Why 30% stake in 8Mtpa Project is Valueless

[Tree]

Follow me here.

Nov. 2011, JP trading house Marubeni purchased, from JX Nippon O&G, a 21% interest of a 4.7% stake in PNG LNG Project for $298,000,000.

That 0.987 % stake valued PNG LNG project at $30,192,502,532, round it at $30 Billion.  Nice premium in a project that cost $20 Billion.

Assume Gulf LNG costs equate PNG LNG at $20 Billion.

Using Marubeni as a comp, IOC's 30% stake in Gulf LNG is valued at $9,029,400,000, round to $9 Billion.

Oil Search has a 30% stake in PNG LNG.  Oil Search did not receive any resource payments for their stakes in project gas fields.  OSH acquired licenses via farm-ins and purchase of licenses from Chevronin the last 15 years.  OSH has funded their share of exploration, FEED and construction of PNG LNG including over $2 Billion in cost overruns.

IOC will net  a 30% stake in Gulf LNG project operated by TOTAL.  IOC will have received this 30% stake and resource payments for PRL TOTAL 15 Farm-in to the tune of $4 Billion+- (likely much more) depending on recertification after a few delineation wells.

Granted, Marubeni bought in 2.5 yrs prior to start-up and IOC is likely 4-5 yrs from start-up, but remember IOC has more better exploration upside than PNG LNG at present and IOC's project is 16% larger and selling LNG into a tighter market.

So as one can plainly see, IOC's 30% stake in IOC/TOT 8Mtpa Gulf LNG plant is valueless.  Apparently so is the $4+- Billion in resource payments IOC will receive.

The market is shrewd and assigns no value to IOC's 30% LNG project stake until FID and FID depends on recertification being 66% of GLJ #s.

And that is why a 30% stake in an 8Mtps LNG project and $4+- Billion bucks is valueless today.

[jft310]

Ho oh huh

[Getitrt2]

Maybe that is tongue-in-cheek on your part, but the professional CFAs covering the stock at Morgan Stanley and Raymond James do not agree with you, and humbly neither do I, FWIW.

[Tree]

Maybe that is tongue-in-cheek on your part, but the professional CFAs covering the stock at Morgan Stanley and Raymond James do not agree with you, and humbly neither do I, FWIW.

Getit,

Calio and Pavel considered that 30% LNG stake valueless didn't they?

[Getitrt2]

Maybe that is tongue-in-cheek on your part, but the professional CFAs covering the stock at Morgan Stanley and Raymond James do not agree with you, and humbly neither do I, FWIW.

Getit,

Calio and Pavel considered that 30% LNG stake valueless didn't they?

I was referring mostly to your indication that, "$4+- Billion bucks is valueless today."  They both certainly assigned plenty of value to that.

Neither included any specific values for the 30% in current NAV or targets, but implicitly recognized significant future value in that.  Calio at MS stated, "We see longer-term VALUATION UPSIDE as IOC becomes comparable to Oil Search, a peer with a similarly sized interest in XOM's further along PNG LNG project.  Oil Search trades at 2-3x the current market valuation for IOC, on a resource basis."   Pavel, in referring to his estimated "aggregate resource value net to InterOil at $4.9 billion", recognized its existence but exclusion from that resource value, stating, "AT THIS POINT, we are NOT ascribing any value to the economics of the prospective LNG plant", emphasizing that value does not YET include any value for the LNG stake.

[jft310]

The market is hardly shrewd . The market is emotional is better said. Multiple Hsrvard B School studies prove the market short

term is just a random walk, longer term it gets it right. Entire theories built around Random Walk . Case studies etc.

The research houses have a compliance dept that limits what they can say and they approve all the Wall Street research reports

that are issued. That compliance dept would not allow a price per share target multiples of the current price and that's what

happens when one adds $1.5

billion in cash flow to IOCs bottom line the value soars .

Exxon reached FID in 9 months and Total is a larger player than Exxon in LNG

Really a matter of dealing with IPI . Getting govt's approval and drilling the 3 wells ,

with 4-6 rigs next year that should not be an issue. Expect an early FID decision. Not defined that time line