Interesting stuff..
You can read the PR here. We’ll highlight two items:
- 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.
- 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:
- It’s contributed investment is $550M
- They can convert this into a 2.5% stake of Elk/Antelope and LNG plant
- This implicitly values Elk/Antelope and LNG plant at 40x550M=$22B
- IOC has a 57%+ stake (taking the 22.5% of Petromin into account) at present.
- Mitsui has a second option to buy another 2.5% stake at the exact criteria of a strategic partner.
- 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)!
- 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..
- 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.

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.