Morgan Stanley
May 15, 2013 4:01 AM GMT
Today’s call highlighted IOC’s path to becoming a mainstream energy company. IOC is in “final [partnership] discussions” with “Majors and National Oil Companies” for developing its resource; will have a new in-Industry CEO; and has additional exploration including a new seismic JV.
New partner. IOC is selling an interest and LNG operatorship in its 9.45Tcfe (gross) nat gas/condensate Elk/Antelope discovery in PNG. While taking longer than initially expected, IOC is in “final discussions with multiple parties, including major oil companies and a national oil company, each of whom we believe would satisfy the PNG government’s objectives.” On the call, IOC clarified it makes no distinction between a Major and Super Major. Majors include ~7 of the largest, publicly traded, oil and gas companies in the world. Partnering with a Major significantly de-risks IOC’s resource and monetization path.
New JV. IOC announced a new seismic JV with Oil Search, IOC’s primary in-country competitor. The JV is 100% funded by Oil Search and will help determine whether the Triceratops discovery extends into the adjacent block, beyond the significant 128sq km footprint (see page 2).
New CEO. Former CEO and founder, Phil Mulacek, was a pioneer and entrepreneur who successfully built IOC into a multi-billion dollar energy company, in one of the most remote locations in the world. Mulacek’s retirement (last month) allows the Board to align new leadership skills necessary to manage a non-op position in a large-scale LNG development and fully funded exploration program with potential subsequent developments or sales. We expect the selection of the next CEO will follow the sell-down/partnering processes.
Old controversy. The controversial nature of the stock (relative to its resource, value, and potential partner) is clear from the relative short interest. IOC’s short interest, 32.7% of the float, would rank it in the top 14 against the S&P 1500 (99th percentile, see page 2).
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