I would like to summarize some of the details of the UBS report of 27 May 2015 http://tinyurl.com/o5lgsbw .
UBS is giving an economic analysis of a range of resource volume numbers from 5 TCFe to 10 TCFe. They are using 2C resource numbers or the same as what we have been calling P-50 numbers or what GLJ’ calls their “best case”.

Since I believe the final resource number will be 10 TCFe or more I will concentrate my comments and summary on the UBS 10 TCFe numbers. UBS believes that OSH and Total both believed the gross gas resource volume (2C) would be less than 7 TCFe when they entered into the sale and purchase  agreements (SPA). OSH had an in-house number of 5.28 TCFe (2C) for raw gas before shrinkage for inerts, fuel and flare. Gaffney Cline and Associates had a 7.0 TCF + 96 mmBbl condensate or 7.58 TCFe (2C) raw gas before shrinkage for inerts, fuel and flare. GLJ had a 2C number for sales gas after shrinkage for inerts, fuel and flare of 9.1 TCF + 135.4 mmBbl condensate or 9.9 TCFe.

Comment:
We have had some recent positive developments that should increase the reservoir engineer’s resource estimates. http://tinyurl.com/q2lzmbq
These positive developments are:
1. Drilling of Antelope-5 to the west, which came in higher than expected, found the thickest pay zone with the best porosity seen to date with porosity up to 25%.
2. Recent seismic, gravity and the drilling of Antelope-5 gives indications that the fault on the western side of the  field should be moved to the west making the field larger.
3. The original Antelope-4 well, drilled on the south side of the field, found high porosity dolomite in the top 495 feet of the pay zone before being suspended. The well is now being side tracked (I think to the south or southeast) to see if the dolomite zone extends further in that direction and possibly determine if the dolomite extends all the way to the gas/water contact on the south and southeast sides of the field.
4. Recent interference test indicated that Antelope-1 and Antelope-5 are connected. Further testing is to be done when Antelope-4 ST-1 is completed. I expect these tests to prove that Antelope-1, Antelope-4 and Antelope-5 are all connected. GLJ originally used a discount factor of 0.80 for continuity uncertainty.  I don’t know what they are using most recently but these tests should just about eliminate this discount factor and increase their sales gas resource number.

Back to the UBS report:

UBS’s calculations indicate that higher resource volumes increases IOC’s percentage of the gross NPV (net present value) while decreasing Total’s percentage. Figure 7 of the report indicates that the gross NPV of the LNG development is $9.55 Billion at the resource level of 10 TCFe. This $9.55 Billion is broken down by owners as follows:
Total $2.97 B, IOC $2.7 B, OSH $1.69 B, and PNG Gov’t: $2.19 B. This does not include the resource and milestone payments that must be made to IOC by Total.
Figure 8 indicates that the resource and milestone payments to be made by Total to IOC at the 10 TCFe resource level is $2.3 B. So when we combine the LNG development with the resource and milestone payments it brings IOC’s NPV to $5.04 Billion as seen in Figure 8,  Figure 12 and Figure 14. Figure 12 indicates that Total’s  part of the total gross NPV of $9.55 B is only $0.63 Billion at the 10 TCFe resource level. Figure 15 again shows Total’s part to be $0.63 Billion.

Figure 16 shows that at the 10 TCFe level Total loses money at an oil price of $70/Bbl and $80/Bbl.

Figure 17 again shows Total’s share at $0.63 Billion.

Figure 18 and the bottom of page 10 shows that if we combine IOC’s share with Totals share at the 10 TCFe resource level IOC gets 89% and Total gets 11% of the combined NPV.

All of the above calculations were made based on $90/Bbl oil (LNG price of US$12.60/mmbtu) and a discount factor of 10%. If Total’s uses a discount rate of 8% instead of 10% then the Total NPV is increased to $2.45 Billion.

The above calculations are all based on the Elk/Antelope Fields only and does not include the rest of PRL-15 which, of course, includes Antelope South-1. Total will make more profit from the areas outside of the Elk/Antelope because they do not have to pay IOC as much. (They pay IOC nothing after Antelope South)  UBS uses the example of finding 6 TCFe at Antelope South-1 and calculates that Total only has to pay IOC $ 0.13/MMBTU. If we do find 6 TCFe at Antelope South-1 Total will owe IOC $327 Million within 10 days of shipping the first cargo of LNG.
End of USB summary.

Comment:
If Total can find other gas in PRL 15 that is not connected to Elk/Antelope or Antelope South they would not have to pay IOC anything for the gas and it would, therefore, be much more profitable for them. Total recently had a map on their presentation (I can no longer open the file) that showed three other exploration prospects in PRL 15. I think they were what IOC has been  calling Raptor, Mule Deer and White Tail. I would not be surprised to see Total drill some of these prospects since any discovery would be more profitable for them than the E/A agreement with IOC for the Elk/Antelope Fields. If the certification result is more than 10 TCFe, as I believe it will be, the profitability of the E/A development will be even less profitable for Total than indicated by UBS above. It appears to me that Total will need to take some action to improve their profitability. Three  possibilities are: 1. Drill Antelope South as soon as possible and make a large discovery at reduced cost 2. Drill Raptor, Mule Deer and White Tail. If discoveries are made they get their share of the gas for their share of the cost of drilling. All could be tied in to the planned LNG development. 3. Buy IOC.

From what I am seeing IOC is going into a cash conservation mode. After completing the drilling of Antelope-4 ST-1 and Antelope-6, both of which are carried 75% up to $50 million, IOC may plan to drill only the Raptor-1 ST-1 in the near future and they are looking for a partner to carry their cost on that. If Total and OSH decide to drill the Raptor, Mule Deer and White Tail prospects in PRL-15 IOC will have to pay their share of the drilling of those wells. Total, as operator, could drill those wells by utilizing IOC’s two new rigs while IOC is in the cash conservation mode waiting on their resource payment after certification on E/A.

Have a good weekend.

'jft310' pid='63166' datel Wrote:MRP if 10 T's that's $1.7 Billion from Total to Interoil . New GLJ report Feb on Interoil assets Oil Search report Mayish on Interoil assets Total report per Interoil mid 2016 A few signed LNG deals and we are off to the races .

That's not the entire picture JFT.

TOTAL would pay IOC $1.717 Billion at Certification PLUS AN ADDITIONAL $517 Million at FID, which is coming soon (less than 12 months) after Certification

At 11.8 tcfe, TOTAL pays IOC $2.248 Billion at Certification PLUS the same $517 Million at FID.

An aside:  Our old friend "Denintex" popped up on the "Other IOC Message Board" three hours ago and posted the following:

THREAD:  "The Final Solution"

"Looking more and more like IOC will be bought by Total in the 5.3 to 5.75b range before mid-2nd Q 16.

You heard it first here."

(09-27-2015, 12:02 PM)Stavros Wrote: You wax and wane between highly optimistic and overly pessimistic Putz. Did your Alma Mater lose today? Mine lost by giving up 17 points in the 4th quarter while scoring ZERO! But I still feel good about IOC's prospects in the next 12 months. Certification payment from TOTAL will be mid-2016 FID will be in 2017 (as I said, less than 12 months after Certification Payment is made) Startup is currently planned for 2022 according to the current schedule THAT's 7 YEARS FROM NOW! When the current worldwide recession is over, energy demand growth will revert back to normal and oil price will recover very quickly due to reduced oil supply growth. ==== I know, I know ... all you folks think the world is in great shape but I assure you it's not. I travel on business worldwide and deal with major corporations in my day-to-day activities, and things are bad everywhere other than in the good ol' USA ==== TOTAL claims they currently own 12 million tons per annum of LNG production capacity but they really don't because Balhaf is shut down. TOTAL stated in their Investor's Day Presentation that they intend to have 20 million tons per annum of LNG production capacity by 2020. They want to stay in a leadership position in LNG and increase sales relative to their Oil business They have Ichthys and Yamal LNG under construction; that won't be enough, especially since they can't get financing for Yamal. Nigeria Train 7 would give them additional 1 million tpa, but it's been delayed for 10 years already ... it's not likely to proceed in my mind. TOTAL needs Papua LNG ... probably sooner than 2022. That's why, all of a sudden (and to my pleasant surprise), TOTAL highlighted/stressed Papua LNG repeatedly in their Investor's Day Meeting last week.

According to NPV presentation sales are starting in 2022. This is a conservative guess to be sure that contracted sales are met without a penalty. It is likely that the spot sales will come in earlier. Normally speaking it should be possible to complete the construction in 4 years time. Considering FID in 2017 they can be ready in 2021. Total has become an expert in modular building in Yamal and can use this expertise in PNG. Many logistic barrieres have been lifted because all kind of special sea transport is available. Moreover, suppliers are more gready to business in order to secure orders in the coming years.