Wag the 800# Gorilla

[Investor1979]

JFT, May I ask what your source is for the Exxon's NG payment to us ,as being the same as PRE is paying, and please remind us what that price is? TIA

[Petro2458]

You can't compare PRE price to this deal. The net present value of the PRE deal is ...frankly...impossible to estimate. There just isn't any reasonable model established for resource size, associated production rates, production timing/ramp-up...

[Getitrt2]

If the government takes 22.5% gas in-kind then it will take ~7 TCF for 1 train.  600 mmcfd for 25 years..5.5 TCF for LNG the other 1.5 TCF to govt't.  This is why only 1 train is being discussed....Remeber that the best case estimate of resource is a 50% likelihood estimate..50% chance it's not as big.  The good news is the after tax net present value of the 5.5 TCF at a higher equity is double current market cap...and is robust under the low case or p90 estimate.

Another point is that it will take a few years of production to understand if more that 7 TCF can be recognized (more wells may help...may not)..production is King when it comes to reserves estimation and narrowing uncertainty.

I believe we get the 1 train deal... Then we drill other prospects... Because we need them to underpin more LNG trains.

Worth noting that the volume need for 1 train is dependent on the decline after plateau ends...

petro, two things about the government's 22.5% that could change your analysis and calculations significantly:

First, I think it is highly likely that the government will sell part of the 22.5% to XOM, leaving more gas for an IOC LNG plant and subsequent sales to XOM.  Also, there is the issue of how long before they will need any of the "in-kind" gas, and I think there was some indication last year that it might not be until after the first train's worth.  On the other hand, maybe the EWC relationship will speed that up.

[jft310]

itvest-Use it or flush it .your call

[ellerslick]

To think that IOC is able manhandle an Oil & Gas Super Major is not rational whatsoever. So yes, in response to your question Tree, I believe you are the only one who thinks IOC is the "tail tip wagging the 880# gorilla" The deal with XOM must be fair to both parties; any attempt by IOC to manipulate the outcome and skew it to their benefit will be a gross mistake in judgement. It is the IB's responsibility to ensure this does not happen; I think they will make appropriate recommendations and Dr. Byker will have the sense to listen and follow them. I believe that Mr. Kavo's recent public statement suggesting that all the gas be proceesed in the Gulf stems from his fear that all the gas may wind up at PNG LNG. Time will tell whether he is successful in getting an LNG plant built there.

You either don't read or purposely miss the point Stavros.  The point is important - IOC appears to have cut the 'great deal' so many have claimed would never happen.

"To think that IOC is able manhandle an Oil & Gas Super Major is not rational whatsoever." - Not what I stated, not even close.   Even so, David's have been known to manhandle Goliaths.  Remember PZ? It's not rational whatsoever to state otherwise.  David legally owns and is willing to sell Goliath a piece of the gold Goliath needs.  Perhaps JKM and others were advised that IOC woul roll-over for them in negotiations in the spirit of 'fairness'.

"The deal with XOM must be fair to both parties; any attempt by IOC to manipulate the outcome and skew it to their benefit will be a gross mistake in judgement." -

Manipulate the outcome?  Do you mean negotiations?  IOC's goal should not be to make a multi-billion $ deal 'fair', their goal should be to cut the best deal for IOC shareholders.  Same with XOM.  Period.  If 'fair' was an IB goal, they should be fired.  I would love to hear you say 'take $120 Dr. Byker, that would be 'fair' to XOM!.  BTW, the deal has been cut.  IOC has a 'great deal' and sure looks to me that IOC is wagging the gorilla with forward terms and optionality and that SM paid the Asian utility price.

The deal reality here is a far cry from what the short liars and nervous Nellie longs have been predicting and there are several more deals ahead, right ahead.

Down $13 since that fantastic PR.  David better put another stone in his sling. He has two Goliath's, Exxon and whoever has their boot on the throat of IOC.  I am not worried about Exxon but the other giant is getting ready to do serious damage with the news.

[kerekesc]

Weren't the IB's hired by IOC in order to find a partner?  It would seem that the better the deal for IOC, the more fees the IB's would earn.

[efi426hemi]

Fwiw one my sources confirms its a very good deal for IOC.

Hey Sparty,

Funny, I was speaking with one of the executive and he also said "It is a great deal".

Keep it on Ice!

Hemi

[jft310]

The words I heard were "Best Possible Outcome" from an IOC Exec.

[admin]

The words I heard were "Best Possible Outcome" from an IOC Exec.

That isn't actually all that surprising. Given the cost of additional trains, the joint surplus created is likely to be larger than with any other possible deal, perhaps only EWC would be able to match. Of course, how such a surplus is divided is another matter, but given OilSearch marginal gas development cost, I'm fairly optimistic here too.