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InterOil tries to get rid of Merrill Lynch

October 21st, 2008 · 4 Comments

Merrill’s recently changed status as a part of Banc of America has created some uncertainty as to exactly what status they have in the LNG project (‘Liquid Niugini’), of which they, together with InterOil and Pacific Gas (owned by Clarion Finanz) are one-third owner. Today, we know a little more.

That status is a diminished one, but apparently not voluntarily. Merrill had the first right to negotiate the offtake, and apparently that is in the way now. Which, we think, can only point to one thing. There is another party interested in the offtake.

This is a logical conclusion, but not one that we know as a fact. What we do know is that negotiations with various parties are ongoing, so it wouldn’t be a surprise either. We have argued before that where other, much more expensive projects (Australian coal seam gas) get generous deals, there really isn’t any reason not to expect such deals for InterOil in the making either.

The only thing might be time, as it’s early days for InterOil, these other projects are a little bit ahead in terms of resource appraisal. But there is no doubt in our minds that InterOil will get it done. And now the signs are that they might get it done sooner, rather than later.

Negotiations are apparently serious, so serious that Merrill has become an obstacle. If you have any doubts, perhaps you should read the following passage from the PR:

  • This decision was taken by the Board in response to recent financial unrest and the resulting need to secure offtake arrangements directly with industry LNG participants.

Here is the whole PR:

InterOil Announces LNG Project Decision to Negotiate Gas Offtake With Industry Operators
Tuesday October 21, 8:55 am ET

  • TORONTO, ONTARIO–(MARKET WIRE)–Oct 21, 2008 — InterOil Corporation (Toronto:IOL.TO – News) (AMEX:IOC – News) (POMSoX:IOC), today announced that, as a result of resolutions passed by the Board of Directors of PNG LNG, Inc., the joint venture owned by affiliates of InterOil, Pacific LNG and Merrill Lynch (“Merrill”), to construct an LNG (liquid natural gas) plant on a site adjacent to InterOil’s refinery in Papua New Guinea, Merrill does not have any right of first negotiation in respect of purchase or offtake of any LNG that may be produced by the plant. In addition, the Board of Directors adopted resolutions redeeming Merrill’s Class A voting shares. Merrill continues to hold all Class B shares issued to it and reflecting its economic interest in the Project.
  • This decision was taken by the Board in response to recent financial unrest and the resulting need to secure offtake arrangements directly with industry LNG participants. PNG LNG Inc. and InterOil’s joint venture subsidiary have sought protective orders in the New York State Supreme Court to affirm these resolutions and support negotiations with potential industry-based LNG offtakers. No assurances can be given as to whether the court will grant the protective order.
  • InterOil Corporation is developing a vertically integrated energy business whose primary focus is Papua New Guinea and the surrounding region. InterOil’s assets consist of petroleum licenses covering about 8.7 million acres, an oil refinery, and retail and commercial distribution facilities, all located in Papua New Guinea. In addition, InterOil is a shareholder in a joint venture established to construct Papua New Guinea’s first LNG plant on a site adjacent to InterOil’s refinery in Port Moresby.
  • InterOil’s common shares trade on the Toronto Stock Exchange under the symbol IOL in Canadian dollars and on the American Stock Exchange under the symbol IOC in US dollars.

What is surprising though, Merrill is, once again, not playing ball. Perhaps they are still interested in the whole venture.

Tags: IOC

4 responses so far ↓

  • 1 rgpapp // Oct 21, 2008 at 4:47 pm

    Why wouldn’t they be. ML has been through the tough times with IOC. I believe the deal with ioc is just icing on the cake for BAC. We are far enough along that everyone can see the light at the end of the tunnel!

  • 2 Jim Tate // Oct 21, 2008 at 5:39 pm

    I think its key to understand the person who cut the deal with IOC at MER was promoted after the deal David Sabato. Further MER would never have agreed to such a deal without their own third party resource report..David is still with MER. Wait and see. The only reason this would come up is if IOC had an alternative to MER though seems logical..

  • 3 rory mcgowan // Oct 22, 2008 at 6:41 am

    does ENI want the offtake ng or is Sumitomo still a player? Would exxon like to step up?what does everyone think?

  • 4 Jim Tate // Oct 22, 2008 at 12:02 pm

    The yahoo boards say 14-16 persons may be talkin to IOC.Those names seem to be confidential.