Pavel PT $100 and Outperform

[SamAdams]

To keep it simple so I look at it as IOC is selling half their NET stake or 2.7 Ts for an average $0.94 or a little less if discounted so perhaps $2.3 bln plus the $2.6 bln they retain for almost $5 bln give or take. MH said taking out IPI would be neutral so this gets you closer to the $100. Pavel does a poor job of covering the stock. And yes the Investor Relations dept should have had the sell side better prepped and ready for this. Another confusing PR to start that opened the door for the sell off. Hopefully MS and Westlake will be more supportive. If any new firms are thinking of launching today or Monday would be the day to catch this sell off. Why would Pavel not even mention the LNG other than he excludes it? Lazy. With the monetization set and licenses secure now is the time to start factoring that in. All IMO.

[ltinvest]

Two things in the SPA I thought were of interest:

1. (Page 59) Any additional upside to the resource certification above 5.4 Tcfe is payable from Total to Interoil at certification. At just 7.1 tcfe, this equated to almost $1 Billion dollars. What if it is only the GLJ best or high case.....that payment goes up substantially.

2. (page 75...need Pets here) The IOC and TOT interpretation of the data for the 6 wells drilled at E/A seem to closely match. Maybe I'm off base but I read that to suggest there is no argument about whats been discovered so far.


Other important info but those jumped out to me on first glance

[admin]

["I believe the discrepancy is that Pavel is not adding back in the $2.59B. He indicated he is ascribing no value at this time for the new plant...which is what IOC will own 30% of eventually."]

Thanks, but that doesn't make sense to me.

Having 30% of a license somebody just paid you $4.1B for 47.5% of it is worth nothing? The value of the license depends on the recertification (and the assumption by Pavel is that it delivers the same number as GLJ P50), not on whether IOC has any stake in the LNG plant..

[Movieguy]

[quote='SamAdams' pid='33269' dateline='1386360112'] Please reread the Westlake report form March and their analysis of a 2 train LNG deal. He wasn't far off the mark and his price targets should still be valid. they should have discussed the LNG bit more this morning. It was clear the analysts were not "prepped" ahead of the call.

Well, yes, but LNG train apart, I'm just wondering whether Pavel's sums add up for PRL15 based on GLJ's midpoint (9.9Tcfe):

• IOC gets a $4.1B payment
• That stake is 47.5% of PRL15
• Meaning PRL15 is valued at $8.63B
• IOC remains with 30% ($2.59B)

$4.1 + $2.59 = 6.69B, not $4.9B that Pavel calculates, and the difference is too big to be explained by a discount factor, since most of it is cash and recertification will take place within 2 years, if I understood that correctly.

**********************

I believe the discrepancy is that Pavel is not adding back in the $2.59B.  He indicated he is ascribing no value at this time for the new plant...which is what IOC will own 30% of eventually. 

Does not IOC own 30% of the coming plant AS WELL AS 30% of the resource, PRL15?

[admin]

["Does not IOC own 30% of the coming plant AS WELL AS 30% of the resource, PRL15?"]

Yes, but Pavel ascribed zero value to that. Fine, his choice (even if I think it isn't the right one). What he cannot do is ascribe zero value to the 30% of PRL15 that IOC retains, especially if he argues that 47.5% is worth $4.1B in cash, which it is, if you argue that the GLJ P50 number holds.

[ebster123]

This news should have come out tonight (Friday) so we had the weekend to digest. Bad move!!

[Putncalls]

The IPI gets one third of the 4.2 billion or 1.4 billion.

That leaves IOC with 2.8 billion plus 30% of A/E which should be 3 billion MCFs at 1.29 or 3.87 billion

2.8 billion plus 3.87 billion is 6.6 billion. 6.6 billion divided by 50 million shares is 132 dollars per share.

Just a swag on what A/E is worth given today's proposed prices.