STO 0.70% $5.70 santos limited

the 2011 rerating of sto

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    Gradual Rerating of Santos in 2011
    Since completing the offtake with KOGAS and FIDing the GLNG project in Jan 2011 I have been surprised at the relatively weak response in the SP.
    Some very good posters here are saying that movements in the SP will largely be a function of the oil price.
    I agree and disagree. But mostly I disagree.
    These are my reasons:

    (1) The performance of OSH?s SP. When PLNG (STO 13.5%) was fidded in Dec 2009. The SP hardly moved.
    (2) But in 2010 OSH?s SP has been the big mover, because I believe the proving up of reserves was going to schedule.
    (3) It may take until mid yr 2011 for a similar thing to happen to STO?s SP
    (4) I believe the market is TOTALLY UNAWARE of how STO has derisked the DELIVERABILITY (CONSTRUCTION) of GLNG. The building contracts, Upstream, Downstream, and Midstream are largely FIXED PRICE lump sum contracts with Bechtel and Fluor. In fact there are severe penalties for delays. The market is constantly reminding us about the BLOW OUT IN WAGES COST. Just take a look at WPL. If these costs are there they are NOT STO?s.
    (5) Another matter the market is ignoring is ESG ( no, not EASTER STAR GAS) but Environmental, Social and Governance factors
    (6) STO?s relationship with its employees is EXCEPTIONALLY GOOD
    (7) Carbon Pricing. I believe Julie will move heaven and high water to get a PRICE
    On Carbon. The big risk for STO?s reputation is how it handles the water coming from the project. I am encouraged to see that STO is well aware of this. They have underway and exciting forestry project in Fairview
 
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