Antelope 7

[Putncalls]

Time is money and they are burning it.

[Palm]

I agree; was thinking of Recert. My bad

[Thylacine-2]

They have no choice but to wait on wild card. The soonest they (or Total) can call for it is first shipment of LNG. The plan put forth by mgmt is to prove up, sell share(s), and develop. The PRL factory theory. With the miss at Wahoo, their next chance is TBR. I think their goal has been to generate their needed operating costs out of these PRL % sales. Hession has said that they "are" talking with others about sales of PRL % (buyins) and their goal is to do similar to as they did with Total. I hope that's the case. The reason I fear dipping into the credit line before Certification is it's that much less they have net from the Certification payment. The drilling carry already comes out of the Certification funds; don't want debt service too. Once they get to FID and PDL their options open up. They book reserves and the government kicks in their share (unless they opt for it to be taken out of initial LNG sales proceeds), and they get more cash from Total. I really hope they can bridge the gap to FID without needing to tap debt or an equity raise.

  Palm - Read your post last evening,and I wanted to think about it over night . Woke up early and thought some more on "the PRL factory theory". What would you think about this senario :  [ buyins] ....work a deal with Rex's reps in PNG as a buyin to PRL 39 .Instead of asking for a small percentage of the LNG/PNG revenues (or a small stake), put in these conditions : build pipelines to the southwest (gas & cndensates) to intersect with the current pipelines, and also to drill several wells to the west (nearer to the fault) in order to get the maximum benifit from the Triceratops field (some 19 or so square miles) much sooner than we might expect otherwise .

  If you disagree with my thinking,please do so with care....( this old 84 yr old 'dude' bruises easily .) Ha,ha.

Sageo, the Triceratops field is large and likely contains a lot of gas.  But so far we haven't seen the big booming wells to indicate it would be easy to produce and exploit.  One of the things attractive about Antelope is that relatively few wells will be necessary to get the gas.

[Relker]

I bet they wait on the wild card . They can borrow 70-80 percent of LNG plant build costs so cash for the build should be sufficient . I do not think they have enough cash to pay corporate overhead for 4 years or so and explore more of their acreage . Will require more debt and or an equity raise to bridge into cash flow or one heck of second sell down or several years from now a second certification. As far as amount of gas no one really cares about gross gas it just means nothing as in nada . Recoverable gas is what we get paid on at P-2 level and GCA and GLJ are based on recoverable gas . If we hear about 9.5 T number as some say it will be recoverable gas cause gross gas means nada .

IOC corporate overhead roughly amounts to USD 0.1 B per year. I can not imagine that this will have a big effect on operation the coming 4 years:.

Cash flow  coming 4 years:

Cash per 30.6 2015                            0.5

• License payment E/A :                  3.5      (the upper GLJ case is considered as the medium case by IOC)
• Already received license             -0.4
• Equity investment  JV                   -1.8
• Corporate overhead                     -0.4
• Drilling                                            -0.9

Cash per 30.9.2019                          0.5          

Relker: We should be looking at costs from now until 2022 when there is cash flow from Papua LNG:

1. I think IOC's contribution to the project equity is more like $1.5 Billion = = = Add $0.3 Billion to your figure

2. You don't include any income from selling down other resources in the next few years - Triceratops, Raptor, Bobcat and Wahoo will all have partners = = = Add $1.0 Billion

3. You don't include corporate overheads and drilling costs for 3 additional years (startup will be in 2022) = = = Subtract $1.2 Billion

4. You don't include the Government's payment of suink costs when they take their 22.5% NET share of the project = = = Add $ 0.1 Billion

===> Net outcome is the same as your figure, but extended to 2022

MY BOTTOM LINE: AN ANNUAL CORPORATE OVERHEAD OF $100 MILLION (excluding drilling costs) IS FAR TOO HIGH

1. I do agree that it is likely that a second project will start in the coming 4 years.
2. The payment of the sunk cost will go the JV and will reduce the investment.
3. The size of the project is not yet decided. Total is building in Yamal 3* 5.5 mmta. I expect something similar in PNG.with the 3rd coming on stream later.
4. Time planning for contracted sales starts in 2022. Normally speaking they are ready somewhere at the end of 2020 and can start selling.

[sageo]

They have no choice but to wait on wild card. The soonest they (or Total) can call for it is first shipment of LNG. The plan put forth by mgmt is to prove up, sell share(s), and develop. The PRL factory theory. With the miss at Wahoo, their next chance is TBR. I think their goal has been to generate their needed operating costs out of these PRL % sales. Hession has said that they "are" talking with others about sales of PRL % (buyins) and their goal is to do similar to as they did with Total. I hope that's the case. The reason I fear dipping into the credit line before Certification is it's that much less they have net from the Certification payment. The drilling carry already comes out of the Certification funds; don't want debt service too. Once they get to FID and PDL their options open up. They book reserves and the government kicks in their share (unless they opt for it to be taken out of initial LNG sales proceeds), and they get more cash from Total. I really hope they can bridge the gap to FID without needing to tap debt or an equity raise.

  Palm - Read your post last evening,and I wanted to think about it over night . Woke up early and thought some more on "the PRL factory theory". What would you think about this senario :  [ buyins] ....work a deal with Rex's reps in PNG as a buyin to PRL 39 .Instead of asking for a small percentage of the LNG/PNG revenues (or a small stake), put in these conditions : build pipelines to the southwest (gas & cndensates) to intersect with the current pipelines, and also to drill several wells to the west (nearer to the fault) in order to get the maximum benifit from the Triceratops field (some 19 or so square miles) much sooner than we might expect otherwise .

  If you disagree with my thinking,please do so with care....( this old 84 yr old 'dude' bruises easily .) Ha,ha.

Sageo, the Triceratops field is large and likely contains a lot of gas.  But so far we haven't seen the big booming wells to indicate it would be easy to produce and exploit.  One of the things attractive about Antelope is that relatively few wells will be necessary to get the gas.

 Thy - Hi there.....good to hear from you. True on Antelope ....it will take less wells. Since Tri will take more wells,that is why I wanted (as one of the conditions) to have Exxon drill them if they wanted to use the gas in order to start their 3 rd train . [ PNG gov't would sure like that .....lots of immediate jobs to booster their economy]. We would receive buyin dollars to enhance our cash position . Just kind'a thinking "out-loud" .....another term for 'wondering' I guess . Have a good one .

[vidon]

Palm, thanks for a clear explanation !

Can any board member explain why we have rigs on standby? IOC mgmt has stated that we are an exploration company. There is a lot of seismic completed. Sites have been selected for drilling. Why not let the drills spin?

Vidon, a couple of parts to that:

1. Decision making.  Now that Ant 7 is being kicked down the road (likely for drilling after Certification), the HA rig that arrived in August can have some decisions made as to where it will go.  They have been working with new Operator Total and that has taken a little time.  With Total in place (taking on everything in PRL 15 after Ant 4) they will move ahead.  Hopefully the HA rig will go to Ant S and then the rig at Tri can go to Raptor.  Something like that; and then when Ant 4 is done (hopefully by end of Oct), it can be mobilized to Ant 6.  Not sure what's going on with the rig that's been at Wahoo; maybe someone else knows or mgmt will discuss on their road-trip next week.

2. Some cash flow conservation.  With the move to Total as Operator mgmt has said they will be working on cutting expenses related to their Operatorship. IMO they need to really focus on this in an attempt to keep from tapping the LOC for as long as possible to avoid the interest charges and needing to use Certification proceeds to pay back debt.  People keep chirping about 9.5Ts plus, but Recoverable is what is used, not gross.  So until we have a much better handle on what Recoverable will be, they would be wise to conserve cash as much as possible.

[jft310]

The problem is who will do the certification ?? What type firm are they aggressive or not ? What's the average number of the two firms is the problem . Until we get the number uncertainty prevails .

[davidhmtk]

The problem is who will do the certification ?? What type firm are they aggressive or not ? What's the average number of the two firms is the problem . Until we get the number uncertainty prevails .

Nothing prevents Total & IOC from amending the SPA and agreeing a number.  Both can call the wildcard (after the first shipment of LNG [thks Palm & Stavros] ) if the amount of gas proves to be off.

[jft310]

The initial numbers always rise . The problem is the size of the payment if small means Interoil will need operating cash and drilling money plus pay for its pro rata share of tbe plant . In this scenario a low number The recertification after first shipment has a cash hole . But the company's objective of doing sell downs on additional resource finds could greatly help cash flow .
I do not expect a small payment and am in the 10 T range but that's my opinion . What will the 2 appraisers think???