Connected Dots---->RDS SD partner

[Tree]

Brainstormed a bit today with a few trusted observers and a presser on philstar.com helped too.

The dots.   And you thought it was some flying reverse wedge thingie.

Dots:

.Inciderr:  mid month (April) selection, end of month fanfare.

.PNG industry article 'Shell tipped to partner with IOC'

.Bid 'rumor' of $3.5 Billion, $1.4/Mcf = $14 Billion for 25% PRL 15 stake. $14 Billion for PRL 15, that's more than fair.

.BoD travel to SG last weekend and on PNG now.

.PNG article yesterday of IOC executive holding out for upstream control and Phil/Civelli met with O'Neill.

.Phil 'resigns' and hangs around as CEO until end of month, resignation is on Phil's terms, he made a choice.  This is the key.

.RDS is our SD partner if you believe the 'rumors' and reports of the last few weeks:

Connected:

Post initial bid negotiations with all bidders were closed mid month.

A preferred bidder was chosen by Bod and was leaked to pngindustry news as Shell tipped to partner with IOC.

That's more than fair bid of $3.5 Bil, $1.4Mcf and 25% stake.

BoD met in SG last weekend with final selection deliberations.  Decision made.  Split between BoD and Phil/Civelli on winner.

Phil/Civelli lobby O'Neill to side with them to maintain upstream control and choose secondary bidder.

Largest, newest shareholder threw his weight behind the BoD. (philstar.com)

Phil 'resigns' and sticks around 8 more days as CEO until end of month.

3 reason's only that Phil 'resigned'

1) Bod canned him. - timing not right for that as SD is wound up and Phil would be gone immediately.

2) Phil's removal was a bid contingency - possible, I've posted that option before. Phil would be gone immediately, like Kalinoe was, the greedy corrupt idiot that ran Petromin and was a bid contingency and O'Neill/IOC could not trust.

3) Phil really did resign and did so on principle and his resignation is effective BEFORE the deal announcement. Phil will not be seen as blessing the selection of the BoD, he will exit prior to it's announcement.  

Now kids, which is the ony bidder that could/should be so repugnant to Phil  as they of Project Zebra fame almost stole his company and he personally has been under attack by 'longs' as the 'buffoon' unable to cut a deal as he was too hubristic and greedy during the 2 year delay they caused?  A delay which also cost Phil control of the project and upstream.

Phil is also smart enough as a holder of what 4 million shares not to rock the boat as any pps tnk would really damage him financially and open the door to a low takeover offer.  He also understands it was a business decision the BoD made.

If right, we get the announcement after May 1.

If right, I applaud Phil as a man of devotion to his shareholders, willing to take the arrows and willing to continue standing on his principles.   Phil's character personally attracted Wayne, Henry, Dave Holland, IPI investors and gained the respect of the nation of PNG.

Thanks Phil.

Use or Flush.

http://www.youtube.com/watch?v=6E2hYDIFDIU

[TxPm]

"Largest, newest shareholder threw his weight behind the BoD. (philstar.com)"

Tree can you shine any light on this? Are you referring to RC or a new undisclosed shareholder

[Petro2458]

Good stuff - wonder if the BoD could/would fire Phil for cause if he didn't conform to the most valuable deal for shareholders whether his principles led him to this or not. It would appear a compromise was made whereby he "retires". Only question is whether the RDS deal can be made while he is on seat or if it must wait until May1. If I were Phil, I'd want to say i got the deal done...i.e. before April 30...but since the SoB's tried to steal it from me..i took their money and "retired"...on to the next thing.

I also have a tough time seeing the difference between "immediate" and 8 days...there is undoubtedly a time pressure on this that must be linked to getting a deal signed ASAP.

[jft310]

What we know as factual the BOD met and Phil did his thing. As Petro implies what else was on the Boards agenda when they got together? Where is that Board meeting in Singapore or Port Moresby??Is the meeting again tomorrow which is tonight in Asia?? Exactly what was/is Shell offering??Does a deal with Shell mean no offtake deal for Exxon and its 3rd train. Where does this leave JKM and what about the Shell relationship with China???Why can't Shell buy EWC and use their FID plans at E/A with their technology the Chart /Seimens units that EWC was also using. Or does IOC own the FID plans??Does this mean that FID is right around the corner post deal?? An entertaining situation for sure.

[Petro2458]

The more I think about this, Phil must have been absolutely adamant that he would not approve the BoD preferred deal...whether its RDS or other. He must have been absolutely against the BoD preferred option so much so that the BoD had no choice but to either fire/retire Phil or side with him. We now know what they decided. At which point, I can only imagine that the BoD can do whatever they please in terms of signing a deal. I think Phil wanted to make another 10 years as CEO of an operated company in PNG...and that this deal made that impossible. Further, perhaps he acknowledged it would be a bad idea for him to shake hands with RDS and deal with them during the transition period.

Extremely entertaining...

[Palm]

Ademant? I'd say especially if Shell is doing a Woodside model. If one thinks a bit what better way to leverage in for 30% share of EA and all of the prospects at a very fair price? That would drive Phil nuts. Say 30% for $100-$120/share and if all works according to plan, everyone wins. If all those prospects pan out, Shell goes breakneck on 238 and 236 and PRE goes nuts in 237. PRE wins also in this as they get a SM partner through IOC. Shell gets the local label through IOC. But it would drive Phil nuts and I couldn't blame him. But he wins too if all he's worked for proves out. Think about it.

Plus nothing prevents a bidding war once such a deal is announced.

[tarulestheday]

Plus nothing prevents a bidding war once such a deal is announced.

I am shocked that no one is talking about a bidding war. Seems we are now entering the perfect storm. I'm sure that Phil would love to see someone steal the deal out from under RDS. Now THAT would be a WIN WIN for that guy with the string.

[SamAdams]

Does $1.40 mcf for 25% imply XOM/JKM BID  was lower if they were bidder number 2?  It might be fair but I would be shocked if RDS stole it at that price.  What if lead bidder is in that range, my guess was $1.50-$1.80, but RDS was offering a buyout at $200 to $250 PPS?  Despite what we all believe to be the long term value, at what price does the BoD have to consider a total sale?  I would say $200 if the lead bid was $1.40 mcf. RDS could offer $200 and then let the market perform price discovery.  If no other bidders show up then RDS would still be getting a bargain.  The full realization of value requires time and money.

[CesiumFormate]

If I were Shell I would make a good offer for for all licenses in cash or stock - essentially a full development asset purchase. This would be as good as a buyout, but once accepted it would be difficult to undo since it was part of the bidding process and would be an asset sale and not effectively put IOC up for sale. Connecting the dots with Pacific Rubialis essentially saying they may be getting a quick cash return on their Triceratops investment -- I think we need to consider that a major (Shell) wants full control. If they made an offer to buy out all the licenses for cash, then effectively there is nothing left in IOC except cash, and down stream assets. This effectively keeps a public buyout from happening. IOC will be pretty easy to value. Value of Shell stock or cash, plus PV of downstream assets. It would leave nothing Phil would want to operate as a CEO. IOC would effectively be a holding company with a refinery. I don't like this scenario, but it is a possibility. It shifts the risk of development and part of the upside from the IOC shareholders to the new asset owner (Shell). I would hope something like this would not be for less Thant $3 per mcf cash equivalent. At 11T's, that would be .67 x $33 Billion, or $22 billion, or about $500 per share.

Would Shell pay that much up front to keep IOC out of play? At $2 it would be $325 per share.

Just a crazy thought.

CF

[SamAdams]

CF, this makes sense to me and not crazynat all. We could see significant upside but not get what we think the full value is. Shell can offer a significant premium and still get a great deal. Perhaps $250 per share is the great disappointment the shorts have been wishing for us, absent a true bidding war.