O'Neill: NEC Approval/Green Light Project

[ArtM72]

Phil also addressed the 50% by saying "it is way to early" to determine if that is an actionable offer.

[admin]

IOC 3Q2012 Earnings CC Q&A

By jbwin416 .

• Q&A
• Q1: Evan Calio, MS
• In opening comments, to be clear, you received official confirmation from O’Neill or NEC?
• A1: Personally from PM with me, Sir Rabbie and others. Got notice for kick-off mtg tomorrow re modification.
• Q2: Congrats, imp event. W/approval, what offering, 25-32.5% of 3.8 MTPA, how many Ts of gas offered?
• A2: Still with the state. Normally have to build up. Govt unit issues, mortality, no stable power, vaccines, crisis in i/s. Asked us to be pioneers, 22.5% in kind, key driver. Removes LNG capacity need for domestic consumption, if they want addit. Kick off 3.8 Tcf, sweet spots, all wanted phased in. Couple of integrated and NOC.
• Q3: If govt takes 22.5% in kind, IOC own 75%.
• A3: If people want to phase in whether sell to integrator, major, State.
• Q4: Why good for IOC s/h?
• A4: Get better deal w/phased in 3.8 Tcf, now project suited to mkt, easier to finance than starting w/7.6. Easier project to accel.
• Q5: Any comments re govt’s ability to buy?
• A5: It is premature. PM said get going. They still need to build own power plants for their gas. They have issues w/i/s, never had partner to work with them. We don’t have to build as much capacity, but PNG govt needs i/s, hospitals, no stable power, rampant throughout country. Govt excited.
• Q6: Can’t publish gas decline, assertions lower than GLG, big difference?
• A6: GLG 8.5 certified, more than enough for 8 MTPA capacity. Look at Exxon, built 19B project on shifting 3P to 2P. ANT-3 help.
• Q7: Sal A.
• Comments re PM permits going to NEC. Does this enable you to negotiate w/bidders or wait until permit actually issued? Ready to sign up someone.
• A7: Both, scopes to sweet spot, people now know what to bid on, push back on 7.6 Tcf, State kick off meeting tomorrow and next week. State takes gas in kind, # of key benefits, go forward.
• Q8: Govt said certain types of bidders, majors
• A8: All parties eligible. Original agreement to bring in established party, in active negotiations.
• Q9: If major, easier to finance, smaller co, more equity?
• A9: Parties we spoke to IOC, NOC, utility all talked about financing, talked to banks, significant capital, finally green lightt, active w/govt, bidders, wanted foundation project.
• Q10: You referred to modular approach, EWC, in mix?
• A10: Everything in mix, IOC could be traditional, bidders will decide.
• Q11: Supply of LNG growing, some surpluses, in negotiations price going down, up or same?
• A11: We see more w/costs of Australia, less available, less contract, declines Malaysia, Indonesia, physical depletion, Thailand, Malaysia, they have crisis, incremental new capacity barely deal w/lack of supply 2014-16. Don’t see shift of supply in Asia.
• Q12: W/all people owning stock, sweating value of stock. Please convey to PM and NEC, look forward to next couple of months.
• A12: Thanks.
• Q13: Pavel, RJ
• 4.8 Tcf, initial plan precisely that, min or max?
• A13: It is starting point, if someone wanted 4.2 could. Those are binary issues, it is a starting pt. Some bidders want 4.2, one 4.9, others 3.8, that covers everyone.
• Q14: What role CSP w/Mitsui?
• A14: A bidder may do themselves. Mitsui is in a consortium, they provided a financing option.
• Q15: Notice of approval verbally, want do you need?
• A15: Recommendation approved, kick-off tomorrow. Port Moresby meeting tomorrow.
• Q16: Colin you were quoted in PNGIndustryNews, 2 majors bid, can you confirm, elaborate?
• A16: Can confirm quote by myself. Have majors, NOCs, utilities. I have made that quote based on very detailed info we have, unlike others who don’t put their names to statements.
• Thank everyone for participating. Discussing absolutely RT issues.

[Palm]

Quick work STP!

[admin]

Quick work STP!

Uhh, quick work by jbwin, thanks to him I was doing some write up but then I saw that one, and before it gets lost in the deluge of nonsense..

[TxPm]

Anybody think "the source" that PNG Industry News referenced could have been Liam Fox? Also did Phil say the team meeting would meet for 1 week?

[Hoosier1]

Anyone address what the tenor of the cc was like? from Phil? Collin? etc... e.g. did they come across upbeat, anxious, ???
I almost wonder if they are a tad irritated because they are on the precipice but cannot say so yet...
Always hopeful!
h1

[ArtM72]

The tenor of the cc was one of relief by Phil...as in 'just hours ago we received the unequivacable go ahead and have already scheduled the working meetings starting tomorrow to finally begin the execution of this project.'

As for Collin it was perhaps prideful, with confidence in where the company was financially. He was also dismissive ... maybe even a bit scornful.. of those who would only speak with anonymity.

[Tree]

Tree, Phil mentioned several times that there was a group kicking off a meeting in PNG to finalize NEC approval. Did he say how long that meeting would last? Also I wonder why no one brought up the 50% quote from Liam Fox or the WSJ although it sounded to me like from Phil's comments that the 50% option is not even a consideration

It seems improbable to me. How much gas can PNG need? It's a country with 6M inhabitants, 22.5% of E/A should provide all the gas they can use and then some..

Let me clear this up as I can.

PNG is not making a power play on 50% of E/A.

PNG has an ongoing social crisis in health care, education, infrastructure and it is in catastrophic proportions.  PNG cannot afford to enter into Gulf LNG start-up and address infrastructure needs simultaneously.  PNG is basically opting out of start-up plant and reserving a larger stake in 2nd plant out of necessity born of national choice.  This makes start-up easily financed s no one has to finance a broke PNG's stake upfront.

It looks to me that O'Neill was heroic in telling the world that IOC has PNG committment to procede on Gulf LNG.  This eliminates PNG political risk.  Callio cross-examind Phil on this point and I bet we get a bullish update from Callio based solely on this point.

Anyone that expected names and prices to be revealed today is nuts.  Final bids are now solicited, we have a project, all bidders are financable and all bidders that have been in the mix are still in the mix.  That means EWC is financable and in the mix.  They will be hard to beat.  Phil said sheme is up to SD partner and IOC is fine with whatever.

We have proposals for 3.8, 4.5 and 4.9 Mtpa start-ups and both GLJ and GC agree there is enough gas in PRL 15 for a 8Mtpa plant.

[Petro2458]

A few comments:

1. NEC Approval and Details - look forward to this milestone being released officially. Important that the company put the facts out in a clear way.
2. All makes perfect sense: no one willing to bid on a monster plant. 4 mtpa puts them in the "sweet spot".
3. "gas in kind": several ways this can work. and project timings are critical. As PNG power infrastructure may not be ready by the time production starts...and even when it is, the reliability will be a challenge. So this is probably the reasons for upcoming meetings.
4. All the hypothetical chatter last night was fun...but speculative and still very uncertain how this plays out.
5. $62.50 is cheap.
6. Elk3 spud will meet the deadline.
7. PRE confirmation / formal acceptance will be another key delivery for IOC...look forward to this announcement as well.
8. Short thesis is crap: at what point do they turn on each other. Don't wanna be the last million shares to cover.

[admin]

["8. Short thesis is crap: at what point do they turn on each other. Don't wanna be the last million shares to cover.]

Yea. As it happens, the short thesis was always crap from the moment Antelope1 hit a reef which the naysayers argued there wasn't. From that point, smart shorts like Andy Left and Ross Smith Energy Consulting left, leaving only the dumb shorts with hired criminals and a motley crew of hangers on, and ever shifting "logic"