'Petro2458' pid='23744' datel Wrote:Market is currently expecting $0.60 cents. Respectfully, all the talk of big $/mcf values are impossible. The numbers required to get NPV's over $2/mcf are fantasy land. To be clear I am talking after 30% tax, net of gov 't take, and with very realistic production start dates. $1 to $1.2 to $1.50/mcf for first train and reserves booked this year make this a perfect analog to OSH...and a double from here.

Petro, I am having trouble reconciling your $1.20 or so with jft's thoughts around $3.00. (See his post very early in this thread.) Are we comparing apples to apples here?  Jft mentions all these other expenses that Exxon will pay for.  Is it right to deduct them from the $mcf price in order to reach your lower price?  Is that even the math you are doing?  Any explanation that you can give as to your price relative to jft's would be appreciated.  I'd like to be clear whether we have an actual disagreement or different math.  Thanks.

Lt,

First off I want to thank you for all the work you put in on the original post. I, as others have stated, recognize the time and effort you put in to the exercise.

I do have some slight issues with some of the conclusions and the acceptance with the $1.00-1.20 range for the selldown. Over 70% on this board who participated in a selldown poll on this forum expect a price over $1.50, and we have long argued the superiority of E/A over Oil Search's fields. Now are these sd numbers based on our own exaggerated expectations? Perhaps but this numbers weren't pulled from thin air and they were numbers that we have repeated on this site and others, perhaps these "fantasy numbers" and talk should have been stomped away sooner rather than later. Had that been the case then the poll results would have been quite different. We all need perspective here and as Jft says we make each other stronger.

http://shareholdersunite.com/mybb/polls.php?action=showresults&pid=12

I agree with Hoosier's comments above, I believe the market is expected a higher selldown number. I trust in  management to make the best decision.

'Movieguy' pid='23753' dateline='<a href="tel:1370370 Wrote:

'Petro2458' pid='23744' dateline='<a href="tel:1370365 Wrote:Market is currently expecting $0.60 cents. Respectfully, all the talk of big $/mcf values are impossible. The numbers required to get NPV's over $2/mcf are fantasy land. To be clear I am talking after 30% tax, net of gov 't take, and with very realistic production start dates. $1 to $1.2 to $1.50/mcf for first train and reserves booked this year make this a perfect analog to OSH...and a double from here.

Petro, I am having trouble reconciling your $1.20 or so with jft's thoughts around $3.00. (See his post very early in this thread.) Are we comparing apples to apples here?  Jft mentions all these other expenses that Exxon will pay for.  Is it right to deduct them from the $mcf price in order to reach your lower price?  Is that even the math you are doing?  Any explanation that you can give as to your price relative to jft's would be appreciated.  I'd like to be clear whether we have an actual disagreement or different math.  Thanks.

'ltinvest' pid='23751' dateline='<a href="tel:1370367 Wrote:"- IOC may also get some ownership in PNG LNG. - I think JFT is right in that XOM will probably be spending another $1 billion or so on additional drilling in PRL 15, starting probably with Elk 3 and Antelope 4, and there may also be some drilling in other prospects in the PRL such as Mule Deer, a formation adjacent to E/A. - Probably 22.5% of the gas sold to XOM will be from the government, in addition to part from Pacific LNG, leaving IOC a larger portion for future deals beyond the proceeds from this deal, and much more flexibility in how it proceeds from here." Get. I'm not as clear on these details as I am on the others. Certainly sounds plausible. As for the valuation comments, It doesn't appear the market is pricing anywhere near the true value of this deal. I consider the $1-$1.20 to be quite attractive....and without having to build an LNG plant!!! As STP often points out......think of the value this first deal creates going forward! It's important to view this deal as a starting point and not a finish line. It is transformative to IOC, unlocks tremendous value and significantly derisks the stock. Tremendously accretive. 1) IOC will receive staged payments in a transaction valued at $4B to $5B. 2) IOC will have ownership in a gathering system, pipeline, and CSP plant. 3) Cash flows from CSP starting in 2015. 4) Ability to do future deals with 4.5T to 8T (TBD) of gas and liquids at E/A. 5) As Palm states, FID and booked reserves. 6) Accelerated exploration. etc... I completely agree with Petro......."$1 to $1.2 to $1.50/mcf for first train and reserves booked this year make this a perfect analog to OSH...and a double from here"

So LT, if I understand correctly the JV with XOM will cover only upstream, CSP plant, and pipeline/infrastructure needed to get the gas to where it is handed over to XOM. IOC will not have an ownership interest in the PNG LNG plant, so it won't have an interest in the value added to the gas after its sale to XOM. XOM may add its train cheaply and sell the gas at $20/mcf or whatever but IOC won't have a share of that.

IOC will have a full (58.6%) ownership in the rest of EA over and above the first 4.5tcf (plus Tri after PRE's 10%). How much that is awaits further delineation. We suspect it is at least another 4-5tcf but won't XOM have to agree there is sufficient extra for any further deals to be made, whether with XOM or with some other partner(s)? (This is where a modular plant for further deals may make a lot of  sense.) Will XOM agree to that on the basis of further delineation wells and recertification (a few months) or will they want to wait until after production firms up estimates of how much EA can produce (rather more than a few months)? Until that point, whenever it is, there will be a return to uncertain speculation about future deals, which has never been good for the pps.

Something I know nothing about is, does this kind of deal, a sale of feedstock, affect the booking to reserves of the rest of EA? XOM's FID won't, I would think (help me out here) refer to anything more than the gas it is buying. Would the rest of EA remain as resource only until a further and different deal gets to FID?

Am I understanding all this right? If so it may account for the market's hesitation about how great this deal will be.

(06-05-2013, 06:34 AM)ArtM72 Wrote: I don't quite understand how LT can state XOM will spend another $billion on E/A wells. Per p51 of the annual report: "We have spent $268.0 million on PRL 15 which includes seismic, Herd Base/Hou Creek wharf and camps, roads, FEED for wells, gas gathering, condensate stripping, and pipelines". That includes I trust the 5 completed wells. Per the presentations to Raymond James and IPAA earlier this year IOC is projecting 8 mtpa (about one million cu ft/day) will require 5 - 11 wells. Just for the sake of argument, @$25M/well (pretty high with existing infrastructure and limited testing!) that's 40 more wells! I seem to recall Antelope 1 and 2 combined for more than a mmcf/d by themselves. Seems to me a lot of LT's argument on the value of IOC's first 4 TCF (at $1.25) is that it gives the company a way to book the rest of its reserves and get the $1/mcf for the condensate. If there were a case to be made for incompetent IOC management, by God sale at that price for those reasons would be it.

I don't see where LT said Exxon would spend a billion dollars on drilling wells at E/A. I don't think he believes that and neither do I.