This report came out on Friday and implied a 100% upside then to their target, 2 trading days later and it's nearly 150% upside now. Imagine if we get certification this year how cheap this looks. Surely JFT can't be the only one buying...?
(sorry about the formatting but was hard to copy it across to SHU for some reason so had to mess about with it, maybe someone else can do a better job)
Driven Solutions, Insights, and Access
18 January 2016
Americas/United States
Equity Research
Oil & Gas Exploration & Production (Oil & Gas Exploration & Production (US))
InterOil Corporation
(IOC.N)
COMMENT
Lets Dance (homage to D Bowie)
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IOC @ US$25 – too low?
E&P stocks are clearly following crude down, but IOC is net cash, funded for a reduced 2016 and waiting for a material tranche payment from Total post the Elk Antelope reserve certification – due in 2016.
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It's all about that cert(ification):
The project partners are talking about potentially drilling a seventh Antelope appraisal well (on the western flank). The upside is that it could increase the reserve pool (and thence the payment to IOC), the downside is that it would lengthen the wait for the certification. It could also question whether enough gas for a two - train development has been identified from the six - well appraisal program
.
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Time to dance? (M&A):
Times are tough in the oil patch but Elk/Antelope is a world class LNG asset, likely to be at the front of the queue for project sanctioning – and there are multiple players with further LNG aspirations and balance sheets that could support acquisitions, including other LNG players like Total, Woodside and Oil Search – but there are also National players who have aspirations to increase equity positions in Tier 1 assets. It was interesting to note that Marubeni was speculated (AFR) to be bidding for Santos's PNGLNG stake.
We believe Japan is interested in further supply from PNG (partially driven by
energy security concerns) and would not be surprised for Japanese interests
looking to take further stakes in PNG LNG developments.
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Valuation still value to un-lock after a 50% premium
:
Our current model risks a two-train, 7Tcf Papua LNG project @ 65%
and gives little value for other exploration.
A fully un-risked TP would be ~US$115/sh(incl exploration –US$67 without). A 50% premium to the current price would be ~US$36/sh, leaving
material headroom for value, should an acquirer share CS's key assumptions.
