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Happy New Year From Derbyshire - Justin94360 - 01-01-2013
Cheers All
This is our year.
Just
RE: Happy New Year From Derbyshire - ArtM72 - 01-01-2013
Derbyshire UK? Aussieland? Happy New Year NYSE! IOC 2014!
RE: Happy New Year From Derbyshire - Stavros - 01-01-2013
Rinse and Repeat as some are wont to say .... Wishing Peace, Happiness and Health to all SHU posters & readers and all their loved ones.
WHAT DO YOU MEAN ART? IOC 2014???
Another lost year for IOC coming up in 2013?
I hope not, but I didn't think 2012 would be a washout for IOC either.
Below are my views on current status of some important outstanding issues .... if some of the below have been resolved in the private/ confidential negotiations, they haven't been revealed to us shmoes.
+ No formal approval of the revised elements of the Project Agreement. This approval must be officially issued by the PNG Government to enable interested parties to submit formal bids. Without this document, no one can be 100% sure which if any of the changes requested by IOC are in vogue (re-location to Gulf Province; staged project execution; extended FID date to December 31, 2013; acceptance of IOC's selected operating partner; etc). Statements by O'Neill that he has recommended approval by the NEC are awaiting written confirmation.
+ No news from the PNG Government on exactly how much more of E/A they want to acquire, the price they will pay and the payment terms/conditions. Remarks in the press that
1) the price will be at "market rates"
2) for a rumored additional 2.5% and
3) that the entire first 4 Million ton per annum LNG Train is free from Petromin participation
are not enough to fully inform interested parties of what's happening. Ink must be put to paper on all these issues.
+ No news from IOC on whether the Deals with EWC (for a modular LNG Train) and Mitsui (for the CSP costs and an option for 5% of E/A) were consummated, extended again or expired yesterday. Interested parties must know the status of these Agreements to know the forward plans and the assets available for sale.
+ No confirmation from the PNG Government as to whether gas from Triceratops can be used to top up the E/ A amounts if it turns out there is a shortfall. Duma stated several months ago that use of Tri gas would be allowed, but the interested parties must see this in writing in the revised PA.
+ No information on the status of the three LNG Offtake HOA's with Gunvor, Noble Clean Fuels Limited (part of Noble Group) and ENN. IOC says these are all bankable deals and underpin the Gulf LNG Project in terms of Project Finance, but many people think otherwise since these three large energy traders (as opposed to being end-users) cannot put their Corporate Guarantees behind their Agreements. Binding Agreements were to have been signed many months ago. To my view they must all be replaced by new Offtake Agreements as part of the Sell Down(s).
So what does all the above mean?
a) It means this is a very complicated set of dealings that take a lot of time to sort out; lot's of "Catch 22" non-action
b) It means that all the pronouncements by IOC Management that deals would be signed, sealed and delivered months ago were far too optimistic. Were the statements made in good faith? I hope so.
c) It means that we will keep waiting for however long it takes until all the above (and others not mentioned) are properly taken care of, factored into the evaluation of the assets, incorporated into formal bids submitted by interested parties, and evaluated by IOC and its Investment Bankers
d) BUT ABOVE ALL ELSE ... it means that once all the T's are dotted and the I's are crossed, the true picture will emerge. Only then will IOC be revealed for what it truly is ^^ A TOTALLY UNDERVALUED ENTERPRISE ^^ and the share price will rocket to a level much higher than most people believe to be possible ... even some of the UBERS are understating the final outcome to my opinion
I've said many times that this will all extend into April and possibly beyond. I've been ridiculed in the past for my view of the timeline but I stick to it as being the most likely outcome.
I hope IOC proves me wrong and that we see something concrete by the end of February.
RE: Happy New Year From Derbyshire - bertl05 - 01-02-2013
Well stated ! I agree with all of it. I happen to agree on your timeline as well, it could take a substantial amount of time to work through these points.
I wonder if we see Chandler add more as time goes by.
RE: Happy New Year From Derbyshire - Orlando - 01-02-2013
Thanks for the post, Stavros. Timeline aside, can you elaborate any on this line: "and the share price will rocket to a level much higher than most people believe to be possible ... even some of the UBERS are understating the final outcome to my opinion"?
1) What do you believe is the likelihood of a complete buyout in 2013? If it happens, what would be your guess on price range?
2) If no buyout this year, but a partnership sell-down, what do you see for stock price in 2013?
3) What is it that makes you more bullish on the stock price? Higher per mcf price? Significant resource addition through drilling in 2013? (I realize that if the price is $2+ per mcf and Tri is as big or bigger than E/A and the fish come through as many expect, the math takes us to APPL/GOOG territory on the stock price)
RE: Happy New Year From Derbyshire - Stavros - 01-02-2013
Dear Orlando:
You posed 3 short questions. Below are some long answers:
Question 1. Likelihood of a Buyout in 2013 ... HIGH and before July; Share price ... $400+
I think that if there is a buyout, it has to be now instead of a Sell Down. IOC already has a 10% partner in Triceratops in PRE. If IOC is taken out, PRE would also be asked to give up their share of Tri in the takeover. That complicates things, but can be managed. If IOC sells a major portion of Elk/Antelope, and the project gets going in earnest, then the SD Partner would also be asked to give up their share.
A lot of majors seem to be coming up with Dry Holes around the world, thereby losing reserves on their books ... out is greater than in!
They are once again faced with the reality that small exploration companies such as IOC are more adept at finding oil, condensate and gas reserves than their own crackpot teams.
With 4 majors (Chevron, Shell, ExxonMobil and Total) plus several Asian National Oil Companies and Utilities ( PTT Thailand, PETRONAS Malaysia, PetroChina et al, JKM) all circling IOC, it's likely that at least one of them has already made a non-conforming bid for all of IOC. I would hazard a guess that a low-ball offer in the $6 Billion range is already on the table; to my opinion, it won't be accepted by the Board of Directors.
Now let's take a step back and look at Anadarko Petroleum (NYSE: APC) in the US.
Anadarko is the second-largest U.S. independent oil and natural gas producer and has been mentioned as a possible target for Exxon. One analyst has speculated the takeover price for Anadarko could be as high as $52 billion. If Exxon and its $18 billion in cash could move on Anadarko, so could Chevron with $22 billion in cash.
Recently, Bloomberg reported Anadarko's reserve replacement ratio last year was 148 percent compared to just 107 percent for Exxon. The company had total reserves of 2.5 billion barrels at the end of 2011 and is targeting 3 billion by the end of 2014.
Back to IOC ... the 9.3 TCF gas in Elk/ Antelope is equivalent to something on the order of 1.5 billion barrels of oil (equivalent) excluding the associated condensate. IOC currently controls 80% of that amount, with 20% in the hands of Partners that can be clawed back at some price. After the PNG Government takes their 22.5%, IOC is left with something over 58%.
If we take 58% of 1.5 billion barrels, that comes to 0.87 billion barrels. Add the Condensate and we come to about 1 billion barrels of oil equivalent in E/A.
Now suppose that Triceratops has roughly the same amount.
That total comes to 2 billion BOE owned by InterOil.
Now suppose the other IOC acreage in PNG has another 1 billion BOE.
===> we're up to 3 billion barrels of oil equivalent .... THE SAME AS ANADARKO WILL HAVE BY THE END OF 2014.
That begs the question: "Is IOC a potential takeover candidate at $52 Billion?"
The answer is surely NO.
So what is the logical amount that a winner would pay to acquire IOC in a bidding war?
ANSWER: at least $20 Billion. That comes to less than $7 per Barrel of Oil equivalent. That's a steal if you ask me.
With 48.59 Million IOC shares outstanding, that comes to $411.69 per share of IOC stock.
Chevron's stock price on Monday was $108.14.
In an all-stock takeover, we would get 3.81 shares of CVX per share of IOC.
Let's round that up to 4 and be done.
Question 2. Stock price for 2013 if a Sell Down but no Buy Out ... $120 per share at most.
The stock would still be at the mercy of SHORTS since political risk and project risk would be in-play until first shipments of LNG in 2017.
Question 3. What is it that makes me so Bullish?
The main reason I'm so bullish on IOC is that the Aussie land-based LNG projects are now suffering badly. The ones under construction will be completed at way over their budgeted costs (in-vogue description is "blow out" cost. New plants won't happen because they won't be able to get financing until the banks see what happens to LNG prices post 2020; project IRR's are unknown. Would you loan someone $35 Billion to build another one???
It's simply too expensive to drill so many holes in the ocean, gather the gas, pipe it to land and build massive plants in remote areas of Australia where environmentalists are fighting tooth and nail to stop them.
The PNG LNG Project, even at $20 billion, is less than half the cost of the Aussie Projects.
The Gulf LNG Project cannot possibly cost as much as PNG LNG. There is no project execution risk whatsoever if a major undertakes the Gulf LNG Project.
As to Bert's Question:
Will Richard Chandler acquire more IOC shares as time goes by ... That's a great one and requires pure speculation about a man who is extremely quiet and avoids the limelight at all costs.
My personal guess is that he won't add more. He would have done so already if he had the inkling and the ca$h to put on the table.
Recently, some folks specuated that someone else has been quietly buying IOC shares ... I'd love to know if that's really true.
OTHER COMMENTS/ IDEAS ON ALL OF THE ABOVE PLEASE
Stay well everyone!
RE: Happy New Year From Derbyshire - Orlando - 01-02-2013
Stavros, thanks for taking the time for the thorough reply. I would certainly love to see a buyout in 2013 in your price range. It makes sense. It could also explain the current delay in finalizing a sell-down deal.
Personally, I see more than $120 on the stock price if we end up with a sell down. If we sell around 30% of EA for 1.5 to 2 per mcf with close to 1 billion in upfront cash, I believe we will have enough new institutional buyers to make things very difficult for the shorts. With a sell down deal like I described and additional drilling, I see 100-120 as the low end.
The comparisons to other projects seems so obvious. Thanks for clear explanation.
RE: Happy New Year From Derbyshire - Stavros - 01-02-2013
Dear Orlando:
In terms of PPS after a Sell Down:
You say $100-120 as the low end
I say $120 as the high end ... but then moving higher over time as political and project risks reduce over time
So we agree it seems.