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Palm, as always I appreciate your thoughtfulness and insights. I don't really want to go down this rabbit hole too far, but what is unsaid is what intrigues me. If this was a formal part of the process it should have been disclosed and probably on the Feb. 28th call. I cannot remember anyone thinking or recommending that a new CEO had to be in place prior to deal announcement. This would have been material information in my view. I don't think anyone is surprised Phil is retiring, again it's the timing. Why would Phil announce the imminent spudding of Elk-3 and retire 3 weeks later prior to both spudding and deal announcement. I think something changed mid month. We will find out. As I said, it will become clearer in the ensuing days and weeks. Phil deserves to go out on top and with all due credit. My intent isn't to question Phil's statements as it is to understand it better. Hopefully that makes sense.
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[quote='SamAdams' pid='21697' dateline='1367323704']
At least the timing of Phil's retirement still confounds me, absent more information. I was hoping that might come today, and there's a scenario where tomorrow makes sense. Given Phil's comments, it is hard to believe he is retiring prior to the deal being announced and while the beauty contest is on. We had a very nice cadence to recent events: confirmation of major Asian interest, dissolution of Petromin, spudding of Elk-3 within weeks, signed JVOAs, BoD meets again, leaks/guesses as to bidders....then Phil retires? That should have come after deal announcement. There are scenarios where it makes sense, but alas we wait. I am digging and hope to understand this better. the only scenario where this makes sense to me is RDS won and Phil doesn't want to be the one to shake thier hands.
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SamAdams -- The RDS scenario could explain it. Frustration with finally conceding O'Neil wouldn't come around and let IOC stay in charge of the operation in a more lucrative way (i.e. with a non-supermajor partner) could explain it. Becoming disgrnutled that the Board chose to expand negotiations with bidders beyong his desire to just sell a portion of E/A (possibly a com[plete buyout or possibly the sale of more assets than just 30% of E/A) could explain it. I agree that the timing likely indicates he left abruptly because he didn't get what he wanted in some way. The upside is that in any of those scenarios it would seem that a major decision has been made and that we should be getting close.
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05-01-2013, 12:13 AM
(This post was last modified: 05-01-2013, 12:14 AM by Palm.)
'SamAdams' pid='21707' datel Wrote:Palm, as always I appreciate your thoughtfulness and insights. I don't really want to go down this rabbit hole too far, but what is unsaid is what intrigues me. If this was a formal part of the process it should have been disclosed and probably on the Feb. 28th call. I cannot remember anyone thinking or recommending that a new CEO had to be in place prior to deal announcement. This would have been material information in my view. I don't think anyone is surprised Phil is retiring, again it's the timing. Why would Phil announce the imminent spudding of Elk-3 and retire 3 weeks later prior to both spudding and deal announcement. I think something changed mid month. We will find out. As I said, it will become clearer in the ensuing days and weeks. Phil deserves to go out on top and with all due credit. My intent isn't to question Phil's statements as it is to understand it better. Hopefully that makes sense.
Sam,
Makes complete sense. But we don't know in what form those "retirement" discussions took place. Outside of an actual announcement of the retirement we have to assume what we were saying last week. We know the BOD met a little more than a week ago and likely made their choice "in the best interest of the shareholders", not necessarily in the best interest of the 4th largest shareholder. I believe Phil has had this dream; as stated in the corporate vision; to be an operator. Assuming the BOD made the decision we feel they may have, he really has no choice but to step down. His heart will not be in it to just be a "silent" JVOA partner. His drive won't be there. We can debate forever the semantics of how much of this was ultimately his decision, but I believe it just recently came to that point. Thus, without the current assumed deal decision by the BOD there could not have been a prior announcement. They couldn't say, "If we go this way, Phil will remain at the helm, but if we go this way, he will retire." Until the trigger event happens, nothing can or should be said. I think that trigger was pulled last week.
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If the "trigger" was pulled by the Board, where/when is the announcement !?!?
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Have to remember; the internal trigger was likely only away from a deal that would have IOC still in control of at least the upstream. Appears that is not happening. For some time the process has been to evaluate and tell the government who their preferred partner is. The government has pre-approved the final bidders, but they now have final approval. No different than OSH. After the fact it came out that they preferred Petronas. Did they anounce that? No, they couldn't. The government preferred Exxon, and that WAS announced and look where it is today; Exxon is in control.
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CEO interview process only commenced 2 weeks ago?
Phil said…….
I recommended a new CEO [for] some months, and we have interviewed to ensure a smooth transition to run the LNG project once it is closed.
Palm says (and I agree)……
Thus, without the current assumed deal decision by the BOD there could not have been a prior announcement. They couldn't say, "If we go this way, Phil will remain at the helm, but if we go this way, he will retire." Until the trigger event happens, nothing can or should be said. I think that trigger was pulled last week.
That must mean that these CEO interviews did not start until after the BOD meeting, that is, in the past 2 weeks.
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'SamAdams' pid='21697' datel Wrote:
At least the timing of Phil's retirement still confounds me...........
I agree with this Sam and this is my take on the situation. First the reasons why I think Phil is leaving:
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Phil wants to be King and call the shots. I think it became clear some time late last year that he couldn't be King.
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Phil has negotiated very hard on this deal. He tried to keep modular and floater in the form of EWC and Flex and then he tried to keep operator control. The side effect, depending upon how intense these meetings were, is frayed relationships on both sides. Phil may have said I am not working with that idiot - aka a RDS for example.
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These hard negotiations I view as healthy btw - I have been in negotiations where the owner didn't fight tooth and nail and was screwed over because of it.
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For those who say Phil was the problem, I believe it is because their information is coming from one of the bidders and any bidder worth 2 cents will ramp up the propaganda/slander as it could provide an edge in negotiations. Therefore I don't believe Phil was the problem, just a part of a normal business process for billions of dollars.
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And actually, I think Phil probably was the best person to conduct this effort as he would be squeezing every drop out of that lemon.
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I believe IOC is transitioning into a new phase of existence where execution is the most important characteristic. I think the board (and Phil) and large shareholders realize that Phil's risk taking, I got kahuna sized biscuits was exactly what we needed to get us where we are today, however going forward we need a CEO who is extreme on detail and delivery. A natural healthy progression for the company.
So with those three reasons in place, why would the timing come when it did? Well we know that the board met during the weekend of April 20-21st. Presumably to choose a winning bidder. At this point, I think there was still a small chance that one of the bidders was someone who Phil could work with/allowed greater control of the process/insert other reason here. After the board met it became very clear this wasn't the case, so Phil capitulated and announced his retirement.
As for why this was only a 7 day notice and not announced with the winning bidder, this is what I believe. All my above reasons for Phil retiring would become obvious late last year and that is why I believe it when they say they have already started a new CEO search and personally I believe this process is almost complete. Now any new CEO coming on board always get some form of stock or stock options. So, if I was a savvy VP from a super major that is being asked to take over the CEO position, I would accept the position based on one condition - I am brought on board before the deal is announced so I can get all those stock options in my name before the inevitable run in share price.
Could it be that simple? Keep it on Ice!
Hemi
p.s. I have reason to believe there may be another round of rebids forthcoming, so I don't anticipate anything for the next 3 weeks or so. I strongly believe we are in a bidding war (unfortunately bids take a while to resubmit) and the appetite of the bidders will determine if rebids go past May. One man's opinion - use or flush.
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It is my guess that were IOC to be in control of the situation the decision would have been made and announced. Government influence in this decision is the confounding element.
One possible reason for the trouble is those, likely in the NEC, who were given the dream of owning 50% of E/A. All well and good for PNG but without money to buy the extra share everyone involved is left scratching their heads and looking for creative ways to make this "dream" come true. Just where does a dirt poor country come up with 6 (or more) billion dollars to buy 3 (or more) Ts of gas?
And let's not forget, there is a double edged sword here. The higher the price paid in the selldown the more the PNG 22.5% is worth, but the more that 27.5% will cost. Hell, I haven't heard where PNG is going to get the capital to buy that 22.5% share.
Maybe the classic Gordian Knot. Sooner or later the PNG factions will have to step back and see there is no perfect solution so they just have to say 'let's get this deal done whatever it is, our interests will be well served if it also serves our partners. There is a lot more petroleum to be found and it is time we move forward'.
I think O'Neil is "there", but he has an entire country full of problems and likely his biggest challenge (and need) is to facilitate the development of a rational democratic decision making structure in PNG government. You don't do that by dictating solutions and O'Neil is already likely wielding too much power. His dictating the final solution doesn't move that ball forward.
So anyway, I think we just wait until the decision is announced. Only time will tell when that will be. Maybe the problem is the supermajors need the time to reconfigure other assets for the financing necessary to beat the $3.50/mcf offered by JKM for E/A and pick up chunks of PPLs 236 and 238. "Multiples"
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