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InterOil and Mitsui strike condensate stripping plant deal

August 5th, 2010 · 3 Comments

Interesting stuff..
You can read the PR here. We’ll highlight two items:

  1. After mechanical completion of the CSP, Mitsui has a right to convert its contributed investment in the CSP into a 2.5% interest in the Elk and Antelope fields and the proposed LNG Plant.
  2. Mitsui also has conditional rights under a separate call option to purchase an additional 2.5% interest in the Elk and Antelope fields and the proposed LNG Plant.

So, let’s see some of the implications:

  1. It’s contributed investment is $550M
  2. They can convert this into a 2.5% stake of Elk/Antelope and LNG plant
  3. This implicitly values Elk/Antelope and LNG plant at 40x550M=$22B
  4. IOC has a 57%+ stake (taking the 22.5% of Petromin into account) at present.
  5. Mitsui has a second option to buy another 2.5% stake at the exact criteria of a strategic partner.
  6. Valuation wise, $22B is really not such a stretch, as it includes the LNG plant, and it’s comparable to the 3.6% sale of OilSearch fields and LNG plant by AGL to Nippon Oil in Dec 08 for $800M, which also happens to be, well, $22B (and change)!
  7. We think the OilSearch part was based in the order of 9Tcf so indeed this is remarkably similar. Ramond James analyst Pavel Molchanov, by the way, has made exactly such a calculation a year or so ago..
  8. There are pretty good reasons to assume the IOC project is better than the Oil/Search one. There is probably more upside in Elk/Antelope, compared to the five OilSearch fields (GLJ hasn’t included the large amount of dolomite found in the horizontal). The LNG plant is way cheaper (locational and infrastructural advantages). Elk/Antelope wells flow much more profusely and are much larger.

So in the end, we think Mitsui has done a good deal. So has InterOil. They’ve given Mitsui a “first mover discount” in the form of interesting options because this also helps them, they gain credibility, cash, and improving their negotiating position vis-à-vis others.

Tags: IOC

3 responses so far ↓

  • 1 ioc4ever // Aug 5, 2010 at 3:38 pm

    Intersting to find out now what RJ, Morgan Stanley…etc and other firms are going to give a Target price now that:

    We have executed a FULL JV Agreement
    We do not have STRANDED GAS
    We have BIG LOGS of reserves we are sitting.
    We have so much $$$$$$$ (oil) we just need it out of the ground

    what news will it take to push us to new 52 week highs, and hopefully triple digits

    Antelope #3 results are 6+ months

    My guess is deals, from LNG shipping, to foreign countries, to the acqusition of acreage that just occured between US and Exxon….

    any thoughts

  • 2 ioc4ever // Aug 5, 2010 at 3:44 pm

    Last comment…..

    The Prelim JV… IOC was up 10-15% in pre-trading and early morning… Once realized by the PUBLIC that prelim, means its “IN WORKS” with no guarentee it viewed it has a disssapointment and smacked us down with a stomach turning Crash, with us all wondering where the HECK is the FLOOR, RJ had no JV, stranded gas $65 and now the LOW 40s! OOOOuuuucccchhhhh! rough several months for US heavy investors…. Heavy weight on IOC, remember that POST…. paying for you kids college in 6 months worth of gains…all the smiling happy in the green days… I remember.. and Im ready to get back to them

  • 3 kencooksam // Aug 6, 2010 at 1:14 pm

    ioc requires patience.