, how they're
fragmented and how the economics

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are different across it?
Well, that's fair.

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I think a good starting point is
that there's a lot of

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similarities between mining and
oil and gas.

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And when I used to work at
Credit Suisse, I used to cover

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both sectors.
I actually think it's, you know,

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those similarities can be a bit
provide a false sense of comfort

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sometimes because they're still
very different sectors.

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And I think that, you know, the
best example of that is how very

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few companies have managed to do
oil and gas well while also do

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mining well.
And you know, PHP is the example

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you know of #1 of that.
But it also works, for example,

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in electricity and oil and gas,
where Origin is a really good

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example of a very good
downstream operator, but quite

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terrible in the upstream.
It's a very specific kind of

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sector, obviously very large
sectors.

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But you need to look at this in
terms of macro oil, which has

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got more geopolitical drivers to
it than most other commodities,

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including most of the mining
names, as surprising as that

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might be.
And then macro LNG, which is

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still a relatively young
commodity, you know, compared to

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oil markets and gold markets,
for example.

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And then you come to Australia
and you need to take those two

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things and overlay our domestic
market, which is extremely

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parochial and subject to very
strong policy drivers in

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Australia.
And you know one of the kind of

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unfortunate things about
Australia is we have a very

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great strong track record of
terrible policy decisions and

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gas which results in impacts on
our producers for the better or

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worse.
And the good thing about it from

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an investor perspective is if
you wanna, if you assume that

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our energy policy makers are
incompetent, which their track

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record suggests they are, then
that's actually going to lead on

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balance to heightened volatility
in gas and electricity prices

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and also higher terms prices
overall, which for the right, if

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you're positioned in the right
way is really good.

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For example, if you're a gas
producer and also if you have

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for example, gas peaker plants
exposure.

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So, you know, if you like to
take, if you want to go long

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energy chaos or energy policy
chaos, you want to go long

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energy policy competence,
there's actually some nice

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exposures to go here.
And you know, it's hard to have

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conviction on too many things in
the commodity markets, as you

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guys will well know.
But I think we can at this point

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have conviction that our policy
makers don't know what they're

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doing.
If we jump into the the

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specifics of the the mistakes
that the policy makers are

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making and the shifts that are
kind of underway, how do you see

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where we're sitting here at the
beginning of 2026?

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Because it's certainly a very
different landscape to what it

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was five years ago, three years
ago in the sense that the

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companies can get funding these
sorts of things.

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So where are we at right now?
So the massive drivers, you

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know, take the long context, 20
years ago, fossil fuels were

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awesome effort that were in
vogue.

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There wasn't a lot of, you know,
ESG pressures weren't a thing to

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a material degree back then.
You had that really big boom

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period kind of 2007 to 2014,
both on the mining side, but

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you'll remember also on the oil,
particularly the LNG side, which

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is compounded by the Fukushima
disaster, which boosted LNG

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demand globally.
And then it was we saw a down

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cycle for oil and gas after that
based on fundamentals.

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We saw the supply coming online.
It was sanctioned during the

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boom, plus sluggish demand
growth.

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And then that all culminated in
COVID.

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We saw record levels of
oversupply that the market had

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never dealt with before, but
that coincided with the rise of

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a lot of climate concerns at a
populist level and at a policy

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level and the rise of ESG.
And you know, you guys remember

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back in 2020, you know, I think
you could buy White Haven, you

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know, $100 free cash flow yield
at spot coal prices of 200%.

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And you know, I'd have debates
with institutional investors who

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would say we don't want to
invest in coal because we don't

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believe in the long term
outlook.

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But I was saying you don't need
to believe in the long term

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outlook.
If you believe in a six month

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outlook, you're going to get
your money back, right.

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And so you saw a bunch of
ideologically driven kind of

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investment thinkers,
particularly at an institutional

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level, which created some
bargains.

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You know, I was unfortunately
not able to invest in cold the

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time because I covered the
sector would have been much

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better off just quitting my job
and putting all my money in

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coal.
But the, you know, guys put

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their kids through school on
Whitehaven and New Hope and a

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few others back then.
What happened since then is you

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couldn't get money for anything.
You know, basically the, you

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know, the cost of capital for
coal was basically Glencore.

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So, you know, 2030% plus oil and
gas didn't get to that extent

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that that coal was kind of in
the sin bin.

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But it's certainly heading that
direction over the last few

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years.
But 2025 was a major tipping

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point, right?
So 2025 was clearly where peak

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ESG is now behind us and that
ESG and climate lens pendulum is

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now starting to swing back.
And there's a few things that

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are driving it.
One is some of the realities

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about the energy transition, you
know, started to come to the

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fore and how difficult it was.
We've had the election of Trump.

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You've seen populist backlashes
across the world, Europe very

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00:12:43,840 --> 00:12:47,040
progressive on climate policy,
starting to take big step

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00:12:47,040 --> 00:12:49,480
backwards once they saw the
implications for the energy

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00:12:49,480 --> 00:12:51,160
security in the manufacturing
base.

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00:12:51,960 --> 00:12:55,280
And we saw for example, even at
the beginning of 2025, still

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00:12:55,280 --> 00:12:58,760
quite challenging to get
institutional capital, for

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00:12:58,760 --> 00:13:02,440
example, into gas exploration in
in Australia, even really good

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00:13:02,520 --> 00:13:05,240
potential gas exploration by the
end of the year.

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00:13:06,440 --> 00:13:09,880
You know, when our ECM team were
going out to do, you know, some

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00:13:09,880 --> 00:13:12,960
of that work, they're getting
massively oversubscribed,

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00:13:12,960 --> 00:13:15,600
increasing rates and ultimately
have to stop calling investors

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00:13:15,600 --> 00:13:18,160
because they couldn't take any
more money like that.

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00:13:18,480 --> 00:13:22,840
You know, and fundamentally that
change was a macro investment

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00:13:22,840 --> 00:13:27,240
appetite change because ASG
pendulum would swung back more

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00:13:27,240 --> 00:13:29,520
than it was actually about any
of the fundamentals of the rocks

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00:13:29,520 --> 00:13:30,920
or the companies over that
period.

240
00:13:31,360 --> 00:13:36,760
And so when we enter now 2026,
that appetite for exploration is

241
00:13:36,760 --> 00:13:39,960
back, that appetite for some of
the smaller companies is back.

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00:13:39,960 --> 00:13:43,120
Institutional capital is
available again.

243
00:13:43,480 --> 00:13:48,080
And we haven't seen this for 15
years, right?

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00:13:49,040 --> 00:13:50,600
And so it's actually a new
chapter.

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00:13:50,600 --> 00:13:52,800
Most of the folks around today
and the investment community

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00:13:52,800 --> 00:13:56,920
weren't around at the beginning
of the last upward cycle, which

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00:13:57,080 --> 00:14:01,360
really took place 20 years ago.
And the dynamics are not the

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00:14:01,360 --> 00:14:02,880
same now.
But at least in terms of

249
00:14:02,880 --> 00:14:06,200
industry appetite and
opportunity set, there is some

250
00:14:06,200 --> 00:14:09,320
interesting stuff here, which is
the first time you can really

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00:14:09,320 --> 00:14:12,040
kind of say that you know, in
the last five to 10 years,

252
00:14:12,040 --> 00:14:13,440
particularly in the small cap
space.

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00:14:13,760 --> 00:14:16,760
Just got to cut in here.
JD, have you been evaluating

254
00:14:16,760 --> 00:14:18,440
your portfolio lately?
You've been making some

255
00:14:18,440 --> 00:14:19,800
different decisions.
Do you own a house yet?

256
00:14:20,560 --> 00:14:22,160
Well, you should get some
property exposure.

257
00:14:22,600 --> 00:14:24,200
I should.
There's an easier way to do it

258
00:14:24,200 --> 00:14:25,320
than just buying a house, isn't
it?

259
00:14:25,760 --> 00:14:27,600
Right.
There are these specific unit

260
00:14:27,600 --> 00:14:31,760
trusts that exceed capital put
together for specific commercial

261
00:14:31,760 --> 00:14:34,600
property investments.
These are really interesting

262
00:14:34,600 --> 00:14:38,880
vehicles and you can get an 8%
cash return plus capital uplift

263
00:14:39,000 --> 00:14:42,320
because the Australian property
market doesn't seem to slow

264
00:14:42,320 --> 00:14:43,680
down.
The beautiful Australian

265
00:14:43,680 --> 00:14:45,920
property market.
They're targeting monthly

266
00:14:45,920 --> 00:14:49,480
distributions as well and from
what I read mate, office grade

267
00:14:49,480 --> 00:14:52,080
buildings.
Great tenants in Gold Coast.

268
00:14:52,240 --> 00:14:55,040
People love their divvy yield
and monthly distribution.

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00:14:55,040 --> 00:14:57,880
Sounds delightful to me.
Let's go to XA Capital to find

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00:14:57,880 --> 00:14:59,880
out more about the SP Property
Trust.

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00:15:00,000 --> 00:15:02,240
SP property trust, I'll be
checking it out after this back

272
00:15:02,240 --> 00:15:04,920
to Seoul.
So overlaying at the the same

273
00:15:04,920 --> 00:15:08,160
time, very recently these, these
incredibly large, you know,

274
00:15:08,160 --> 00:15:13,080
industrial users of of our, our,
our energy gas in particular,

275
00:15:13,160 --> 00:15:18,600
like the all of the refineries,
which are increasingly clearly

276
00:15:18,600 --> 00:15:22,560
uneconomic, but also
strategically important.

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00:15:22,560 --> 00:15:25,960
And that's led to led to these,
you know, continuation decisions

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00:15:25,960 --> 00:15:28,760
to to subsidize them from
Australian governments,

279
00:15:29,240 --> 00:15:33,000
governments overseas as well.
How does that kind of like play

280
00:15:33,000 --> 00:15:35,920
into the, the whole energy mix
and the and the and the the

281
00:15:35,960 --> 00:15:37,520
system broadly the winners and
losers?

282
00:15:38,160 --> 00:15:41,560
So the other big thing that's
changed in the last few years is

283
00:15:41,560 --> 00:15:44,080
the notion that we need to have
sovereign supply chains.

284
00:15:44,080 --> 00:15:49,680
So then we've moved from just in
time supply chains which are

285
00:15:49,680 --> 00:15:52,000
internationally integrated to
recognize that there's certain

286
00:15:52,000 --> 00:15:55,400
sectors that need to have
sovereign supply chain security.

287
00:15:55,400 --> 00:16:00,000
I think you would have seen
yesterday, for example, with all

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00:16:00,000 --> 00:16:04,720
the changes, for example, in the
Liberal Party, Hasty has just

289
00:16:04,720 --> 00:16:08,840
been given basically a sovereign
supply chain shadow ministerial

290
00:16:08,840 --> 00:16:10,240
portfolio.
But I think that, you know, it

291
00:16:10,240 --> 00:16:13,920
reflects how this is now
something on the agenda, right?

292
00:16:13,920 --> 00:16:16,480
And government is definitely
there too.

293
00:16:16,480 --> 00:16:19,680
If you look at critical mineral
strategy, what they're doing

294
00:16:19,680 --> 00:16:22,920
with the national reconstruction
funds, the idea that we need

295
00:16:22,920 --> 00:16:25,080
sovereignty over a certain
critical supply chain is really

296
00:16:25,080 --> 00:16:28,600
important.
That's got 2 very important

297
00:16:28,600 --> 00:16:31,280
implications for energy.
It's actually three.

298
00:16:31,600 --> 00:16:34,440
So the first one is, is energy
of itself is a critical supply

299
00:16:34,440 --> 00:16:37,320
chain because obviously
everything we do runs on it,

300
00:16:37,320 --> 00:16:39,160
including, you know, our show at
the moment.

301
00:16:40,360 --> 00:16:42,800
And you want to make sure that
you have resilience in that.

302
00:16:42,800 --> 00:16:45,600
And it comes down to things
like, for example, in a conflict

303
00:16:45,600 --> 00:16:50,160
situation, Australia has fighter
jets, you know, to help, you

304
00:16:50,240 --> 00:16:53,440
know, blocking, you know, clans
for an embargo, for example, on

305
00:16:53,440 --> 00:16:57,440
our imports of oil products
around the country.

306
00:16:57,800 --> 00:17:00,800
But that embarked that those
fighter jets useless unless

307
00:17:00,800 --> 00:17:02,440
you've got enough jet fuel for
the fighter jets.

308
00:17:02,440 --> 00:17:05,280
And we don't, right?
And this is where it comes down

309
00:17:05,280 --> 00:17:09,760
to, well, do we need to have
sovereign support for refineries

310
00:17:09,800 --> 00:17:11,520
and the crude into the
refineries?

311
00:17:11,520 --> 00:17:14,720
So we now have two refineries in
Australia which have propped up

312
00:17:14,920 --> 00:17:18,920
the government support, but they
are useless if you don't have

313
00:17:18,920 --> 00:17:21,280
the crew to put into the
refinery, right?

314
00:17:21,280 --> 00:17:24,480
And we don't have that crew and
there's some, you know, some

315
00:17:24,480 --> 00:17:26,280
interesting players who are
looking to change that, but

316
00:17:26,280 --> 00:17:29,920
right now we just don't.
The second element then is if

317
00:17:29,920 --> 00:17:32,560
you look critical mineral supply
chains and you guys are much

318
00:17:32,560 --> 00:17:34,160
bigger experts on that than I
am.

319
00:17:34,680 --> 00:17:37,880
But if you look at the
concentration, for example, of

320
00:17:38,480 --> 00:17:42,840
green metal processing, where
earth processing and all of that

321
00:17:43,400 --> 00:17:47,000
in China and there's a big, you
know, push underway here, but in

322
00:17:47,000 --> 00:17:49,840
the US and Europe to diversify
away their supply chains from

323
00:17:49,840 --> 00:17:52,680
China, well, that's energy
intensive.

324
00:17:53,280 --> 00:17:56,400
That the whole, you know, your
ability to take, you know, for

325
00:17:56,400 --> 00:17:59,560
example, our rare earths here or
our lithium and then process

326
00:17:59,560 --> 00:18:02,720
that is fundamentally limited by
your ability of energy to do

327
00:18:02,720 --> 00:18:05,320
that.
And then lastly, using the AI

328
00:18:05,320 --> 00:18:10,200
race, obviously critically
important, it's really a race

329
00:18:10,200 --> 00:18:14,000
between the US and China, but
Australia's going to play or try

330
00:18:14,000 --> 00:18:17,200
to play and it's important for
us to play certain niche roles

331
00:18:17,200 --> 00:18:21,200
within that AI race.
And in order for us to win in

332
00:18:21,200 --> 00:18:24,760
the areas we play in the AI
race, that is all ultimately

333
00:18:24,760 --> 00:18:27,680
driven by energy, because we
need the sovereign data centers,

334
00:18:28,120 --> 00:18:33,080
which are ultimately energy and
water businesses in order to

335
00:18:33,080 --> 00:18:35,080
deliver on our AI and technology
goals.

336
00:18:35,080 --> 00:18:38,960
And if you look at the
Australian government's list of

337
00:18:38,960 --> 00:18:42,600
priority technology, priority
technology list, which includes

338
00:18:42,600 --> 00:18:45,920
things like cybersecurity,
quantum and all these cloud

339
00:18:45,920 --> 00:18:48,640
compute areas.
And if you look at our critical

340
00:18:48,640 --> 00:18:50,760
infrastructure list, every
single one of them are

341
00:18:50,760 --> 00:18:56,520
completely dependent on very
high reliability, strong signal

342
00:18:56,760 --> 00:18:59,640
power sources.
And this comes on top of the

343
00:18:59,640 --> 00:19:01,960
market where we're actually
struggling just to maintain

344
00:19:01,960 --> 00:19:04,760
current demand, let alone deal
with growth from data center and

345
00:19:04,760 --> 00:19:07,840
AI demand.
So if you look at those policy

346
00:19:07,840 --> 00:19:10,800
pressures, which are overlaid
with real new demand growth

347
00:19:10,800 --> 00:19:15,760
areas like in data centers, it's
all these things are pushing up

348
00:19:15,840 --> 00:19:19,760
the demand outlook versus what
was otherwise expected.

349
00:19:20,520 --> 00:19:24,600
And when you get those changes
in our energy grid, we've got

350
00:19:24,600 --> 00:19:26,080
different things.
We've got renewables, we've got

351
00:19:26,080 --> 00:19:31,720
coal, we've got hydro, etcetera.
But gas is basically the energy

352
00:19:31,720 --> 00:19:34,840
group, which is good at
everything, but not the best at

353
00:19:34,840 --> 00:19:37,800
any one thing.
And so it's kind of used as a

354
00:19:37,800 --> 00:19:39,520
stopgap.
It's always, it's there to

355
00:19:39,520 --> 00:19:40,960
balance.
You hear, you know, from now

356
00:19:40,960 --> 00:19:43,920
from you know, even the
government now is talking about

357
00:19:43,920 --> 00:19:46,000
we need gas backup renewables,
for example.

358
00:19:46,360 --> 00:19:50,120
But when the demand ends up
being suddenly higher than you

359
00:19:50,120 --> 00:19:54,280
thought, like from AI and you
haven't planned for it, it's gas

360
00:19:54,280 --> 00:19:57,800
that ends up filling most of the
gap because gas is the flexible

361
00:19:58,000 --> 00:20:00,480
source of energy.
And that's also going to be

362
00:20:00,480 --> 00:20:04,040
pushing on the overall supply
demand balance and pushes, you

363
00:20:04,040 --> 00:20:08,040
know, again, makes it a more
constructive outlook for those

364
00:20:08,160 --> 00:20:09,760
plates.
You can actually get more gas

365
00:20:09,760 --> 00:20:10,960
out of the ground, which is not
easy.

366
00:20:11,200 --> 00:20:13,320
But for those who are well
placed with an advantage

367
00:20:13,320 --> 00:20:15,480
project, it puts them in a very
good position.

368
00:20:15,480 --> 00:20:17,800
I.
Think, I think what you, the

369
00:20:17,800 --> 00:20:20,240
picture you painted is a, is a
landscape where there's going to

370
00:20:20,240 --> 00:20:23,920
be a lot of activity in in the
future for, for many of the the

371
00:20:23,920 --> 00:20:25,440
companies and the equities in
the space.

372
00:20:25,440 --> 00:20:29,480
And we, we're markets adjacent.
So all, all of us.

373
00:20:29,480 --> 00:20:33,320
And we're really curious to get
your insights on, on the, on the

374
00:20:33,320 --> 00:20:37,120
companies that that are playing
a big role in the sector.

375
00:20:38,000 --> 00:20:41,240
ASX is kind of our, our native,
our native exchange.

376
00:20:41,240 --> 00:20:46,680
And yeah, there's probably been
no, no bigger company of just

377
00:20:47,280 --> 00:20:51,240
absurd dynamics over the, the,
the, the previous year or so

378
00:20:51,360 --> 00:20:56,840
than than Santos's, you know,
failed, failed bids, culture

379
00:20:56,840 --> 00:21:02,040
dynamics potential, yeah, yeah,
own own divestment of, of

380
00:21:02,040 --> 00:21:05,040
internal assets, etcetera.
But it it all feels like a bit

381
00:21:05,040 --> 00:21:06,720
of a nothing burger because
nothing's really changed.

382
00:21:07,000 --> 00:21:10,160
Well, as your words, I think
they're quite kind.

383
00:21:12,160 --> 00:21:15,000
Well, I, I think it's a point to
carry things.

384
00:21:15,920 --> 00:21:19,520
There's a lot of support in the
market for Santos.

385
00:21:19,520 --> 00:21:22,960
There's a lot of, there's at
least a degree of support for

386
00:21:23,320 --> 00:21:25,880
the Mandarin team and
particularly how they kind of

387
00:21:25,880 --> 00:21:29,800
brought the company, saved it
when it was on it's knees, you

388
00:21:29,800 --> 00:21:34,960
know, about 10-12 years ago.
And I'm more, I'm a, I've got a

389
00:21:34,960 --> 00:21:37,080
more counter consensus view,
right?

390
00:21:37,680 --> 00:21:41,920
I, I, I'm more, far more
cautious and wary of where

391
00:21:41,920 --> 00:21:45,480
Santos sits.
And there's a few reasons for

392
00:21:45,480 --> 00:21:47,440
that.
I mean, one is the results just

393
00:21:47,440 --> 00:21:48,920
come out.
You know, I'm a strong believer

394
00:21:48,920 --> 00:21:53,040
that incentives Dr. behaviour.
That's, you know, why we live in

395
00:21:53,040 --> 00:21:57,040
a capitalist society.
That's why we trade on markets.

396
00:21:57,120 --> 00:22:00,600
And if you look at the incentive
structure that just awarded the

397
00:22:00,600 --> 00:22:04,680
CEO of Santos, Kevin Gallagher,
was awarded five years ago, it's

398
00:22:05,960 --> 00:22:12,200
called the CEO growth incentive
of $6 million / 5 years to

399
00:22:12,200 --> 00:22:19,080
deliver 2 main projects, being
Dorado and Barossa at the time

400
00:22:19,080 --> 00:22:22,440
and a few other smaller items.
They've just announced that this

401
00:22:22,520 --> 00:22:25,520
is the end of that period.
So it was the end of 2025 and

402
00:22:25,520 --> 00:22:30,640
they're warning the CEO 90% of
that SMIX million.

403
00:22:31,200 --> 00:22:36,120
Despite the fact that Barossa is
over six months late and ended

404
00:22:36,120 --> 00:22:38,640
up actually costing more if you
factor in the twitting of the

405
00:22:38,640 --> 00:22:41,760
pipeline.
Despite the fact that the Moomba

406
00:22:41,760 --> 00:22:45,560
CCS project had a cost blowout,
a massive 1 and it was late.

407
00:22:45,920 --> 00:22:49,280
Despite the fact that the Dorado
project hasn't happened at all.

408
00:22:49,720 --> 00:22:52,360
For those who followed the
Carnarvon sorry saga, they know

409
00:22:52,360 --> 00:22:55,400
all about that.
Despite the fact that Pika has

410
00:22:55,400 --> 00:22:58,680
had two cost blowouts.
They say it's still on target to

411
00:22:58,680 --> 00:23:00,520
start up, but we won't know it
because it's only meant to start

412
00:23:00,520 --> 00:23:02,480
up next in a in a few months
time.

413
00:23:03,800 --> 00:23:10,200
And so when you basically have a
board rewarding incentives to

414
00:23:10,200 --> 00:23:15,920
leadership for really not
delivering, in my view, I think

415
00:23:15,920 --> 00:23:19,720
that, you know, is a sign of a
cultural and governance problem,

416
00:23:19,960 --> 00:23:25,880
which does ultimately people say
culture doesn't matter, but I

417
00:23:25,880 --> 00:23:27,520
think culture doesn't matter
until it does.

418
00:23:28,280 --> 00:23:32,760
And then all of a sudden you
start to see impacts and I think

419
00:23:32,760 --> 00:23:36,360
you have seen that at Santos.
So since the Santos was kind of

420
00:23:36,360 --> 00:23:40,680
rescued from its lows 12 years
ago, you know, the the the first

421
00:23:40,680 --> 00:23:45,640
bid around 2018 share price is
still below that bid, which

422
00:23:45,640 --> 00:23:49,520
Santos turned down in 2018.
Woodside had a look to buy them

423
00:23:49,520 --> 00:23:53,000
two years ago, suddenly walked
away after doing looking under

424
00:23:53,000 --> 00:23:55,920
the hood.
XRG had a look last year,

425
00:23:56,080 --> 00:23:58,840
suddenly walked away after
looking under the hood.

426
00:23:59,120 --> 00:24:01,000
There's something under that
hood which keeps scaring

427
00:24:01,000 --> 00:24:05,840
everybody off, right?
And what I think people forget

428
00:24:05,840 --> 00:24:09,480
is, first of all, execution risk
is real.

429
00:24:09,480 --> 00:24:12,640
And Santos doesn't actually have
a lot of experience building big

430
00:24:12,640 --> 00:24:14,720
projects which they're in the
middle of execution.

431
00:24:15,320 --> 00:24:16,840
Now.
Santos has only ever built one

432
00:24:16,840 --> 00:24:18,480
big multi billion dollar project
before.

433
00:24:18,720 --> 00:24:21,080
It was the GLNG project, which
was delivered exceptionally

434
00:24:21,080 --> 00:24:24,800
poorly.
But the second thing, and this

435
00:24:24,800 --> 00:24:30,680
would kind of be, you know, what
really I think is the main

436
00:24:30,680 --> 00:24:32,480
challenge to the thesis in
Santos.

437
00:24:32,480 --> 00:24:35,240
The reason you're in Santos
today is they've got two big

438
00:24:35,240 --> 00:24:37,920
projects which are going to be
delivered over the next six

439
00:24:37,920 --> 00:24:38,960
months.
And then you're going to finally

440
00:24:38,960 --> 00:24:42,000
get this uptick in cash flow,
uptick investor returns.

441
00:24:42,280 --> 00:24:44,920
And you'll have seen through
that painful execution process

442
00:24:44,920 --> 00:24:49,080
patiently and then get rewarded.
And my concern is, and you can

443
00:24:49,080 --> 00:24:51,480
actually, I'll give you the
numbers because we've just run

444
00:24:51,480 --> 00:24:54,000
them once these projects are up
and running.

445
00:24:54,000 --> 00:24:56,480
So you finally get through all
the execution risks you're

446
00:24:56,480 --> 00:25:00,640
looking at, you know at about a
$60.00 oil price, you will get

447
00:25:01,360 --> 00:25:07,280
about four to 6% all in free
cash flow yield And at a $770

448
00:25:07,280 --> 00:25:11,600
oil price, you'll get between 7
and 10% all in free cash flow

449
00:25:11,600 --> 00:25:14,400
yield.
You know, and consensus is

450
00:25:14,400 --> 00:25:18,120
between those two levels.
And I just ask people, do you

451
00:25:18,120 --> 00:25:23,560
want to take the risk on
execution on equity to receive

452
00:25:23,840 --> 00:25:28,280
that kind of return because you
know, I can get that about 5% in

453
00:25:28,280 --> 00:25:31,520
the bank, right.
So oil price needs to be above

454
00:25:31,520 --> 00:25:34,440
the mid 60s to do better than a
risk free term deposit.

455
00:25:35,880 --> 00:25:38,680
And I can do, you know, you can
buy Santos bond and and you

456
00:25:38,680 --> 00:25:42,040
know, get close to those levels.
So my concern is that the

457
00:25:42,040 --> 00:25:45,640
market's overestimating what I
think the actual fundamental

458
00:25:45,640 --> 00:25:47,560
yield and value of this business
is.

459
00:25:47,800 --> 00:25:50,440
And once everything's up and
running, that's going to become

460
00:25:50,440 --> 00:25:53,520
really clear to the market.
Sorry.

461
00:25:53,520 --> 00:25:55,480
And then, you know, that's
before we deal with all the

462
00:25:55,480 --> 00:25:58,960
governance issues where, I mean,
how often do you see a CFO

463
00:25:58,960 --> 00:26:03,120
suddenly depart after raising a
long laundry list of complaints

464
00:26:03,120 --> 00:26:08,280
directly with the CEO and
refuses to sign a non disclosure

465
00:26:08,280 --> 00:26:12,240
agreement because she felt
compelled to have the ability to

466
00:26:12,240 --> 00:26:13,760
talk about it?
Like that doesn't happen very

467
00:26:13,760 --> 00:26:18,440
often, you know, So it's just
like red flags, red flags, gore

468
00:26:19,800 --> 00:26:23,160
on some of these things.
You know, I think there's,

469
00:26:23,480 --> 00:26:27,720
there's an article Joe Aston
wrote about this a few months

470
00:26:27,720 --> 00:26:30,960
ago.
You know, I think Joe knows how

471
00:26:30,960 --> 00:26:32,840
to pick his targets.
He's picked a target here.

472
00:26:33,640 --> 00:26:35,200
You know, people can read it for
themselves.

473
00:26:35,200 --> 00:26:40,680
But you know, I kind of prefer
companies which are more boring.

474
00:26:40,800 --> 00:26:43,920
Management is low ego, more
boring, and they just deliver

475
00:26:44,400 --> 00:26:48,120
things and you don't have these
kind of red flags.

476
00:26:48,920 --> 00:26:51,920
Do do you think the reason we
haven't seen more of an activist

477
00:26:52,160 --> 00:26:55,880
push to, to fix some of those
governance issues is the fact

478
00:26:55,880 --> 00:26:58,320
that, as you've kind of
highlighted that the stock

479
00:26:58,320 --> 00:26:59,600
doesn't actually trade that
cheaply.

480
00:26:59,600 --> 00:27:03,520
So maybe it's not the, the low
hanging fruit that you'd hope

481
00:27:03,520 --> 00:27:06,320
in, in a, in a big activist
push, which takes a lot of time

482
00:27:06,320 --> 00:27:06,920
and energy.
Well.

483
00:27:08,760 --> 00:27:11,680
I think that's the issue.
So if you look for example, XRG

484
00:27:12,440 --> 00:27:16,400
is not a price sensitive buyer
or if you look they in my

485
00:27:16,400 --> 00:27:18,720
opinion paid way over for
Cvestro.

486
00:27:18,760 --> 00:27:22,320
They have a strategic mandate on
supply chain security coming

487
00:27:22,320 --> 00:27:25,440
back to that where like it
honestly, it looks like they're

488
00:27:25,440 --> 00:27:30,440
willing to pay massively over in
order to secure pay strategic

489
00:27:30,440 --> 00:27:33,440
assets.
And so they look to Santos and

490
00:27:33,720 --> 00:27:37,160
they put in a good bid, you
know, close to $9.

491
00:27:37,720 --> 00:27:39,800
And then after looking under the
hood for a few months, they've

492
00:27:39,800 --> 00:27:41,920
walked and, you know, reading
between the lines of the

493
00:27:41,920 --> 00:27:45,400
messaging that's coming out of
it, clearly, you know, at least

494
00:27:45,400 --> 00:27:48,320
valuation or what they expected
of valuation wasn't there.

495
00:27:48,320 --> 00:27:50,920
It's like if you have a price
incentive to buy, who's willing

496
00:27:50,920 --> 00:27:54,360
to pay over and even they're
walking away, right?

497
00:27:54,400 --> 00:27:57,080
I mean, what's the implication
of the underlying business?

498
00:27:57,080 --> 00:28:01,240
And this was a buyer who had the
balance sheet to do and de risk

499
00:28:01,240 --> 00:28:03,520
and accelerate a lot of
projects, which Santos as a

500
00:28:03,520 --> 00:28:09,440
standalone doesn't, right.
And so, you know, that's a much

501
00:28:09,440 --> 00:28:13,240
more informed buyer who's much
less price sensitive and they're

502
00:28:13,240 --> 00:28:15,920
running away.
And what does that mean?

503
00:28:15,920 --> 00:28:19,480
And again, there can be other
reasons for why they've done

504
00:28:19,480 --> 00:28:22,480
that, but this is just another
red flag.

505
00:28:22,480 --> 00:28:25,200
And do we need to take those
risks on the rest way?

506
00:28:25,200 --> 00:28:28,640
So I'll give you a contrast.
You know, Woodside, it doesn't

507
00:28:28,640 --> 00:28:31,200
have these kind of red flags
associated with it.

508
00:28:31,440 --> 00:28:35,880
It's currently providing A
dividend yield, you know, which

509
00:28:35,880 --> 00:28:40,160
is above 7% the last time I
checked, fully franked, right?

510
00:28:40,160 --> 00:28:42,760
So you're basically getting the
return right now from Woodside

511
00:28:42,760 --> 00:28:45,640
that you're waiting for to get
from Santos if everything's

512
00:28:45,640 --> 00:28:48,280
delivered well.
And that includes delivering a

513
00:28:48,280 --> 00:28:52,120
growth profile to increase that
yield over time, not just keep

514
00:28:52,120 --> 00:28:57,960
things flat.
It's just it's easier, right.

515
00:28:58,080 --> 00:29:01,240
You know, if we just, if you're
after macro exposure with just

516
00:29:01,240 --> 00:29:04,200
fundamentally what I think is
better metrics, you can get it

517
00:29:04,200 --> 00:29:07,400
there.
You don't have to be in Santos

518
00:29:07,400 --> 00:29:08,840
and take on some of the risk
there.

519
00:29:09,520 --> 00:29:12,120
That said, I've been wrong
before, but that's a counter

520
00:29:12,120 --> 00:29:13,880
consensus view.
Like I said, there's others out

521
00:29:13,880 --> 00:29:15,800
there who take a different view
to me.

522
00:29:17,320 --> 00:29:19,920
And you know, we do need to
acknowledge that the management

523
00:29:19,920 --> 00:29:23,200
team, particularly early on in
their tenure, did a very good

524
00:29:23,200 --> 00:29:27,120
job in stabilizing that ship.
Just while we're on Woodside,

525
00:29:27,120 --> 00:29:30,240
I'm, I'm curious, I mean, the
one of the knocks on Woodside

526
00:29:30,240 --> 00:29:34,640
is, is of course the Louisiana
acquisition and, and the fact

527
00:29:34,640 --> 00:29:38,880
that all the American parties
passed on it to why, why did

528
00:29:38,880 --> 00:29:41,560
Woodside pay what they do?
Do you think they'll be proven

529
00:29:41,560 --> 00:29:45,640
right in that over time?
And do you see an attractive

530
00:29:45,640 --> 00:29:49,120
like funding pathway for that?
And then tying it to, to Santos,

531
00:29:50,840 --> 00:29:52,400
where do they go from here?
Like what?

532
00:29:52,400 --> 00:29:55,120
Like what actually makes sense
for them to do from a portfolio

533
00:29:55,120 --> 00:29:55,920
perspective?
Well.

534
00:29:56,840 --> 00:29:59,040
Let's maybe then finish off on
Santos first because it's

535
00:29:59,040 --> 00:30:02,480
probably easier.
This is, you know, my opinion

536
00:30:02,560 --> 00:30:06,880
would be Santos has been a
growth stock today.

537
00:30:07,160 --> 00:30:12,040
It's moving to be a yield stock.
I don't think Santos works as a

538
00:30:12,040 --> 00:30:14,320
yield stock because it's yield
is subpar.

539
00:30:14,800 --> 00:30:17,200
So Santos needs to maintain
being a growth stock.

540
00:30:17,520 --> 00:30:20,920
Now it doesn't want to do that
by leveraging itself up to the

541
00:30:20,920 --> 00:30:22,800
hilt again and taking on a lot
of risk.

542
00:30:22,840 --> 00:30:25,440
But in order to do that, there's
two things you need to do. 1 is

543
00:30:25,440 --> 00:30:27,760
you need to be realistic about
the value of the assets you have

544
00:30:28,400 --> 00:30:31,520
so that you can sell them.
And this comes down to, is there

545
00:30:31,520 --> 00:30:34,200
a fundamental mismatch?
Are you unable to sell down a

546
00:30:34,200 --> 00:30:37,680
bit of Project A to pay for a
Project B because the market has

547
00:30:37,680 --> 00:30:39,760
been led to believe Project A is
worth more than you can actually

548
00:30:39,760 --> 00:30:42,000
sell it for?
But the second one is also a

549
00:30:42,000 --> 00:30:45,480
relationship thing where a lot
of the natural kind of deal

550
00:30:45,480 --> 00:30:47,960
partners for Santos, whether
it's a corporate level but also

551
00:30:47,960 --> 00:30:53,120
at an asset level, are very wary
of dealing with Santos under

552
00:30:53,120 --> 00:30:55,600
their current management.
I mean, an example I think would

553
00:30:55,600 --> 00:30:58,280
be is Conoco.
Conoco is the neighboring

554
00:30:58,560 --> 00:31:01,520
operator in Alaska.
It's actually the natural owner

555
00:31:01,520 --> 00:31:04,200
of Santos's asset.
There's a lot of synergies that

556
00:31:04,200 --> 00:31:07,120
could be happening with Conoco.
There's deals that could be

557
00:31:07,120 --> 00:31:09,360
handing with Conoco, which would
unlock value.

558
00:31:09,800 --> 00:31:13,480
And you get the sense that
Conoco is basically just

559
00:31:13,480 --> 00:31:18,400
refusing to do anything with
Santos under its current

560
00:31:18,400 --> 00:31:20,760
management team because of the
way the management team treated

561
00:31:20,760 --> 00:31:25,520
Conoco with regard to the NT
acquisition, which Santos bought

562
00:31:25,520 --> 00:31:27,640
from Conoco a number of years
ago.

563
00:31:27,640 --> 00:31:30,560
And there was a dispute where
Santos refused to pay an FID

564
00:31:30,560 --> 00:31:35,120
payment for a number of, I think
it was a few years, ultimately

565
00:31:35,120 --> 00:31:38,240
paid it.
But that was seen as a very

566
00:31:38,240 --> 00:31:40,680
disrespectful thing to do to
Conoco.

567
00:31:40,720 --> 00:31:44,360
And these bigger companies like
Conoco and Shell and others, you

568
00:31:44,360 --> 00:31:46,000
know, they've got very long
memories.

569
00:31:46,440 --> 00:31:48,680
And when they do a deal and they
feel they haven't been treated

570
00:31:48,680 --> 00:31:50,840
right, well, they just feel
like, well, they won't deal with

571
00:31:50,880 --> 00:31:54,960
you for another decade.
And I feel that I fear that

572
00:31:54,960 --> 00:31:58,480
Santos is in that boat with a
lot of companies now around the

573
00:31:58,480 --> 00:32:01,280
way around the world and in
Australia because of the way

574
00:32:01,280 --> 00:32:03,720
they've behaved.
And it's actually limited now,

575
00:32:03,720 --> 00:32:08,160
limiting their ability to take a
value creative gender forward

576
00:32:09,280 --> 00:32:12,360
because a lot of these natural
partners who would otherwise

577
00:32:12,360 --> 00:32:15,520
engage may be more reluctant to.
And just finishing off on

578
00:32:15,520 --> 00:32:17,520
Woodside, the ability to fund
Louisiana.

579
00:32:18,120 --> 00:32:20,080
Yeah.
So look, Louisiana, the

580
00:32:20,080 --> 00:32:23,240
acquisition of Tulorian, so I
understand.

581
00:32:23,840 --> 00:32:26,400
So the criticism of it is, is
Tulorian was distressed.

582
00:32:26,760 --> 00:32:29,600
Anyone could have put it up.
Woodside wasn't particularly

583
00:32:29,600 --> 00:32:32,520
clever to do so.
I think those are valid.

584
00:32:33,840 --> 00:32:37,080
I think what you've seen today
is what DeLorean has given them

585
00:32:37,080 --> 00:32:40,280
is it's given them a head start
in the next wave of USLNG

586
00:32:40,280 --> 00:32:42,400
projects where they've locked in
a cost structure which is

587
00:32:42,400 --> 00:32:48,120
probably at least now 10% below
what doing that projects again

588
00:32:48,120 --> 00:32:50,840
or competing projects are going
to cost going forward.

589
00:32:50,840 --> 00:32:53,880
So you can make it because
they've actually already

590
00:32:53,920 --> 00:32:57,320
created, you know, that small
amount of value just in terms of

591
00:32:57,320 --> 00:33:01,360
locking in their cost structure.
But ultimately the value of this

592
00:33:01,360 --> 00:33:05,080
comes down to two things. 1 is,
what's your LNG price versus

593
00:33:05,080 --> 00:33:08,440
Henry Hub price, right?
And the second thing then is

594
00:33:08,440 --> 00:33:11,640
what can you add in value in
terms of your marketing when you

595
00:33:11,640 --> 00:33:14,800
integrate it with what Woodside
has elsewhere in the US and here

596
00:33:14,800 --> 00:33:17,360
in Australia?
And so you're going to get a lot

597
00:33:17,360 --> 00:33:20,240
of debate in the market about,
is that valid?

598
00:33:20,240 --> 00:33:23,200
All right.
Now the way I would look at it

599
00:33:23,200 --> 00:33:27,160
is like if you really believe
that LNG is going to be lower

600
00:33:27,160 --> 00:33:30,160
for longer and Henry Hub is
going to stay where it is or

601
00:33:30,160 --> 00:33:34,160
potentially go up, then if that
plays out, it's going to be a

602
00:33:34,160 --> 00:33:36,680
bad deal.
That's the honest truth.

603
00:33:38,000 --> 00:33:40,400
If you take a different view
where you think actually you

604
00:33:40,400 --> 00:33:44,440
know like I said earlier, LNG
might be 10 to $13 or not $9

605
00:33:45,240 --> 00:33:49,920
long term, that then is
completely game changing to the

606
00:33:49,920 --> 00:33:52,640
economics of this project,
right.

607
00:33:52,640 --> 00:33:56,480
So you know Woodside's economics
for its 12% is about is based on

608
00:33:56,480 --> 00:33:58,760
a $10 LNG price for $3.50 and
1/2.

609
00:34:00,240 --> 00:34:04,560
If you say that's going to be
$11.50 instead of 10 roughly

610
00:34:04,560 --> 00:34:05,880
that can double the value of the
project.

611
00:34:08,480 --> 00:34:12,000
And so you know, it, what I
think it does for Woodside is it

612
00:34:12,000 --> 00:34:16,120
makes Woodside one of the purest
large scale LNG explosives in

613
00:34:16,120 --> 00:34:19,600
the world.
That's good if LNG goes up, it's

614
00:34:19,600 --> 00:34:22,320
bad if LNG goes down.
But it is differentiating and

615
00:34:22,320 --> 00:34:25,639
it's I think Woodside will
increasingly be of interest to

616
00:34:25,639 --> 00:34:28,560
some of the funds
internationally as they see it

617
00:34:28,560 --> 00:34:32,440
as a different exposure to oil
that they need to take part of

618
00:34:32,800 --> 00:34:34,800
and that of itself.
You know, if you start to see

619
00:34:34,800 --> 00:34:40,320
Woodside just rewrite towards US
energy multiples just on that

620
00:34:40,360 --> 00:34:42,679
even partly doing that, you're
starting to get a significant

621
00:34:42,679 --> 00:34:47,560
uplift on its current valuation
relatively still in a depressed

622
00:34:48,040 --> 00:34:51,480
valuation space on a multiple
basis in Australia compared to

623
00:34:51,560 --> 00:34:55,080
the US.
Those elusive US multiples, I'd

624
00:34:55,080 --> 00:34:56,719
love to see more of them down
down here.

625
00:34:57,400 --> 00:35:00,240
Let's go and talk about some of
the the smaller players and kind

626
00:35:00,240 --> 00:35:02,680
of go through the the basins
across Australia.

627
00:35:02,840 --> 00:35:08,480
Perth Basin is, you know, an
area to have a look at and lot,

628
00:35:08,480 --> 00:35:10,480
you know, people who have
followed that saga over the last

629
00:35:10,480 --> 00:35:13,400
five years have, you know, had
some really big highs and some

630
00:35:13,400 --> 00:35:16,080
really big lows.
You know, what you are getting

631
00:35:16,080 --> 00:35:18,520
now is the maturity of the
understanding of that basin,

632
00:35:19,600 --> 00:35:22,240
particularly it's interesting,
you know, strike is there and

633
00:35:22,240 --> 00:35:25,280
it's doing, you know, it's got
basically one asset which is

634
00:35:25,280 --> 00:35:29,280
stuck with Hancock and Hancock
will do things the way Hancock

635
00:35:29,280 --> 00:35:31,240
want to do things.
And no one is going to push Gina

636
00:35:31,240 --> 00:35:34,080
Ryan out around.
And you know, you, you, you fall

637
00:35:34,080 --> 00:35:35,760
in with Hancock's schedule, not
the other way around.

638
00:35:35,760 --> 00:35:37,080
And it's important to understand
that.

639
00:35:39,000 --> 00:35:42,440
And the, but the second part is
this gas peaker story, which I

640
00:35:42,440 --> 00:35:46,400
like I said is very interesting.
So again, the WA energy market's

641
00:35:46,400 --> 00:35:49,680
also very volatile.
There's energy security risks

642
00:35:49,680 --> 00:35:51,800
and the government's actually
paying very high record high

643
00:35:51,800 --> 00:35:54,560
capacity payments now to bring
in new peaker capacity.

644
00:35:55,240 --> 00:35:58,480
So that's a very exciting macro
to be building into.

645
00:35:59,440 --> 00:36:03,040
The risk around it is, you know,
can they, you know, strikes

646
00:36:03,040 --> 00:36:05,320
never done this before.
So there's going to be a lot of

647
00:36:05,320 --> 00:36:06,600
execution risk before you get
there.

648
00:36:06,600 --> 00:36:09,760
So it's kind of a timing thing
that when it comes in, but when

649
00:36:09,760 --> 00:36:12,480
it comes in, I think it's quite
exciting, particularly, you

650
00:36:12,480 --> 00:36:16,680
know, if you look at where kind
of strike is a really suppressed

651
00:36:16,680 --> 00:36:18,720
strike now, you know, and if you
look at, you know, what

652
00:36:18,720 --> 00:36:21,560
multiples are just on the gas
they've got in the ground.

653
00:36:21,880 --> 00:36:26,040
Now at some point you, you know,
you make a call on will someone

654
00:36:26,040 --> 00:36:29,600
buy them to help develop,
develop some of these things.

655
00:36:29,600 --> 00:36:32,720
But the, you know, I'd say
there's, there's execution risk

656
00:36:32,720 --> 00:36:35,400
there that's real and it's, you
know, this year.

657
00:36:35,760 --> 00:36:39,120
But once they're through that,
it's the macro is quite good.

658
00:36:39,120 --> 00:36:43,920
Is there anything else you want
to touch on in WA?

659
00:36:44,840 --> 00:36:46,600
It is an interesting dynamic
with Hancock, right?

660
00:36:46,600 --> 00:36:51,720
I mean, Hancock does does have
a, A history of once there is a

661
00:36:51,720 --> 00:36:54,720
bid for a company, then they'll
then they'll, you know, come

662
00:36:54,720 --> 00:36:59,440
over the top and force AJV or,
or or kind of, you know, take

663
00:36:59,440 --> 00:37:02,120
that ride themselves.
But but yeah, good luck kind of

664
00:37:02,520 --> 00:37:06,400
motivating them to move first.
Yeah, I agree on that.

665
00:37:06,400 --> 00:37:08,720
And I mean they've also they've
got a lot of rights within that

666
00:37:08,720 --> 00:37:10,760
joint venture.
So even if someone else takes

667
00:37:10,760 --> 00:37:14,080
over strike, then they're in the
same boat, right?

668
00:37:14,360 --> 00:37:16,160
You still do it on Jane's
schedule.

669
00:37:16,160 --> 00:37:18,640
And that obviously ties in
Canarvon have an estate there,

670
00:37:18,640 --> 00:37:20,680
Caravan's got Dorado.
Then coming back to, you know,

671
00:37:20,680 --> 00:37:23,560
we talked about again, it's when
will Dorado start to make

672
00:37:23,680 --> 00:37:26,000
progress?
And part of it's about Santos

673
00:37:26,000 --> 00:37:29,080
needs to decide what's its
priorities in terms of where

674
00:37:29,080 --> 00:37:33,160
it's going to grow next and is
it be willing to do deals now?

675
00:37:33,160 --> 00:37:34,960
I think that's like Dorado is a
good example.

676
00:37:34,960 --> 00:37:37,960
I think if Santos is willing to
sell a big chunk of that, you

677
00:37:37,960 --> 00:37:41,440
would find some buyers who are
willing to take it off their

678
00:37:41,440 --> 00:37:44,280
hands for a price and and
develop it.

679
00:37:44,280 --> 00:37:46,800
It's a question of is Santos
willing to sell at that price to

680
00:37:46,800 --> 00:37:49,280
transact and move it forward or
would rather just have it sit

681
00:37:49,280 --> 00:37:51,400
there for its option value for a
time being.

682
00:37:51,400 --> 00:37:54,320
And of course, Kanavan's just
beholden to the, you know,

683
00:37:54,640 --> 00:37:56,880
Santos decision making on that,
as it has been for a number of

684
00:37:56,880 --> 00:37:58,680
years.
As are the Taiwanese who bought

685
00:37:58,840 --> 00:38:00,200
bought a minority stake as well,
right?

686
00:38:02,240 --> 00:38:06,000
Yeah, which in the way he's been
a bit of a a kind of a noose

687
00:38:06,000 --> 00:38:09,680
around Santos's nest, nest for
sell down because that price tag

688
00:38:09,680 --> 00:38:13,320
was quite good.
So one is the project has been

689
00:38:13,320 --> 00:38:16,680
delayed since then, so valuation
has probably changed and got

690
00:38:16,680 --> 00:38:19,320
worse.
But the second thing is, you

691
00:38:19,400 --> 00:38:23,640
know, the Santos stake and
carbon stake are different from

692
00:38:23,640 --> 00:38:25,920
value.
The history of a Santos stake

693
00:38:25,920 --> 00:38:29,200
means it's got some additional
royalties, for example, attached

694
00:38:29,200 --> 00:38:33,040
to it and if ID payments, which
changes the valuation equation.

695
00:38:33,760 --> 00:38:35,760
So I think people have been
tended to say, well, take a

696
00:38:35,760 --> 00:38:38,600
simple read through, here's the
Taiwanese price, therefore the

697
00:38:38,600 --> 00:38:40,600
derivative price of Santos with
X.

698
00:38:40,600 --> 00:38:44,080
But that's actually not being
healthy because now it's very

699
00:38:44,080 --> 00:38:47,960
hard for Santos to sell below
that when in fundamental years

700
00:38:47,960 --> 00:38:50,680
is going to be worth below that.
And therefore you can't make

701
00:38:50,680 --> 00:38:54,000
progress on the project.
You know, these kind of market,

702
00:38:54,400 --> 00:38:57,240
you know market managing the
market expectations does

703
00:38:57,240 --> 00:39:00,920
ultimately can result in, you
know, investment decisions

704
00:39:01,800 --> 00:39:03,160
taking longer than otherwise
would be.

705
00:39:03,320 --> 00:39:08,400
Why would, I mean, clearly the,
the, the value inhibitor in, in

706
00:39:08,400 --> 00:39:11,560
Dorado is, is the fact that
Santos has operatorship and

707
00:39:11,560 --> 00:39:14,440
Santos has literally no
motivation to develop this

708
00:39:14,440 --> 00:39:17,280
anytime soon.
So why would they not sell a

709
00:39:17,280 --> 00:39:18,960
stake that includes
operatorship?

710
00:39:18,960 --> 00:39:21,600
Why would they, you know and and
and and actually see this

711
00:39:21,600 --> 00:39:23,560
project developed that wouldn't
that benefit everyone?

712
00:39:25,640 --> 00:39:26,920
Well, look, you're preaching to
the choir.

713
00:39:26,920 --> 00:39:31,040
I agree with you, right.
But you know, again, it comes

714
00:39:31,040 --> 00:39:35,080
down to there's an expectation
in the market of what it's

715
00:39:35,080 --> 00:39:36,520
worth.
If they have to sell it down,

716
00:39:36,520 --> 00:39:38,920
it's giving a discount to that
in order for it to then move

717
00:39:38,920 --> 00:39:41,040
forward.
Are they going to do that?

718
00:39:41,040 --> 00:39:44,600
And particularly if you take
operatorship with it, then you

719
00:39:44,600 --> 00:39:47,960
need, you know, you want a
credible, proven operator to be

720
00:39:47,960 --> 00:39:49,720
doing this.
And then particularly if Santos

721
00:39:49,720 --> 00:39:51,960
are going to stay in the in the
project.

722
00:39:51,960 --> 00:39:55,360
So I can't say, you know, I'm
not sure what exactly is

723
00:39:55,360 --> 00:39:57,080
driving.
Santa's had a lot on their plate

724
00:39:57,080 --> 00:39:59,240
over the last few years with two
other two other projects and the

725
00:39:59,240 --> 00:40:00,720
CCS projects.
You can also understand why they

726
00:40:00,720 --> 00:40:03,600
just let's not do a fourth
project concurrently, you know,

727
00:40:03,640 --> 00:40:11,760
smart thing.
But it's not, you know, it's

728
00:40:11,760 --> 00:40:15,520
again, it's one similar to the,
the, the Hancock situation,

729
00:40:15,520 --> 00:40:19,480
Perth Basin, where they'll make
the decision in their own time.

730
00:40:19,840 --> 00:40:21,680
And you can't force it and it's
just a struggle.

731
00:40:21,680 --> 00:40:25,520
And if you're a small cap, you
know, minority JV partner in a

732
00:40:25,520 --> 00:40:28,880
project with the big elephant of
a company which is driving

733
00:40:28,880 --> 00:40:32,200
things, you just, you know,
there's not much you can do.

734
00:40:32,440 --> 00:40:34,720
And it's very hard to have
conviction on when that decision

735
00:40:34,720 --> 00:40:37,400
will get made.
We're not getting sounds out of

736
00:40:37,400 --> 00:40:40,880
Santos that an FID on you know
Dorado is imminent in the next

737
00:40:40,880 --> 00:40:44,600
18 months.
How do you interpret yeah,

738
00:40:44,600 --> 00:40:47,960
Knarvan's acquisition of 20%
stake in strike.

739
00:40:47,960 --> 00:40:50,680
I mean, now that that 20% you,
you talked about before, the

740
00:40:50,680 --> 00:40:53,800
dynamics in the, the Perth Basin
with Hancock, surely strike at

741
00:40:53,800 --> 00:40:56,040
some point in time is a, is an
acquisition target.

742
00:40:56,280 --> 00:40:59,920
Given, given that interest is,
would it not make sense to like,

743
00:40:59,920 --> 00:41:04,080
if a pathway to acquiring strike
is actually buying Caernarvon

744
00:41:04,080 --> 00:41:07,880
because you, you know, you're,
it trades for like less than

745
00:41:07,880 --> 00:41:11,000
cash and the, the strike shares.
So you can get a 20% interest in

746
00:41:11,000 --> 00:41:15,640
Strike And this this, you know,
free carry an option on on

747
00:41:15,640 --> 00:41:18,600
Dorado in the future when Santos
gets their shit together.

748
00:41:19,000 --> 00:41:21,040
Yeah.
So I fully understand that

749
00:41:21,040 --> 00:41:25,240
thesis and there's nothing
inherently wrong with that

750
00:41:25,240 --> 00:41:26,080
thesis.
I don't think.

751
00:41:26,080 --> 00:41:29,320
I think the issue is question of
timing and how patient you're

752
00:41:29,320 --> 00:41:32,320
willing to be because that could
all come to fruition in the next

753
00:41:32,320 --> 00:41:39,000
6 months or six years.
And most of us, you know, want

754
00:41:39,000 --> 00:41:41,320
to be doing not waiting that
long.

755
00:41:41,720 --> 00:41:44,320
I'm I'm very impatient.
I'm not waiting six years.

756
00:41:44,400 --> 00:41:46,720
What's that saying?
Yeah, everyone's trying to buy a

757
00:41:46,720 --> 00:41:51,360
dollar for $0.50, but but if it
becomes a dollar in 10 years,

758
00:41:51,360 --> 00:41:52,520
then it wasn't an amazing
return.

759
00:41:53,560 --> 00:41:55,360
Well, you know, in the long run
there's value.

760
00:41:55,360 --> 00:41:56,840
He's the.
In the long run, we're dead.

761
00:41:56,840 --> 00:42:00,600
So you know I want my run now.
All right.

762
00:42:00,600 --> 00:42:01,880
Let's keep hunting for value
then.

763
00:42:01,880 --> 00:42:04,720
So what do you make of Beach in
the position they're in Waitsia

764
00:42:04,720 --> 00:42:08,120
and M&A that they may or may not
do in the near term?

765
00:42:09,560 --> 00:42:11,960
Yeah.
So Beach has been through kind

766
00:42:11,960 --> 00:42:15,240
of this terrible ordeal with
HCA, which is actually operated

767
00:42:15,240 --> 00:42:18,600
by Matsui.
It should have been a good

768
00:42:18,600 --> 00:42:20,880
project.
It's just the execution's gone

769
00:42:20,880 --> 00:42:26,680
very poorly for a number of
reasons and it's finally on the

770
00:42:26,680 --> 00:42:27,560
ramp up.
Now.

771
00:42:27,680 --> 00:42:30,400
I don't believe a project's out
of the woods until it's kind of

772
00:42:30,400 --> 00:42:32,760
ramped up for a few months and
showing that and we're not there

773
00:42:32,760 --> 00:42:35,440
yet.
But the issues with this delay

774
00:42:36,360 --> 00:42:40,520
in this project coming up is
basically now when weightier,

775
00:42:40,520 --> 00:42:42,840
let's assume weightier is up and
running fully in the next few

776
00:42:42,840 --> 00:42:47,160
months.
Everything else is basically in

777
00:42:47,160 --> 00:42:49,360
decline.
And so Beach is.

778
00:42:49,520 --> 00:42:52,800
So unlike Woodside and Santos,
Beach doesn't have long life

779
00:42:52,800 --> 00:42:54,360
assets, it's shorter life
assets.

780
00:42:54,360 --> 00:42:56,440
So it's a very big CapEx
treadmill.

781
00:42:56,480 --> 00:43:01,880
It's what Santos used to be 15
years ago in that sense as well,

782
00:43:02,120 --> 00:43:05,240
where you're constantly
investing to stop this, you

783
00:43:05,240 --> 00:43:07,440
know, declining profile in a few
years.

784
00:43:07,440 --> 00:43:12,640
And so that's where Beach is.
What do they do about it?

785
00:43:12,840 --> 00:43:15,640
Means they basically have to,
you know, we, we wrote a note

786
00:43:16,160 --> 00:43:18,920
last year on this, we called it,
you know, deal or drown.

787
00:43:18,920 --> 00:43:21,800
And that's where beach is.
Because just letting everything

788
00:43:21,800 --> 00:43:24,960
decline, first of all, narrative
wise is terrible.

789
00:43:24,960 --> 00:43:27,360
And particularly as you pay it
out, then your market cap drops,

790
00:43:27,360 --> 00:43:30,240
which means you become less
relevant to institutions and

791
00:43:30,240 --> 00:43:33,120
then you're bringing forward the
decommissioning spend, which is

792
00:43:33,120 --> 00:43:35,040
like a ticking time bomb across
the whole industry.

793
00:43:35,040 --> 00:43:37,080
So it's something you want to be
kicking further out, not, you

794
00:43:37,080 --> 00:43:40,120
know, bringing closer today.
For example, Santos talked, for

795
00:43:40,120 --> 00:43:42,760
example, about doing a review of
some of the Australian assets.

796
00:43:42,760 --> 00:43:45,160
Beach would be a potential
natural acquirer of those.

797
00:43:45,480 --> 00:43:48,640
And you're at the right price.
It gives you some longevity to

798
00:43:48,640 --> 00:43:50,760
the Beach portfolio.
Beach, I think for example, if

799
00:43:50,760 --> 00:43:55,320
Beach bought Toronto, Beach
would be a hungry developer, you

800
00:43:55,320 --> 00:43:57,800
know, they wouldn't be putting
that on the back burner while

801
00:43:57,800 --> 00:44:00,320
they look at other things.
So Beach, I think to the extent

802
00:44:00,320 --> 00:44:02,520
Beach does acquisitions going to
be very good for the Australian

803
00:44:02,520 --> 00:44:05,400
market because they're very
focused, they want to do things,

804
00:44:05,920 --> 00:44:09,120
they're very Australian and that
could be really positive.

805
00:44:09,880 --> 00:44:11,800
There's other assets that could
come on the table.

806
00:44:11,800 --> 00:44:13,960
I think you've seen and we'll
touch on it more, but you know,

807
00:44:13,960 --> 00:44:17,160
Beach has gone into the Taroom
in Queensland and exploration

808
00:44:17,160 --> 00:44:19,160
and that's a position I think
they've got a foothold there

809
00:44:19,160 --> 00:44:21,920
that could build on, which could
potentially lead to M&A and

810
00:44:21,920 --> 00:44:23,600
consolidation in that base as
well.

811
00:44:24,040 --> 00:44:29,000
And you know, beaches being on
something like pretty volatile

812
00:44:29,000 --> 00:44:31,080
journey.
What you have seen under Brett

813
00:44:31,080 --> 00:44:34,360
Woods since he came in is at
least you know, their base

814
00:44:34,360 --> 00:44:38,960
business guidance is now proving
conservative, but fixed up some

815
00:44:38,960 --> 00:44:42,600
of like the cost structure in
their business, you know, and

816
00:44:42,600 --> 00:44:45,960
now it's time to say, well,
we're going to make you know,

817
00:44:45,960 --> 00:44:49,800
that big investment which is
likely to be M&A over the course

818
00:44:49,800 --> 00:44:54,440
of the next year.
I don't like M&A being a thesis.

819
00:44:54,960 --> 00:45:00,720
You know, there's for anything
you know, but you know, Beech is

820
00:45:00,720 --> 00:45:02,520
still based on those current
assets.

821
00:45:02,520 --> 00:45:04,440
There's, you know, you've got a
value proposition there and it's

822
00:45:04,440 --> 00:45:09,760
you don't beat it up so much
that the way I see it is you can

823
00:45:09,760 --> 00:45:13,200
easily justify kind of a dollar
$1.10 just based on the base.

824
00:45:13,200 --> 00:45:16,440
And then if you have a high
conviction in high macro, for

825
00:45:16,480 --> 00:45:21,240
example on East Coast gas prices
or West Coast gas prices, Beach

826
00:45:21,240 --> 00:45:24,240
is one of the best exposures
that in that regard.

827
00:45:25,000 --> 00:45:27,560
And, and what about those
exploration plays you mentioned

828
00:45:27,560 --> 00:45:31,640
there in, in the Terum and their
potential inclination to, to

829
00:45:31,640 --> 00:45:33,000
consolidate?
There's a, there's a few other

830
00:45:33,000 --> 00:45:36,240
names that have done a few deals
with one another over, over

831
00:45:36,240 --> 00:45:39,680
recent times.
Do you have strong opinions on

832
00:45:39,680 --> 00:45:41,880
on any of them, be it Alexa,
Omega or others?

833
00:45:43,160 --> 00:45:48,480
So I'd say Terum is the most
interesting and high potential

834
00:45:48,480 --> 00:45:53,440
exploration play.
Australia is saying at least

835
00:45:53,440 --> 00:45:57,800
five years, if not 20 years.
So what's really interesting

836
00:45:57,800 --> 00:46:02,600
about it is if you look at the
basin, look who's there, right?

837
00:46:02,600 --> 00:46:06,640
So Shell is there.
Shell has brought a specific rig

838
00:46:06,640 --> 00:46:10,360
over from the US to drill this,
already drilled a number of

839
00:46:10,360 --> 00:46:12,480
wells.
They are likely to drill several

840
00:46:12,480 --> 00:46:14,360
more wells over the course of
the next year or so.

841
00:46:15,360 --> 00:46:19,880
Shell doesn't go into opening up
a new play, particularly new

842
00:46:19,880 --> 00:46:22,240
unconventional play in Australia
lightly.

843
00:46:22,840 --> 00:46:26,680
So they must say something in
those wells which is exciting

844
00:46:26,680 --> 00:46:29,760
them enough that even Shell,
which is like this, you know,

845
00:46:29,920 --> 00:46:34,320
you know, this kind of massive,
slow moving beast is willing to

846
00:46:34,320 --> 00:46:36,920
do something there.
And then next door you have

847
00:46:36,920 --> 00:46:39,080
Amiga.
Now Amiga's one of their major

848
00:46:39,080 --> 00:46:41,200
shareholders is Tristar.
So Tristar looked across the

849
00:46:41,200 --> 00:46:44,560
whole eastern seaboard, right,
and decided this is the play we

850
00:46:44,560 --> 00:46:46,680
want to be.
And Tristar was on the founders

851
00:46:46,720 --> 00:46:49,520
of CSJA really rocks focused
company.

852
00:46:50,160 --> 00:46:54,480
So you've got 2 of the most long
standing informed industry

853
00:46:54,560 --> 00:46:57,600
participants saying this is
where we want to deploy our

854
00:46:57,600 --> 00:47:01,400
capital.
Some of the recent well results

855
00:47:01,400 --> 00:47:04,360
are at least encouraging.
It's still early stage, right?

856
00:47:04,800 --> 00:47:07,800
It needs to be appraised.
But this has both got a lot of

857
00:47:07,800 --> 00:47:09,800
gas potential, but also a lot of
liquids potential.

858
00:47:09,800 --> 00:47:11,240
So it plays into what we talked
about before.

859
00:47:11,240 --> 00:47:14,000
It's not about gas, just not
just about the gas macro.

860
00:47:14,360 --> 00:47:17,400
But is Australia going to be
doing something that is critical

861
00:47:17,400 --> 00:47:20,160
supply chains in liquids?
This has potential for scalable

862
00:47:20,160 --> 00:47:24,240
liquids and it's really, you
know, outside of kind of Dorado,

863
00:47:24,240 --> 00:47:27,600
it's the only one.
And this could potentially be

864
00:47:27,640 --> 00:47:30,320
even much larger than Dorado.
And this is something that can

865
00:47:30,320 --> 00:47:32,480
be scaled.
And the beauty of it is it's

866
00:47:32,480 --> 00:47:35,000
right next to the existing
infrastructure and wallabile gas

867
00:47:35,000 --> 00:47:38,200
hub in Queensland in a pro
development jurisdiction with

868
00:47:38,200 --> 00:47:40,920
the pro development government
in an area where people

869
00:47:40,920 --> 00:47:43,880
understand oil and gas from the
CSG world.

870
00:47:45,720 --> 00:47:47,360
You don't find that very often
in Australia.

871
00:47:47,440 --> 00:47:50,520
And I think you're saying so
smart money is invested there,

872
00:47:50,800 --> 00:47:53,200
well informed industry
participants are invested there.

873
00:47:53,520 --> 00:47:55,200
It's still exploration and a
prize.

874
00:47:55,200 --> 00:47:57,920
Also you can you know, put a
dollar in there and go to 0.

875
00:47:57,920 --> 00:48:04,920
But I think the relative risk
you kind of around this is one

876
00:48:04,920 --> 00:48:07,600
of the most interesting things
we've looked at for a while.

877
00:48:07,600 --> 00:48:10,280
So, you know, at least from the
Beach perspective, that's why I

878
00:48:10,280 --> 00:48:12,000
think Beach had gone in there on
the ground floor and

879
00:48:12,000 --> 00:48:15,400
exploration.
And I don't know what Beach will

880
00:48:15,400 --> 00:48:19,360
do, but I'm hoping that Beach
looked to expand their footprint

881
00:48:19,360 --> 00:48:24,400
there and that could be good for
Beach and I guess there'd be a

882
00:48:24,400 --> 00:48:27,200
potentially a positive read
through for the other players

883
00:48:27,200 --> 00:48:29,800
there.
The other players being Omega

884
00:48:29,880 --> 00:48:31,320
and Elixir.
Yes.

885
00:48:31,480 --> 00:48:32,200
Yeah.
Gotcha.

886
00:48:34,160 --> 00:48:38,200
Another basin that that is
coming to, coming to fanfare

887
00:48:38,200 --> 00:48:42,040
with capital markets in, in, in
recent history, the Beadalou

888
00:48:42,040 --> 00:48:46,120
Basin, yeah.
Italy, so NT, the Great North,

889
00:48:47,920 --> 00:48:49,360
those who haven't gone, it's
fantastic.

890
00:48:49,800 --> 00:48:53,560
Go up to Darwin, go see one of
the most beautiful parts of

891
00:48:53,560 --> 00:48:58,440
Australia up there.
But sorry, Beadalou Beetle has

892
00:48:58,440 --> 00:49:01,480
got a compared to Tyrone, right?
It's kind of a nice contrast.

893
00:49:01,520 --> 00:49:04,840
Beetle has got more even like
Tyrone's large scale, but Beetle

894
00:49:04,840 --> 00:49:07,880
is huge scale.
So the potential is very large.

895
00:49:09,280 --> 00:49:12,280
They've also got some more wells
in the grounds there.

896
00:49:12,280 --> 00:49:15,560
They've got some pilot
production starting to pilot

897
00:49:15,560 --> 00:49:21,200
production because two companies
starting this year, but it's

898
00:49:21,200 --> 00:49:22,760
more remote far from
infrastructure.

899
00:49:23,360 --> 00:49:28,040
All right, so trade-offs.
I think this is going to be a

900
00:49:28,040 --> 00:49:31,680
defining year for the Betaloo,
particularly to see now that

901
00:49:31,680 --> 00:49:38,040
again with peak ESG behind us,
appetite for gas again, appetite

902
00:49:38,040 --> 00:49:42,200
for exploration globally.
Do we see a large oil and gas

903
00:49:42,200 --> 00:49:44,600
company, not necessarily a
major, but someone like impacts

904
00:49:44,600 --> 00:49:47,720
Conoco, someone say we're going
to go into the beta because the

905
00:49:47,720 --> 00:49:50,480
trick to the beta is it's a
multi billion dollar investment

906
00:49:50,480 --> 00:49:52,960
required to get this ultimately
to where it needs to go.

907
00:49:54,160 --> 00:49:56,840
Small cap land is not going to
do that all by itself.

908
00:49:56,840 --> 00:49:58,240
You need a big partner to come
in.

909
00:49:58,360 --> 00:50:01,680
So the room's already got Shell
as an example and Beach, which

910
00:50:01,680 --> 00:50:04,240
is still quite, you know,
relatively large and now moving

911
00:50:04,240 --> 00:50:07,440
in.
Beadaloo doesn't quite have that

912
00:50:07,440 --> 00:50:09,120
yet.
It's got Santos is even starting

913
00:50:09,120 --> 00:50:11,200
to do something now this year
after kind of parking it for a

914
00:50:11,200 --> 00:50:12,320
little bit.
But we do.

915
00:50:12,400 --> 00:50:16,120
Will we see a big oil and gas
company come in in this year?

916
00:50:16,120 --> 00:50:19,120
And it and, you know, from what
I hear in industry for the first

917
00:50:19,120 --> 00:50:21,200
time, it is being looked at
seriously.

918
00:50:21,760 --> 00:50:24,000
They've kicked ties over the
last five years, but this is

919
00:50:24,000 --> 00:50:26,240
the, you know, now they're
looking at it more seriously.

920
00:50:26,680 --> 00:50:29,960
I don't know whether that means
something eventuates, but I do

921
00:50:29,960 --> 00:50:35,120
think it means that this year we
will get a good sense of

922
00:50:35,120 --> 00:50:38,480
whether, you know, if you get
that big player in, it changes

923
00:50:38,480 --> 00:50:40,680
the game.
If not, it's going to remain

924
00:50:40,680 --> 00:50:44,080
still hard where the companies
have to come cap in hand for,

925
00:50:44,200 --> 00:50:46,880
you know, money after you know,
every few wells that they drill.

926
00:50:48,840 --> 00:50:51,240
Are there, are there any other
parts of Australia like they're

927
00:50:51,240 --> 00:50:52,880
the big ones?
And I think we're, we're loosely

928
00:50:52,880 --> 00:50:55,760
familiar given we come from a
very low base here, here.

929
00:50:55,760 --> 00:50:58,800
So, but are there other parts
like there's other basins that

930
00:50:58,800 --> 00:51:01,400
we haven't touched upon?
The, the, the Cooper comes to

931
00:51:01,400 --> 00:51:05,560
mind and you know, there's other
kind of pockets here and there

932
00:51:05,800 --> 00:51:08,280
where there's not such
significant action or players.

933
00:51:08,280 --> 00:51:11,160
But are there other up and
coming areas that that you're

934
00:51:11,160 --> 00:51:13,720
kind of excited about or just
companies doing exciting things?

935
00:51:15,560 --> 00:51:17,400
Oh, the one I'm excited about
this year is the tour.

936
00:51:17,520 --> 00:51:21,120
So we've covered that off the, I
mean, there's other bases you've

937
00:51:21,120 --> 00:51:24,040
got the, you got, you've got
stuff further north in

938
00:51:24,040 --> 00:51:27,720
Queensland, you've got Canning
in WA, you know, you've got

939
00:51:27,720 --> 00:51:31,800
offshore offshore like the
recent well, for example, in the

940
00:51:31,800 --> 00:51:35,080
South Conoco's well.
I know that the second one

941
00:51:35,080 --> 00:51:37,280
didn't come good, but the first
one looks like there's, you

942
00:51:37,280 --> 00:51:40,040
know, potentially something
there that has to go through

943
00:51:40,040 --> 00:51:41,720
infrastructure.
It probably has to be beaches.

944
00:51:41,720 --> 00:51:44,880
I amplitudes amplitudes
obviously got its campaign at

945
00:51:44,880 --> 00:51:46,280
the moment.
I know they got torched the

946
00:51:46,280 --> 00:51:48,080
other day because the first well
doesn't come in.

947
00:51:48,400 --> 00:51:50,760
And I mean, like wells don't
come in sometimes.

948
00:51:51,440 --> 00:51:53,160
That's kind of going to roll
with the punches on that.

949
00:51:54,400 --> 00:51:57,320
Jane Norman, the CIA is
exceptionally good, you know,

950
00:51:57,400 --> 00:52:00,760
but you know, you do have a lot
riding on just, you know, 3

951
00:52:00,760 --> 00:52:08,800
worlds And that I think to my
mind that covers off what's most

952
00:52:08,800 --> 00:52:10,320
pressing at least to be looking
at.

953
00:52:10,320 --> 00:52:12,640
You know, like if you, if you're
sitting at home now and say we

954
00:52:12,640 --> 00:52:15,480
need to, you know, do the work
on something, right?

955
00:52:15,480 --> 00:52:18,160
I think we've covered off, you
know, the the key plays which

956
00:52:18,160 --> 00:52:21,480
are interesting that need to be.
There could be some urgency to

957
00:52:21,480 --> 00:52:24,440
do some work, but things will
evolve elsewhere.

958
00:52:24,440 --> 00:52:27,320
I just don't think there's
necessarily an urgency on some

959
00:52:27,320 --> 00:52:30,400
of the other players yet.
It, it may be worth finishing up

960
00:52:30,400 --> 00:52:33,160
on, on a comment.
When we spoke earlier, you, you

961
00:52:33,160 --> 00:52:35,600
said there's something that kind
of stuck in my mind that small

962
00:52:35,600 --> 00:52:38,840
scale oil and gas is very
different to junior mining.

963
00:52:39,600 --> 00:52:41,120
What did you kind of mean by
that?

964
00:52:41,640 --> 00:52:45,960
So I'd say as a general rule,
perhaps I'll ask you, you know,

965
00:52:46,200 --> 00:52:52,840
if you, you get of 100, you
know, small cap mining explorers

966
00:52:52,840 --> 00:52:56,080
that come across your desk, you
know, how many of them would you

967
00:52:56,080 --> 00:52:59,440
say equality?
Explorers.

968
00:53:00,040 --> 00:53:03,280
Yeah.
Like 1% maybe, maybe 2%.

969
00:53:03,760 --> 00:53:08,440
Yeah, let's go 5.
Let's assume that's true.

970
00:53:08,640 --> 00:53:11,640
I'd say for oil and gas that
would then be like .1%.

971
00:53:14,960 --> 00:53:17,800
I think the numbers are probably
objectively higher on both, but

972
00:53:18,680 --> 00:53:24,720
it's there's where there's a big
difference, particularly with

973
00:53:24,760 --> 00:53:28,120
smaller scale oil and gas, which
is not targeting elephants,

974
00:53:29,240 --> 00:53:32,000
right?
So for example, Interim and

975
00:53:32,000 --> 00:53:35,480
Beverly looks like
hypothetically imagine the next

976
00:53:35,480 --> 00:53:37,920
three wells are absolutely
gangbusters.

977
00:53:38,440 --> 00:53:40,680
Then a big major comes in,
everyone cleans up, everyone's

978
00:53:40,680 --> 00:53:43,960
very, very happy, right?
But if you're not targeting

979
00:53:43,960 --> 00:53:47,080
that, if you're targeting a
modest domestic gas development

980
00:53:47,080 --> 00:53:51,160
for the East Coast, then you,
you are unlikely to have that

981
00:53:51,160 --> 00:53:55,520
exit, unlike in, in mining where
you, I think that, you know,

982
00:53:55,520 --> 00:53:59,080
once you've firmed up the
resource play, the exit pathway

983
00:53:59,080 --> 00:54:02,360
is kind of clearer.
I mean, oil in gas, particularly

984
00:54:02,360 --> 00:54:03,920
in Australia, you need to
actually be willing to go

985
00:54:03,920 --> 00:54:07,040
through the development which is
where you can.

986
00:54:07,080 --> 00:54:09,640
It's really hard to transition
your register from what's

987
00:54:09,800 --> 00:54:11,840
required from explorer to
development mode.

988
00:54:12,120 --> 00:54:14,960
And so you've seen Synnex did it
before, it was ultimately taken

989
00:54:14,960 --> 00:54:18,880
private Amplitudes doing it now,
B Balu, the B Balu players are

990
00:54:18,880 --> 00:54:22,760
doing it now.
And so I think that's one part

991
00:54:22,840 --> 00:54:27,520
of the dynamic which can be
tougher and the other part is

992
00:54:27,520 --> 00:54:34,560
the macro like you've seen gold
prices, you know, double, triple

993
00:54:34,600 --> 00:54:37,240
silver prices up five times,
you'll be more across the

994
00:54:37,240 --> 00:54:41,560
numbers than I am.
We don't tend to see that level

995
00:54:41,760 --> 00:54:45,160
of gyration in energy because
the market is bigger and it's

996
00:54:45,160 --> 00:54:46,640
there's more kind of offsetting
things.

997
00:54:46,640 --> 00:54:49,560
So it's, you know, I can make a
really strong case while the

998
00:54:49,560 --> 00:54:53,800
domestic gas price will be $15
rather than 10, but it's not

999
00:54:53,800 --> 00:54:56,480
going to 40 and staying there,
right?

1000
00:54:56,760 --> 00:55:01,400
And so you don't get those huge
kind of moves along with the

1001
00:55:01,400 --> 00:55:03,720
macro.
So in the sense it's more stable

1002
00:55:04,440 --> 00:55:08,640
from a macro perspective, but
you need to be willing to go to

1003
00:55:08,640 --> 00:55:12,120
development and the development
risk pathway can be very hard in

1004
00:55:12,120 --> 00:55:13,960
Australia and particularly very
political.

1005
00:55:14,840 --> 00:55:17,520
And that's why you can, you end
up, you know, getting stuck.

1006
00:55:17,520 --> 00:55:21,520
And so, you know, you've got to
look at Australia, like when you

1007
00:55:21,520 --> 00:55:23,840
look, you know, say you're
looking at mining companies in

1008
00:55:23,840 --> 00:55:26,720
Africa, different African
countries have very different

1009
00:55:26,720 --> 00:55:28,880
risk profiles.
You know, what you might be

1010
00:55:28,880 --> 00:55:31,120
willing to do in Zambia is going
to be different to, you know,

1011
00:55:31,160 --> 00:55:34,280
the risk profile in the Congo.
You've got to in oil and gas,

1012
00:55:34,280 --> 00:55:35,640
you've got to look at Australia
like that.

1013
00:55:35,680 --> 00:55:38,880
WA pretty much great across the
board, except for, you know, a

1014
00:55:38,880 --> 00:55:42,760
little pocket Queensland and NT
is really great, but there's

1015
00:55:42,760 --> 00:55:44,720
exception depending on where you
are.

1016
00:55:45,040 --> 00:55:48,440
And then like Victoria's
basically like a no go zone and

1017
00:55:48,440 --> 00:55:51,320
so is NSW.
But you need to be even more

1018
00:55:51,320 --> 00:55:55,800
specific, you know, like Santos,
Narrabri has very acute social

1019
00:55:55,800 --> 00:55:58,600
license issues just in the
little pocket that it's in.

1020
00:55:59,360 --> 00:56:01,760
If Narrabri was just in a
different part of NSW would have

1021
00:56:01,760 --> 00:56:05,120
a much more, much easier time.
And so you've got to be really

1022
00:56:05,120 --> 00:56:08,480
acutely aware of the above
ground risk in Australia down to

1023
00:56:08,480 --> 00:56:13,120
quite a significant local level.
And unfortunately, we do not

1024
00:56:13,120 --> 00:56:20,160
have the government at a federal
level which is willing to put

1025
00:56:20,160 --> 00:56:24,320
political capital behind this.
You know, I think since the

1026
00:56:24,320 --> 00:56:27,160
election last year, they've
certainly moved much more to

1027
00:56:27,160 --> 00:56:31,040
this pragmatic center on a lot
of things regarding gas.

1028
00:56:31,600 --> 00:56:34,520
But that hasn't necessarily
trickled down, you know, into

1029
00:56:34,520 --> 00:56:37,120
the environmental departments in
terms of the inertia and

1030
00:56:37,120 --> 00:56:40,680
austerity that's embedded there.
That hasn't trickled down to

1031
00:56:41,000 --> 00:56:43,760
individual MPs willing to put
their neck on the block to

1032
00:56:43,760 --> 00:56:47,040
support a gas project.
And so you know, you've got to

1033
00:56:47,040 --> 00:56:49,360
make sure you've got delayed
land there, right?

1034
00:56:51,160 --> 00:56:53,920
Otherwise, you can be right on
everything else and still you

1035
00:56:53,920 --> 00:56:55,240
know you're not going to get
your payday.

1036
00:56:55,640 --> 00:56:58,720
Last last one from me so I
didn't didn't get time to ask

1037
00:56:58,720 --> 00:57:00,680
you about a few a few specific
equities.

1038
00:57:00,680 --> 00:57:03,520
So I'm just going to ask you
overrated or underrated and list

1039
00:57:03,520 --> 00:57:07,800
off a few that come to mind. 3D
energy post raise.

1040
00:57:07,800 --> 00:57:11,400
I presume they're needing to do
they're in suspension I.

1041
00:57:13,040 --> 00:57:17,720
Can't comment on what their the
plan is there.

1042
00:57:18,160 --> 00:57:20,280
What I'd say is to highlight
what I said before is I think

1043
00:57:20,280 --> 00:57:22,720
that first discovery, at least
from what I hear in industry

1044
00:57:22,720 --> 00:57:24,160
sounds like it's got some
potential.

1045
00:57:24,440 --> 00:57:27,840
So it's modest, but they might
have, you know, a couple 100 B's

1046
00:57:27,840 --> 00:57:30,760
for example.
Now there's still a way to go

1047
00:57:30,760 --> 00:57:33,040
there in terms of bringing that
to developments and getting the

1048
00:57:33,040 --> 00:57:34,960
infrastructure sorted.
None of which is going to be

1049
00:57:34,960 --> 00:57:37,920
straightforward.
And I don't know if pretty, you

1050
00:57:37,920 --> 00:57:40,800
know, their appetite or ability
to carry themselves all the way

1051
00:57:40,800 --> 00:57:44,800
through that, but they have
actually found something it

1052
00:57:44,800 --> 00:57:49,280
seems, you know, still with the
risk around it and you know, it

1053
00:57:49,280 --> 00:57:50,680
has value.
I think the real question is

1054
00:57:50,680 --> 00:57:54,720
going to be assuming that is
viable, who's going to make all

1055
00:57:54,720 --> 00:57:56,120
the margin?
Is it going to be the upstream

1056
00:57:56,120 --> 00:57:59,760
or is it going to be the
infrastructure owner and that

1057
00:58:00,440 --> 00:58:02,960
both sides could really use
something.

1058
00:58:04,800 --> 00:58:07,280
So, but it's not clear which way
that will go.

1059
00:58:07,280 --> 00:58:11,720
And it's really unclear how
Conoco are going to approach all

1060
00:58:11,720 --> 00:58:14,240
of this.
You know, to my mind, it still

1061
00:58:14,240 --> 00:58:16,560
makes almost no sense why Conoco
drilled this to begin with.

1062
00:58:17,400 --> 00:58:19,680
You know, I get the sense a lot
of Conoco people just moved

1063
00:58:19,680 --> 00:58:21,800
over.
Remember when the the Origin

1064
00:58:22,040 --> 00:58:25,040
deal was going to go through and
then Conoco was going to take

1065
00:58:25,040 --> 00:58:28,120
over APL and G, but then the
deal fell over.

1066
00:58:28,560 --> 00:58:31,240
And so I think you have a whole
bunch of Conoco expats probably

1067
00:58:31,240 --> 00:58:33,760
in Brisbane trying to justify
staying here and looking to do

1068
00:58:33,760 --> 00:58:35,360
other good things, which is
great for Australia.

1069
00:58:36,360 --> 00:58:38,400
But like, I don't know why
Conoco drilled it.

1070
00:58:38,600 --> 00:58:40,400
I don't understand what their
agenda is.

1071
00:58:40,400 --> 00:58:43,200
And it doesn't because there's
only a small discovery, not a

1072
00:58:43,200 --> 00:58:44,360
big one.
I don't know if it even fits

1073
00:58:44,360 --> 00:58:46,080
with what Conoco really want to
do.

1074
00:58:47,520 --> 00:58:51,600
The extent the Conoco, No.
So yeah, I think there's a lot

1075
00:58:51,600 --> 00:58:53,720
of water to go under the bridge
in terms of getting clarity

1076
00:58:53,720 --> 00:58:56,840
about the path forward.
Equus.

1077
00:58:57,760 --> 00:59:01,840
Recent IPA.
I'll speak to this from the

1078
00:59:01,840 --> 00:59:04,960
Woodside angle.
My understanding was ECOS was

1079
00:59:05,040 --> 00:59:08,880
like ECOS was, you know, over a
billion dollars was dumped into

1080
00:59:08,880 --> 00:59:13,400
that by Hess back in the day,
couldn't really make it work.

1081
00:59:13,720 --> 00:59:18,320
And then they sold it to the
company which is now the one you

1082
00:59:18,320 --> 00:59:22,400
refer to.
My only, you know, question on

1083
00:59:22,400 --> 00:59:26,240
that is the most natural owner
of that asset is Woodside,

1084
00:59:26,720 --> 00:59:28,080
right?
Because a lot, you know, it

1085
00:59:28,640 --> 00:59:31,080
naturally should be processed
through Woodside's

1086
00:59:31,080 --> 00:59:33,840
infrastructure, which kind of
particularly now the selectors,

1087
00:59:33,880 --> 00:59:38,560
you know, Scarborough trunk line
goes out that way and put their

1088
00:59:38,560 --> 00:59:43,680
infrastructures nearby too.
And why didn't Woodside buy it

1089
00:59:43,680 --> 00:59:46,720
when it was essentially for sale
for almost nothing those years

1090
00:59:46,720 --> 00:59:48,320
ago?
And what's changed between now

1091
00:59:48,320 --> 00:59:51,040
and then?
And I'm not close enough to it

1092
00:59:51,040 --> 00:59:56,560
to give a strong view.
But, you know, why did Woodside

1093
00:59:56,560 --> 00:59:58,800
turn it down when it could have
got it when it's the natural

1094
00:59:58,800 --> 01:00:01,120
owner and turned it and could
have gone for nothing?

1095
01:00:01,120 --> 01:00:03,280
I think that's the question
people would ask.

1096
01:00:04,280 --> 01:00:08,560
You know what's changed, what
is, what's the the the new owner

1097
01:00:08,800 --> 01:00:11,200
going to be able to achieve that
Woodside couldn't achieve with

1098
01:00:11,200 --> 01:00:14,920
it.
Fantastic salt, lots to reflect

1099
01:00:14,920 --> 01:00:18,120
on and think and think about and
we're very thankful for your for

1100
01:00:18,120 --> 01:00:20,480
your time to to help educate us
on the landscape.

1101
01:00:22,000 --> 01:00:23,400
Thank you both, Jen.
It's been a pleasure.

1102
01:00:23,560 --> 01:00:25,360
There we go, Trev.
We're much wiser about the

1103
01:00:25,360 --> 01:00:27,400
energy landscape across
Australia.

1104
01:00:27,680 --> 01:00:29,960
A massive thank you.
Next time, next time you've got

1105
01:00:30,000 --> 01:00:31,280
energy questions, what are you
going to do?

1106
01:00:32,000 --> 01:00:35,240
Going to call us all.
I can't.

1107
01:00:35,640 --> 01:00:39,000
I can't do it.
Thank you very much to our

1108
01:00:39,000 --> 01:00:42,320
partners.
Sandy Ground support focus the

1109
01:00:42,320 --> 01:00:45,800
platform by market tech
interlinks and AC Capital.

1110
01:00:46,080 --> 01:00:50,400
Hoodoo money minus hoodoo.
Now remember, I'm an idiot.

1111
01:00:50,640 --> 01:00:53,120
JD is an idiot.
If you thought any of this was

1112
01:00:53,120 --> 01:00:55,640
anything other than
entertainment, you're an idiot

1113
01:00:56,000 --> 01:00:57,160
and you need to read out
disclaimer.