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Business | Wed Jul 20, 2016 9:39am BST
Total seen unlikely to fight ExxonMobil over South Pacific gas
Total SA (TOTF.PA) is unlikely to take on ExxonMobil (XOM.N) in a bidding war for explorer InterOil Corp (IOC.N), the French giant's partner in a rich gas field in Papua New Guinea, analysts said on Wednesday.ExxonMobil this week trumped an offer from Oil Search, which was backed by Total. Oil Search is due to declare on Thursday whether or not it will match ExxonMobil's $2.2 billion bid.
ExxonMobil and Total both want to simplify the ownership of the Elk-Antelope gas field by taking out InterOil's 36.5 percent stake. This would clear the way for the majors to tie together their rival gas export projects, PNG LNG and Papua LNG.
Analysts said it made more sense for Total to let ExxonMobil take over InterOil. Using Elk-Antelope to feed an expansion of ExxonMobil's existing PNG LNG plant could generate double the return compared to building Total's proposed $10 billion Papua LNG plant, they said.
"While it is possible that they go it alone, it would certainly make more economic sense if it was to be combined," said Saul Kavonic, an analyst at consultant Wood Mackenzie.
The oil majors are targeting PNG for growth as the quality of its gas, low costs and proximity to Asia's big liquefied natural gas (LNG) consumers make it one of the world's most attractive places for gas projects.
Total entered PNG in 2014, by buying a 40.1 percent stake in Elk-Antelope for $401 million up front plus future payments that could range between $594 million and $2.48 billion, based on reserves between 7.1 trillion cubic feet and 9.9 tcf, according to InterOil. Total will have to make those payments to ExxonMobil if the U.S. giant succeeds in taking over InterOil.
"Total would need to believe in material upside to want to counter-bid at this stage," Bernstein analyst Neil Beveridge said in a note.
ExxonMobil offered $45 worth of its own shares plus $7.07 per share for each trillion cubic feet equivalent above 6.2 tcfe up to a maximum of 10 tcf, while Oil Search offered 8.05 of its own shares plus $6.05 per share for each tcf above 6.2 tcfe.
Oil Search said last week two experts had concluded that Elk-Antelope most likely holds 6.43 tcf of recoverable gas, with potential for a further 1-2 tcf of gas, yet to be certified.
Total declined to comment on the bidding battle.
(Reporting by Sonali Paul; Editing by Ed Davies)
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i would say that of total did not at least try to buy out the value of their contract it would be fiscally irresponsible of them.
It is not IF they will, it is how could they NOT bid?
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If neither OSH nor TOTAL submit a Superior Bid to the current XOM Offer, then the vote will be a resounding NO since +10% above OSH is not acceptable.
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'cybersssss' pid='74352' datel Wrote:i would say that of total did not at least try to buy out the value of their contract it would be fiscally irresponsible of them. It is not IF they will, it is how could they NOT bid?
TOT's move here will be dictated on the interest they've received in their pre marketing efforts of Papua LNG's LNG and TOT's internal E/A resource #s.
If the sales interest is weak, TOT may just cut bait, sell their E/A stake to XOM. This eliminates bid war to lose, eliminates future payments due to XOM and saves face by selling to XOM at break even.
If sales interest is strong and E/A #s are high TOT will bid and will win.
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What an incredibly poor analysis of the situation.
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These journalist can't spell SPA and certainly don't know what Total's contractural obligations are to Interoil . It certainly is not double the return to process all the gas at PNGLNG per Botten who one should conclude should know .
That's not to say the interest in future cargos will not have a bearing on what Total plans .
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'Tree' pid='74354' dateline='<a href="tel:1469010 Wrote:
'cybersssss' pid='74352' dateline='<a href="tel:1469010 Wrote:i would say that of total did not at least try to buy out the value of their contract it would be fiscally irresponsible of them. It is not IF they will, it is how could they NOT bid?
TOT's move here will be dictated on the interest they've received in their pre marketing efforts of Papua LNG's LNG and TOT's internal E/A resource #s.
If the sales interest is weak, TOT may just cut bait, sell their E/A stake to XOM. This eliminates bid war to lose, eliminates future payments due to XOM and saves face by selling to XOM at break even.
If sales interest is strong and E/A #s are high TOT will bid and will win.
And why would XOM want to buy out Total's interest in PRL15? As it currently stands XOM would stand to get perhaps $2 Billion from Total if they buy IOC. So it would be better to give Total cash AND forego the resource payment that they would get from Total?? They would be better off holding Total's feet to the fire, collecting the cash from them and, basically, having Total pay for the IOC buyout. Total is in a box and the only way out for them is to try to outbid Exxon for something that both companies need and want.
But let us say that for some mysterious reason, it appears Exxon buys out Total's interests. At that point, I would be inclined to vote NO on an Exxon deal. I would rather have them pay us the resource payment and keep the rest of the prospects. Of course, with our BOD and CEO, ZERO chance of that happening.
It should be an interesting couple of months
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'Tree' pid='74354' datel Wrote:
'cybersssss' pid='74352' datel Wrote:i would say that of total did not at least try to buy out the value of their contract it would be fiscally irresponsible of them. It is not IF they will, it is how could they NOT bid?
TOT's move here will be dictated on the interest they've received in their pre marketing efforts of Papua LNG's LNG and TOT's internal E/A resource #s.
If the sales interest is weak, TOT may just cut bait, sell their E/A stake to XOM. This eliminates bid war to lose, eliminates future payments due to XOM and saves face by selling to XOM at break even.
If sales interest is strong and E/A #s are high TOT will bid and will win.
I can't see this as a sales decision so much as a huge marketing decision. Do they want to forgoe this very, very promising foothold into the massive Asian Pacific market? If Total wants to abandon their strategic plan for the Asian Pacific and simply give their piece to XOM then XOM will just have to pay IOC as soon as the certification gets done.
Big delay though and the government would NOT likely be happy.
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'cybersssss' pid='74352' datel Wrote:i would say that of total did not at least try to buy out the value of their contract it would be fiscally irresponsible of them. It is not IF they will, it is how could they NOT bid?
Cyber - I agree with your thinking . Btw,did you see the volume for the last 15 minutes today ? Over 200,000 shares . Maybe TOT heard your words ! What will tomorrow bring ??
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'sageo' pid='74422' datel Wrote:
'cybersssss' pid='74352' datel Wrote:i would say that of total did not at least try to buy out the value of their contract it would be fiscally irresponsible of them. It is not IF they will, it is how could they NOT bid?
Cyber - I agree with your thinking . Btw,did you see the volume for the last 15 minutes today ? Over 200,000 shares . Maybe TOT heard your words ! What will tomorrow bring ??
Someone is accumulating. MM holds data until end of day to report accumulated trades. Notice total volume for the day?
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