Implications and Importance of new Licenses

[petrengr1]

I don’t claim t be clairvoyant but I think you should read my post of June 3, 2013 last two paragraphs of Post #13  http://tinyurl.com/kaahwcn ; . This post is about how I expected the license renewals to play out. It sounds about like today’s PR.

So we get new licenses (for all of our former license area) for 6 years. Only new licenses are for 6 years. This means that we may apply for up to two 5 year extensions. Upon expiration of the 6 year term of a new license the Government may require IOC to relinquish half of the license area. It may be that if the Government sees that IOC is diligent in exploring the license areas that they may allow IOC to keep all of the area.

This is the best news we could have possibly expected. An aggressive exploration company could probably be assured of holding all of the area where our known prospects are located for the next 16 years even if we have to relinquish half of the area after six years.

It seems that both Total and Oil Search think they have some kind of exclusive right to farm-in to all of IOC’s licenses. Now that the licenses have been extended any Company that wants to farm-in to IOC’s licenses can be assured that the licenses will belong to IOC for at least 6 years and probably 16 years. This will make our prospective farm-in partners much more willing to commit to exploration expenditures and drilling commitments.

Now that the license issue is behind us I believe it also becomes more likely that some Major will make an offer to  buyout IOC.

IOC is a much more valuable company today than it was yesterday.

[sageo]

Pet- Thanks much for those important comments. OT, would you agree (if we are looking at 90 days for Bobcat) that we may be looking at 60 days for Wahoo? [ without any "bumps" in the road !! ] . Good luck. sag

[Spartina]

Thanks Pet. I thought this news was HUGE and don't understand the market's response or even the quiet nature of this board right now. We've been kicked around I know but I truly think this is a firm base from which we will bounce up from. The tough stuff is all behind us.

[Brew Swillis]

From your June 3, 2013 post:

"If we could get the Government Approval for new licenses before the old licenses expire that would no doubt expedite the bringing in of new farm out partners in all of the PPL’s as any new prospective partners would like to be assured of having more than a few months."

I strongly suspect this, along with other obstructionist behavior, is why Duma was sent packing.  Approval for new licenses should not remain in limbo until the nth hour.

[Tusker]

I don’t claim t be clairvoyant but I think you should read my post of June 3, 2013 last two paragraphs of Post #13  http://tinyurl.com/kaahwcn ; . This post is about how I expected the license renewals to play out. It sounds about like today’s PR.

So we get a new licenses (for all of our former license area) for 6 years. Only new licenses are for 6 years. This means that we may apply for up to two 5 year extensions. Upon expiration of the 6 year term of a new license the Government may require IOC to relinquish half of the license area. It may be that if the Government sees that IOC is diligent in exploring the license areas that they may allow IOC to keep all of the area.

This is the best news we could have possibly expected. An aggressive exploration company could probably be assured of holding all of the area where our known prospects are located for the next 16 years even if we have to relinquish half of the area after six years.

It seems that both Total and Oil Search think they have some kind of exclusive right to farm-in to all of IOC’s licenses. Now that the licenses have been extended any Company that wants to farm-in to IOC’s licenses can be assured that the licenses will belong to IOC for at least 6 years and probably 16 years. This will make our prospective farm-in partners much more willing to commit to exploration expenditures and drilling commitments.

Now that the license issue is behind us I believe it also becomes more likely that some Major will make an offer to  buyout IOC.

IOC is a much more valuable company today than it was yesterday.

I was wondering why the new numbers.  So, one can say that On The Ground, these lease profiles are a FACT for a long term relationship with the PNG Government for current and future stakeholders.

Fine work

Cheers

[petrengr1]

Pet- Thanks much for those important comments. OT, would you agree (if we are looking at 90 days for Bobcat) that we may be looking at 60 days for Wahoo? [ without any "bumps" in the road !! ] . Good luck. sag

Sageo - Since Wahoo is more shallow than Bobcat one would think they should be able to drill it in less time than Bobcat. I think that is likely the case but I might call your attention to a couple of things that might make Wahoo take longer than normally expected.

When we thought Rig-3 was going to be used to drill Elk-3 I mentioned that sometimes a new rig or a rig that has been out of service for a lengthy period of time may take some time to get everything working properly. This is the case with Rig-3. IOC has owned the rig for several years but has never used it. After buying the rig it was “remodeled” somewhat and it has never been used in the present configuration. We now have some good experienced drilling people and I am sure they will get everything working as quickly as possible. Of course the crew(s) have never worked on this rig so they will have to become familiar with the equipment.

I expect IOC to use a similar casing program as has been used on previous wells even though the well is fairly shallow. They will have to set casing at least three times before reaching the pay zone. They will probably set 18 5/8” casing, 13 3/8” casing and 9 5/8” casing with the 9 5/8” being set at the top of the carbonate pay zone. I mentioned in my “Wahoo” post that they may encounter an over pressured clastic zone before they get to the top of the carbonate pay zone. If this hypothesis is correct then they will probably set the 13 3/8” casing as close as they dare to the top of that zone. The 9 5/8” casing will first be set as a liner and then the dual down hole deployment valves will be installed with the 9 5/8” tie-back to the surface. This is a complicated operation and it will take some time.

After drilling into the pay zone, if gas is indicated, they may test the top of the zone by setting the packer in the 9 5/8” casing before drilling to TD.

After drilling the pay zone and TD is reached the formation will be logged and probably cored . If the test, logs, cores and the indications while drilling (gas in the mud, oil/gas shows in cuttings, gas flow to surface etc)  indicate a possible discovery I believe they will run 7” casing to TD, cement it in place and do all of the drill stem testing inside of casing.

I would not be surprised if this well also takes 90 days or more.

[petrengr1]

So why did we get four new licenses over the same area that was previously three licenses. I think it was because the Company wanted some changes and the Government wanted some changes.

When we got PRL 15 some blocks were taken from PPL 237 and some from PPL 238. When we got PRL 39 all of the blocks came from PPL 237.

I believe it is to the Companies benefit to have all of each exploration prospect in the same license area. There may be different ownership percentages in the various licenses as we take in farm-in partners. So it is best if a given prospect has all of the same ownership.

You may refer to http://tinyurl.com/may8c52 page 21 magnify as necessary. You may also need to refer to the second page of today’s PR for the new license areas. http://tinyurl.com/kxduthf

The new PPL 474 is the same as the old PPL 236 except that 6 blocks were carved out of the old PPL 238. This was probably done so that all of the Tuna Prospect and all of the onshore part of the Mackerel Prospect will be in the same license area - PPL 474. The work commitments and drilling commitments for a given prospect will all be included in one license area.

The new PPL 475 is the same as the old PPL 237 after PRL 39 was carved out. This means the farm-in agreement with PRE remains over the same area.

The new PPL 476 is all a part of the old PPL 238. They left the following northern prospects in the new PPL 476 : Bobcat, Jaguar, Cougar, Moose and Bear. 

The new PPL 477 is all a part of the old PPL 238 on the North and Northeastern sides. This new PPL 477 includes the following prospects: Longhorn, Chameleon, Caribou, Bison and Elephant. I believe these prospects are the less desirable ones and by carving these prospects out of the old PPL 238 and making a new license the Government is forcing IOC and any farm-in partners they may have to make a work program, expenditure commitment and a drilling commitment for these less desirable prospects. This allows the Government to get more of the area evaluated and keeps the Company from concentrating only on the best prospects.

Except for these prospects mentioned above for PPL 477 all other former PPL 238 prospects remain in the new PPL 476

[petrengr1]

So why did we get four new licenses over the same area that was previously three licenses. I think it was because the Company wanted some changes and the Government wanted some changes.

When we got PRL 15 some blocks were taken from PPL 237 and some from PPL 238. When we got PRL 39 all of the blocks came from PPL 237.

I believe it is to the Companies benefit to have all of each exploration prospect in the same license area. There may be different ownership percentages in the various licenses as we take in farm-in partners. So it is best if a given prospect has all of the same ownership.

You may refer to http://tinyurl.com/may8c52 page 21 magnify as necessary. You may also need to refer to the second page of today’s PR for the new license areas. http://tinyurl.com/kxduthf

The new PPL 474 is the same as the old PPL 236 except that 6 blocks were carved out of the old PPL 238. This was probably done so that all of the Tuna Prospect and all of the onshore part of the Mackerel Prospect will be in the same license area - PPL 474. The work commitments and drilling commitments for a given prospect will all be included in one license area.

The new PPL 475 is the same as the old PPL 237 after PRL 39 was carved out. This means the farm-in agreement with PRE remains over the same area.

The new PPL 476 is all a part of the old PPL 238. They left the following northern prospects in the new PPL 476 : Bobcat, Jaguar, Cougar, Moose and Bear. 

The new PPL 477 is all a part of the old PPL 238 on the North and Northeastern sides. This new PPL 477 includes the following prospects: Longhorn, Chameleon, Caribou, Bison and Elephant. I believe these prospects are the less desirable ones and by carving these prospects out of the old PPL 238 and making a new license the Government is forcing IOC and any farm-in partners they may have to make a work program, expenditure commitment and a drilling commitment for these less desirable prospects. This allows the Government to get more of the area evaluated and keeps the Company from concentrating only on the best prospects.

Except for these prospects mentioned above for PPL 477 all other former PPL 238 prospects remain in the new PPL 476

As I mentioned above I think the area PPL 477 is the less desirable of the four new licenses. If you look at http://tinyurl.com/mtztdrz page 22 you will see that IOC has only committed to spend $9 million in the first two years of the contract term and $3.75 million is the second two years of the contract term. This is enough money to get some seismic data. So we will have to wait until the 5th and 6th years of the term (March 5, 2018 - March 5, 2020) to see one or more wells drilled in this contract area. This new PPL 477 includes the following prospects: Longhorn, Chameleon, Caribou, Bison and Elephant.

On page 10 they say “On October 16, 2013, we applied to the DPE for new licenses over PPL 236, PPL 237 and PPL 238, which were due to expire on March 6 (PPL 238) and March 27, 2014 (PPLs 236 and 237). We proposed new work programs and commitments for each new license applied for. On March 6, 2014, these applications were approved with PPL 474 replacing PPL 236, PPL 475 replacing PPL 237, and PPL 476 and PPL 477 replacing PPL 238.”  This is not exactly correct because they did move a few blocks between the old PPL 236 and the old PPL 238 as I mentioned in the previous post. This was OK since those two licenses have identical working interest owners as shown on page 17 of http://tinyurl.com/mtztdrz .