"It's unheard of..."

[jft310]

" giving IOC a no-cost interest in that plant," I like what you are saying, but I'm not sure the above statement is correct. IOC will contribute their percentage of the gas and share in their percentage of the costs. At todays 30% forecast of IOC ownership, the costs will be considerable.

expect a $10 Billion project best guess with IOC paying cash for $1 billion and financing the balance

[efi426hemi]

I did not understand Hession's comment on this.  What vested, tangible "reward" did they actually get right now for this undiscovered gas?  My understanding was that they would only be getting money for this undiscovered gas...if and when it is actually discovered.  So if there's no discovery...they get no reward.  And if there is a discovery...they have now pre-agreed to sell the newly "discovered" gas for $100M per tcf.  Isn't that an "unheard of" price (on the low end) for would be, at that time, fully discovered gas? 

CAC - I would suggest that you spend some time to try and find out how many other NG asset sales have occurred where there was a payment structure for gas that hasn't been discovered yet.  This rarely or never happens.  Our deal SHOULD have been for ONLY the known gas in E/A TODAY.  However:

• we get upside potential with 3 appraisal wells in E/A
• we get to pick a bonus discovery location to drill, which sounds like Bighorn that:
  
  • may be as large as Antelope
  • and based upon whispers from the roadshow it may also be connected to E/A
• and if any future drilling shows connectivity to E/A then it becomes part of our 1.29 (net) payment structure

Whispers are already leaking that XOM and Shell were not giving us this potential upside.  Now pretend for a minute that you have access to the IOC data room and know the probability of future finds and the probability that they are connected to E/A.  So, which deal would you take.

---

AD123 - you post might contain the most ignorant comments I have read in a while.  Respectfully, you have no knowledge of what deals were on the table (which is already starting to leak out), clearly you have never cut a multi billion dollar deal in LNG and you do have access to the IOC data room to understand the potential in PRL 15.  We got the best deal possible and if it doesn't aign with short term, impatient investor expectations, then so be it.

Health and Happiness,

Hemi

[CAC]

I did not understand Hession's comment on this.  What vested, tangible "reward" did they actually get right now for this undiscovered gas?  My understanding was that they would only be getting money for this undiscovered gas...if and when it is actually discovered.  So if there's no discovery...they get no reward.  And if there is a discovery...they have now pre-agreed to sell the newly "discovered" gas for $100M per tcf.  Isn't that an "unheard of" price (on the low end) for would be, at that time, fully discovered gas? 

[/quote]

CAC - I would suggest that you spend some time to try and find out how many other NG asset sales have occurred where there was a payment structure for gas that hasn't been discovered yet.  This rarely or never happens.  Our deal SHOULD have been for ONLY the known gas in E/A TODAY.

[/quote]

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That makes sense.  I guess another option (and one that might make our deal more in line with what you say is typical) would have been to sell only the E/A discovery (i.e. the "known" gas); keep the rest of the PRL until the new gas was discovered; and then sell the newly "known" gas for the higher price. Doing it the way they did is a reasonable choice.  I just don't know that I see it as an economic coup.