OSH/PacLNG Deal Details Reported

( HOHOHO, WARNING:Shorts will still claim IOC/TOT deal sucks though.........)

$3.9 Billion valuation on PRL15 alone

Potential feedstock for PNG LNG based

$.77/Mcf per 'best' estimate

5.3 T's and 75 mill bbl condensates OSH estimates

Unconditional deal, close within 2 weeks

Binding HOA seeking with PAC LNG seeking 100% of their 4 other licenses.

Duma will not be at photo op

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Papua New Guinea-focused Oil Search has signed an agreement to buy a 22.8% interest in Interoil’s PRL 15 on the eastern margin of the Papuan basin in PNG for $900 million.

Bianca Bartucciotto

27 February 2014 06:09 GMT

Speculation was confirmed when the company announced on Thursday it was taking a stake in the Elk/Atelope gas field to find potential feed stock for PNG liquefied natural gas project.

Oil Search will take its stake through a purchase of Pac LNG which is a 22.8% stakeholder in the project.

The company will pay $900 million to acquire all shares in Pac LNG which equates to $0.77 per million cubic foot of certified best estimate contingent resource.

The acquisition was unconditional and is expected to settle in two weeks.

Separately, Oil Search has entered into a binding heads of agreement with Pac LNG shareholders and other parties to undertake exclusive negotiations to purchase up to 100% interest in four other permits.

This is made up of a 13.4% interest in PPL 236 and PPL 238 and 11.04% interest in PPL 327 and PRL 39.

The exclusivity period will last for six months with the price to be negotiated in that time.

Oil Search said the purchase gave it access to the “largest undeveloped gas resource in PNG”.

“Oil Search estimates presently that gross Elk/Antelope best estimate contingent resources are 5.3 trillion cubic feet of raw gas including 75 million barrels of associated liquids,” the company said in a statement to the Australia Securities Exchange.

“Up to three appraisal wells, including the proposed Antelope- 4 well, are planned to be drilled on PRL 15 over the next 18 months, to prove up sufficient gas resources to support a new LNG development.”

Based on estimates, a potential LNG development from PRL 15 gas could warrant an expansion of PNG LNG or a standalone facility.

The asset is complementary to Oil Search’s existing interests which it could leverage to expand its presence in PNG.

Oil Search said cash flow from the project could support multiple LNG developments.

The company entered a trading halt on Tuesday pending the announcement.

It was tight-lipped about the material announcement but speculation was mounting it would involve the Elk/Antelope purchase.

Oil Search previously tipped the potetial for a new train or a new gas project before the deal was announced.

Full-year results were delayed pending the announcement, but Oil Search posted its results on Thursday afternoon.

The company posted a year-on-year profit jump of 17%, which the company said was a good result given the lower oil price.

The board has approved an unfranked dividend of $0.2 per share, with a view to change the dividend policy in 2015 as the PNG LNG project comes on stream.

The project, operated by ExxonMobil, is more than 95% complete as crews are starting demobilising and commissioning activities at the Hides Gas conditioning plant and the downstream site.

PNG LNG production is expected to have a “market impact” on 2014 oil and gas production despite the fact it will only be operational for part of the year.

2014 production guidance is expected to double on 2013 levels with the inclusion of PNG LNG production

No. This OSH % is a gross % as was PAC LNG/IPI, prior to Gov't opt in. Gov't 22.5% stake will come from the 3 now existing partners, TOT, IOC and OSH.

The way to view this is owership after Gov't buy in. Stated material stakes should be:

This leaves 15% for net for OSH, or their may be more sell-downs by OSH, IOC or TOT.

32.5 + 30 + 22.5 = 85%, leaves 15% for OSH at this point, assuming Gov't opts in for 22.5%.

Remember, as owners of the PRL 15 prior to Gov't opt in, IOC, TOT and OSH stakes will be reduced proportionately to make up the Gov't stake. Gov't will pat back in costs to these partners as well. Could be Gov't opts in for less than 22.5% also. We will see soon, like a couple weeks.

Sorry, but I am missing something. How do you get TOT at 32.5% net instead of 47.5%? Also, how do you get OSH at 15% if it shows they bought 22.8% gross, which is 17.7% net (22.8%*(1-22.5%))? Thanks.

sure looks that way to me. Another damn case of bad PR. Market opens and shitstorm returns I fear. Unbelievable.