IOC re-opens bidder door

[CAC]

XOM does not walk away from this huge gas-buying opportunity. Gas (and oil ofcourse) is XOM's core-business!
I am convinced it is negotiation-tactics from the bigboy (XOM) to try to scare the little boy (IOC) into selling it cheaper.... they'd better think twice to persue this posture!

To boot XOM recently stated that PNG is their primary focus and hub for their Asian development.  So how important does ALL PNG gas/liquids become to a company that just made that statement?  If one looks at what all XOM is doing in PNG right now you will see that they are working at securing gas finds all down the "string of pearls".  Look at the NGE presentation that Tree pointed to this AM.  Recently XOM/OSH purchased PPL 277 from NGE and that PPL lies right in line with Tri/PRL15/Wahoo.

Did XOM approach IOC with the idea of going into exclusive negotiations? I believe that was the case

Did XOM do that with the thought they could lock up IOC and bleed things out to the point IOC cried "uncle"? One of the oldest negotiating tricks in the book

Would Hession have agreed to exclusive negotiations had he been at the helm at the time exclusive negotiation was proposed? I would guess not, based on his record as pointed out by Getit and others

Exxon wants the gas; in fact needs it or their statement of the importance of PNG as a whole in their strategic planning becomes mute shortly after they said it.  Hession and his colleagues and the IOC team know what's there and so does XOM and so do others.

I disagree that because the exclusive period has ended the next offer(s) will be inferior.

I also disagree that NOW is the time for IOC to put itself up for sale.  That would be an act of desperation.  As we have said, and as analysts of OSH have said about them.  The best time for a sale is just prior to production when pending cashflows can help pay for any buyout.

************

Well stated.  I agree with almost all of that.  My only qualification would be with regard to a buyout.  The best time for XOM to buyout IOC might be just prior to production...but the best time for RDS to buy IOC would likely be before a large chunk of IOC's valuable assets has already been gobbled up by XOM. That would be right now.

[ArtM72]

The Palmer announcement today (http://www.brisbanetimes.com.au/business...2satg.html), while evidently not confirmed by drilling or independent evaluation, if it pans out, would add weight to IOC's geological theories and thus make IOC's other properties potentially more likely to have hydrocarbons in large quantities as well. Selling IOC now in today's environment would be madness unless a very, very attractive price in the tens of billions were offered.

[Palm]

XOM does not walk away from this huge gas-buying opportunity. Gas (and oil ofcourse) is XOM's core-business!
I am convinced it is negotiation-tactics from the bigboy (XOM) to try to scare the little boy (IOC) into selling it cheaper.... they'd better think twice to persue this posture!

To boot XOM recently stated that PNG is their primary focus and hub for their Asian development.  So how important does ALL PNG gas/liquids become to a company that just made that statement?  If one looks at what all XOM is doing in PNG right now you will see that they are working at securing gas finds all down the "string of pearls".  Look at the NGE presentation that Tree pointed to this AM.  Recently XOM/OSH purchased PPL 277 from NGE and that PPL lies right in line with Tri/PRL15/Wahoo.

Did XOM approach IOC with the idea of going into exclusive negotiations? I believe that was the case

Did XOM do that with the thought they could lock up IOC and bleed things out to the point IOC cried "uncle"? One of the oldest negotiating tricks in the book

Would Hession have agreed to exclusive negotiations had he been at the helm at the time exclusive negotiation was proposed? I would guess not, based on his record as pointed out by Getit and others

Exxon wants the gas; in fact needs it or their statement of the importance of PNG as a whole in their strategic planning becomes mute shortly after they said it.  Hession and his colleagues and the IOC team know what's there and so does XOM and so do others.

I disagree that because the exclusive period has ended the next offer(s) will be inferior.

I also disagree that NOW is the time for IOC to put itself up for sale.  That would be an act of desperation.  As we have said, and as analysts of OSH have said about them.  The best time for a sale is just prior to production when pending cashflows can help pay for any buyout.

************

Well stated.  I agree with almost all of that.  My only qualification would be with regard to a buyout.  The best time for XOM to buyout IOC might be just prior to production...but the best time for RDS to buy IOC would likely be before a large chunk of IOC's valuable assets has already been gobbled up by XOM. That would be right now.

From that standpoint I agree; would be the opportune time for someone to come with an unsolicited buyout offer and hopefully it would start a bidding war.  I was more responding to what I thought I read last night where it was stated that there is a bit of angst with large institutions and they are pushing IOC to sell the company.  A difference between "putting oneself up for sale" and being approached by a Shell with an unsolicited buyout offer.  Putting oneself up for sale at a time like this would be seen more as an act of desperation I think, but agree with you.  And XOM knows that an unsolicited offer to buy IOC would screw up their PNG strategy most likely.  So they try the exclusive while at the same time talking to others about their smaller and more expensive prospects.  All good and necessary business, but also part of the negotiation strategy; make it look like there are other equal opportunities to IOC's assets.  And Hession knows there is nothing out there as desireable as what IOC has.  So he draws the line on the exclusive.  Now IOC can and is talking to others again, with reports of offers coming in soon after Hession is on board.  He's playng this just right with the hand he was dealt when he assumed the CEO position.

[sageo]

Art -- If Clive Palmer's assesment of his gas 7 miles west of Port Moresby is thrown into the mix, does that portend more waiting and even more waiting (years) on any E/A or prl 15 settlement ?? Can Exxon just keep on "waiting" . Humm !

[calaban48]

Link failed for me. Try this one:

http://www.brisbanetimes.com.au/business/clive-palmer-announces-petroleum-deposit-discovery-off-papua-new-guinea-20130821-2satg.html

Sounds big.

[cybersssss]

Good Post Palm. However if all you are saying is true then IOC is a prime takeover candidate now at the current pps and market cap. XOM does not appear to be to worried about that and neither do our management.

If things are as good as you say, I do not think we would have seen the drop that we saw in the stock the past week.

[ArtM72]

Art -- If Clive Palmer's assesment of his gas 7 miles west of Port Moresby is thrown into the mix, does that portend more waiting and even more waiting (years) on any E/A or prl 15 settlement ?? Can Exxon just keep on "waiting" . Humm !

That case has already been made, but there aren't many people willing to pay for all of those reefs IOC is showing down in 236, are there?  The world has a mighty and developing thirst for LNG.  In the grand scheme of things the Palmer "find" should prove to be a good thing.  First thing he has to do though is sell down his interest in the licenses in order to punch some holes.  This story is still very new.  Maybe he's announced to help screw up the IOC deal on behalf of other interests.  Who knows?

[Palm]

Good Post Palm. However if all you are saying is true then IOC is a prime takeover candidate now at the current pps and market cap. XOM does not appear to be to worried about that and neither do our management. If things are as good as you say, I do not think we would have seen the drop that we saw in the stock the past week.

I think the drop last week was due to several things but in large part it happened last Tuesday at the open after earnings were released, no deal was announced and there was uncertainty on how things were going with Exxon.  Then we had the Friday fiasco.  So IOC has entered oversold territory and been de-risked until we know exactly how negotiations are going.  How good is Hession? What all is being discussed with Exxon and now others?  Etc etc.  All uncertainty, so we have dropped to the $65 level.  Doesn't mean that things aren't good IMHO; more uncertainty at a time when the general markets are uncertain and risk is being taken out of the market and stocks like IOC.  Not necessarily a direct reflection on the status of negotiations.  Tough to stomach, but it's where we are IMO

[Getitrt2]

Art -- If Clive Palmer's assesment of his gas 7 miles west of Port Moresby is thrown into the mix, does that portend more waiting and even more waiting (years) on any E/A or prl 15 settlement ?? Can Exxon just keep on "waiting" . Humm !

That case has already been made, but there aren't many people willing to pay for all of those reefs IOC is showing down in 236, are there?  The world has a mighty and developing thirst for LNG.  In the grand scheme of things the Palmer "find" should prove to be a good thing.  First thing he has to do though is sell down his interest in the licenses in order to punch some holes.  This story is still very new.  Maybe he's announced to help screw up the IOC deal on behalf of other interests.  Who knows?

I don't think there is any significant likelihood that that POTENTIAL offshore undrilled resource which might be available many years from now will "screw up the IOC deal".

[Resourcearb]

Palmer hasn't drilled a single well yet, and while 3d seismics may be adequate to attract a farm-in partner at compelling terms, it's not relevant to the Elk/Antelope sell-down process.  An additional PNG LNG train underpinned by P'nyang and Hides will take at least 2 years to reach FID while speulative offshore acreage like Palmer's would likely take several years beyond that to develop.  Elk/Antelope is the only source of certain gas that can underpin an additional 1-2 trains now.  If anything, Palmer's claims only serve to draw more attention to the PNG gas story and hence more value to InterOil's core license areas with a proven string of pearls.