'UncleT' pid='31393' dateline='<a href="tel:1384212 Wrote:Can someone shed a little more light on this for me? Midstream Liquefaction On August 6, 2013, InterOil signed an agreement with PacLNG relating to the alignment of interests in the Midstream – Liquefaction Joint Venture to those in the PRL15. Following the alignment, the Company’s interest in the joint venture is 77.165% and PacLNG’s interest is 22.835%. The Midstream Liquefaction segment had a net gain of $2.4 million during the quarter mainly due to $2.6 million profit recognized on the disposal of our interest in PNG LNG as a result of the equalization agreement with PacLNG.
Uncle T, this Note 15 from the financials fully explains what went on here
"The Company’s interests in PNG LNG Inc. is governed by a Shareholders’ Agreement signed on July 30, 2007 between InterOil LNG Holdings Inc., a wholly-owned subsidiary of InterOil, and PacLNG. PNG LNG Inc. is resident in The Bahamas with subsidiaries resident in PNG and Australia, the principal activity of which is the previously proposed joint venture of the development of an LNG plant in PNG.
Under the agreement, both parties have joint control of the arrangement as decisions about the relevant activities of the arrangement require the unanimous consent of the parties sharing control. As at September 30, 2013, InterOil LNG Holdings Inc. holds 77.165% of the ‘B’ Class shares of PNG LNG Inc. However, InterOil LNG Holdings Inc. holds 52.5% economic interest in the LNG project, subject to the exercise of PacLNG’s rights to the ‘B’ Class shares on payment of cash calls.
As a result of the change in IFRS 11, effective January 1, 2013, the Company has reclassified its involvement with PNG LNG Inc. from a jointly controlled entity to a joint venture. The Company has assessed its interest in the joint arrangement as a joint venture as the assets and liabilities held in PNG LNG Inc. and its subsidiaries are the assets and liabilities of those entities and not the assets and liabilities of the parties to the joint arrangement. The separate vehicle is to be considered in its own right and as such the PNG LNG joint arrangement is considered to be a joint venture.
The Company’s interests in PNG LNG Inc. were previously accounted for using the proportionate consolidation method and now are being accounted for using the equity method of accounting.
As a result of this change in accounting, the investment in PNG LNG Inc. as at January 1, 2011 has been recognized at the net carrying amount of the assets and liabilities of PNG LNG Inc. previously proportionately consolidated by the Company. The Company assessed whether the investment was impaired as at January 1, 2011 and determined no impairment existed. Subsequent to January 1, 2011, the Company has accounted for its investment using the equity method of accounting.
On August 6, 2013, the Company entered into an agreement with PacLNG in relation to their interest in the PNG LNG joint venture whereby their interest was aligned with the interest they have in the Upstream operations of the Company, and their share of historical joint venture costs was accepted and settled. In effecting the terms of this agreement, PacLNG will be issued 185,286 ‘B’ Class shares in the joint venture and a net 3,565,300 shares on issue to the Company are to be cancelled. Following the alignment, the Company’s interest in the joint venture is 77.165% and PacLNG’s interest is 22.835%.
To date the Company has a recognized deferred gain on its contributions to PNG LNG Inc. based on the share of other joint venture partners in the project. As the Company’s shareholding within PNG LNG Inc. as at September 30, 2013 is 77.165% (Dec 2012 – 84.582%, Sep 2012 – 84.582%), the gain on contribution of non cash assets to the project by the Company relating to other joint venture partners’ shareholding (22.835% - amounting to $9,566,992) has been recognized by the Company in its balance sheet as a deferred gain. This deferred gain may increase/decrease as the other joint venture partners decrease/increase their shareholding in the project.
This amount has been recorded as a reduction of the investment balance of $9,566,992 at September 30, 2013 (Dec 2012 - $9,922,089, Sep 2012 - $9,724,498), which has reduced the investment balance to $17,548,190 at September 30, 2013 (Dec 2012 – nil, Jun 2012 – nil), with the remaining balance of $nil (Dec 2012 - $5,191,101, Jun 2012 - $5,006,468) being recorded as a deferred gain. Any deferred gain will be recognized in the consolidated income statement when/if the risks and rewards have considered to be passed.
Information relating to the joint venture is set out below."
Hope that helps
