'Stavros' pid='40491' dateline='<a href="tel:1396057 Wrote:First, let me say that to my opinion, whatever ultimately happens will benefit IOC. What do you think Binck?
USE OR FLOSH THE BELOW
I believe it’s instructive to look at all the deals in-play, the timelines of the deals and how the issue of Pre-emptive Rights fits in.
Pacific LNG Operations Ltd was an entity created by Clarion Finanz, who acquired the 20+ percent stake in IOC’s resources when they invested $140 Million in 2005 to fund the drilling programs. Pac LNG owns 47.5% of Liquid Niugini Gas Ltd which was given the rights by the PNG Government to develop the Gulf LNG Project.
A JVOA is still in-place for this project which seemingly contains clauses related to Pac LNG’s Pre-Emptive Rights if IOC chose to sell a portion of their share in the project to a third party.
This is what OSH referred to in their PR when they announced the acquisition:
“Direct participation in the PRL 15 joint venture, which is governed by an existing joint venture operating agreement (JVOA). The terms of the existing agreement and Pac LNG’s rights are consistent with market standard petroleum JVOA for terms such as minority interest protection, work programme and capital commitments and also pre-emptive rights. This will deliver Oil Search significant influence within the joint venture and enable the Company to provide input into determining the optimal commercialisation route for the Elk/Antelope field as well as Oil Search’s other undeveloped PNG gas resources.”
And also when they said the following about their “Notice of Dispute”
“Oil Search advises that it has, via the Pacific LNG Group Companies that were acquired by the Company on 12 March 2014, issued a notice of dispute to an InterOil corporation entity (SPI (208) Limited) pursuant to the Elk/Antelope PRL 15 Joint Venture Operating Agreement.”
Now along comes TOTAL and works out a tentative agreement (SPA Structure 1) with IOC to acquire 61% of PRL 15. TOTAL knew that Pac LNG held Pre-Emptive Rights so they added a Condition Precedent to the SPA requiring IOC to buy out Pac LNG’s PRL 15 share before the SPA could be consummated.
TOTAL chose this SPA Structure 1 because they knew there was a chance that Pac LNG would invoke its Pre-Emptive Rights if they were still in the equation.
Then Clarion (Carlo Civelli) undertook an extensive road show to peddle their share in PRL 15 to the highest bidder. OSH was intrigued by the opportunity to acquire a measurable portion of PRL 15, especially since the deal would include Pre-Emptive Rights to acquire additional percentage of the asset. A deal was struck that was announced on February 27.
Lo and behold, OSH then made it known that they were interested to invoke their Pre-Emptive Rights!
Scramble time ... TOTAL convened a war room to figure out how to fight OSH and retain the deal with IOC. They concluded that an SPA Structure 2 should be developed that after the fact removed the Pre-Emptive Rights held by Pacific LNG. They could have chosen this SPA Structure 2 at the very outset but chose not to
IOC went along with TOTAL’s plan knowing full well that if they didn’t TOTAL would back out and leave IOC exposed to a low ball bid from OSH (with XOM behind the curtain).
Here we are today ...
+ OSH says that, as the new owner of Pacific LNG, “we have a JVOA with IOC that gives us Pre-Emptive Rights, and that the terms of the JVOA have been violated.”
+ IOC says “sorry OSH, you no longer have Pre-Emptive Rights (possibly to match the deal we struck with TOT) because we re-structured the SPA after the fact.”
So what will a single arbitrator in Texas say about this? Yes ... Texas because the OSH protest is related to the deal between IOC and Pac LNG as related to the JVOA that is still in-place. It has nothing to do with the Terms and Conditions of the SPA Structure 2 between IOC/TOT.
Personally, I believe that OSH has a good chance to win the arbitration IF IT GOES THAT FAR. I don’t think that IOC can change the rules of a game in the middle of a game (NOTE TO READERS ... I did not say that they WILL win their dispute; only that they have a good chance).
In baseball, the rules say you cannot replace a pitcher in the middle of an inning, send him to the dugout, and then bring him back to pitch in the next inning unless you keep him in the game in another position during the time he’s not pitching. If the home team ignored the rule and brought the first pitcher back in from the showers, the umpire would not allow it. If the home team refused to abide by the rule the game would be forfeited. The league can change the rules to allow it in future, but they cannot change the rule retroactively to validate what transpired in a previous game and void the forfeiture.
IOC and TOTAL are going beyond this simple example of changing the rules. They’re trying to change the game. Suppose my favourite team, the Yankees, arrive in Boston to play the Red Sox in a 3 game series only to find that the Bosox replaced their starting 9 with members of the Celtics , erected a basketball court in the Fenway Park infield and told the Yankees that they will play three basketball games instead of baseball; and furthermore the Yankees are not allowed to change their roster. The Yankees would protest and win.
Nice job! Thanks very much. It all seems very plausible. But also It seems that if the new agrrement between IOC and TOT coulld be deemed to be actually the "old agreement with modifications" necessitated only by the impossibility of IOC to fulfill only one requirement, the aquisition of the IP, then perhaps the original "offer date" of that ageement holds and thus the 30 day clock for PAC LNG to act is expired. Isn't there a 30 day clock? If so,then weren't PAC LNG's rights already expired before the OSH acquisition? If so, then the fact that ownership of PAC LNG changes and thus affects the IOC/TOT offer terms cannot IMHO reset the clock of that same agreement. PAC LNG had their opportunity. It's now too late. On the other hand if the new agreement resets the clock, then it seems the scenario you note above is very plausible. But we all are simply entertaining ourselves when we start trying to predict what lawyers will do.
