Drilling and the Minority Interest

[cybersssss]

Interesting dialogue. Not to burst the bubble but it seems that at this point, per the current valuation of IOC, there is ZERO value ascribed to any of the future drilling. We are at a low case just for the deal itself and do not even have an LNG participation priced in. As I see it, drilling provides only upside with any finds.

Interested to hear if PET has anything to add here.

[jdeo1969]

The deal is structured in order to "preserve the upside.". We have all heard that comment from Hession, and I have heard it unsolicited from others who know a lot more about this transaction than myself, and have a lot more money invested as well. So I think, with all due respect, I'm going to be cautiously optimistic that there is more gas there, rather than cite statistics that dont really amount to a hill of beans. We are talking about an area that has been studied explicitly by Dave Holland and IOC, so to say track records in other areas of the world are relevant here is a Serious leap IMO.

Good luck longs

[jft310]

Cyber nailed this one . Nada is done so Mr Market assumes the worst. The stock price assumes no Total deal, no exploration success, no reasonable minority interest settlement.
Reality may be different than the current pricing when certainty is a fact the stocks higher.
Period

[ArtM72]

Interesting dialogue. Not to burst the bubble but it seems that at this point, per the current valuation of IOC, there is ZERO value ascribed to any of the future drilling. We are at a low case just for the deal itself and do not even have an LNG participation priced in. As I see it, drilling provides only upside with any finds. Interested to hear if PET has anything to add here.

all good points, Cyber.  I too would be interested in Pet's take.  My uninformed opinion is there is a major difference between looking for HCs in 50 foot thick horizontal seams and looking for HCs in vaulted structures hundreds or thousands of feet high.

I recall all an air photo interpretation course I took in school.  The technique was extremely successful  predicting oil under salt domes and water at the base of alluvial fans.

after all, it is a lot more productive fishing on and adjacent to defined structures than flat bottoms. It is though good to see in this thread alone the POS has tripled or quadrupled from 10% to 30-40% ;-)

[Thylacine-2]

The deal is structured in order to "preserve the upside.". We have all heard that comment from Hession, and I have heard it unsolicited from others who know a lot more about this transaction than myself, and have a lot more money invested as well. So I think, with all due respect, I'm going to be cautiously optimistic that there is more gas there, rather than cite statistics that dont really amount to a hill of beans. We are talking about an area that has been studied explicitly by Dave Holland and IOC, so to say track records in other areas of the world are relevant here is a Serious leap IMO. Good luck longs

jdeo, I agree that the statistics cited by Indoreseroir "don't really amount to a hill of beans".  Stavros' post was right on.  The people at IOC running the exploration program are going about it like they think there is a good chance of success.

My guess doesn't amount to a hill of beans either, but just for fun, here goes:

Bobcat...right in the trend, bracketed by productive reefs on each side.  POS....  high.

Raptor...adjacent to Elk/Antelope.   Deeper.  Reef or sandstone?.....POS ...?

Antelope Deep....Beautiful Structure. Huge.  Needs a closing fault on north side....POS...?

Wahoo....A step out down the string of pearls...POS....medium

[jdeo1969]

Indoresevoir states this:

"Regardless of Elk/Antelope nearby, the probability of success (POS) for our exploration wells is 1 in 10 or 2 in 10. As IOC has not recently published POS to my knowledge, I wouldn't think they were higher than these historic worldwide success rates based on 2D seismic.

That means we have an 80% to 90% chance of failure."

My feeling, not being a drilling expert by any stretch, is that this statement is not necessarily applicable, as we have heard numerous comments from the company to the contrary. Hession stated in one of his CC's that you typically find more gas, near gas. So using a success rate of drilling campaigns "worldwide" would seem to be like comparing apples to oranges from a logical and scientific standpoint. it is not as if they have chosen random fields, they are drilling areas near gas already found, or areas their research and science leads them to believe they will discover more, and their track record in exploration I think begets a little more faith on Indoresevoir's part here FWIW.

Good luck longs

[Getitrt2]

I think Dr Hession's comments on the subject have some value:

"I will then come to the capturing the upside, the very, very important fact InterOil has been a very successful explorer, the most successful explorer in PNG."

"Now moving on, the upside. This is a part of the business that really also excites me, because I do believe we will find more gas. I do believe that also, we'll be very, very happy with the appraisal program around Elk/Antelope. Why? Why do I believe that? Again, I'm going to talk to you about delivery team. I brought in a team from -- probably got century’s worth of experience actually when I add it up -- people who are experienced explorers and experienced development teams. They've worked with companies like Shell, like BP, like Arco, actually Exxon people. People from my personal network and from the network of people that now work at Interoil.

What did I do? I asked those guys, I gave them a clean [indiscernible] -- I said, "Go away, and tell me what you think about this resource. And go away and tell me what you think about this exploration program." How I know? I've got [indiscernible]reports and geo [indiscernible] reports telling about the resource, but I wanted my own independent verification of what we were looking at.

The resource itself, Elk/Antelope. I worked with people who have defined these mega-projects and these mega-resources before, and I asked them to tell me what they thought they saw. Well, they came back with nothing but a glowing report on this discovered resource.

I also got an exploration team together, this exploration team includes people -- sat on the global committees, as I said, the BPs, and Shells and Exxon, and they've come back and told me this is a world-class exploration province, and in fact, a world-class gas province. That started to give me more confidence that I can come out today and tell you how happy I am to be the Chief Executive Officer of this very exciting company.

What have we done about that? Now we're confident -- now I'm confident that we've got a world-class gas province. As part of this company's portfolio, we've initiated a multi-well program. Now, the track record is as I said before, InterOil has found the biggest gas field in Southeast Asia for 20 years. I mean, that is not a particularly shabby record, that's a pretty good record we've already got. We are recognized as the biggest and best explorers in PNG, and we're going to do more of it. And we're going to make sure that we understand this province that we're working in. So what we've done is we've contracted 3 rigs at this moment in time, and they're all assigned to various prospects, and I'll talk through that in a moment."

"So I'll take you through the exploration. There is a series of slides there, we're talking through Slides 19 to 23. I won't go through the slides in detail, but I'll give you the headlines.

Operations are underway, site preparation's underway, and rigs are being mobilized to site. So Wahoo, it fits the PPL 236. One of the more significant things about Wahoo is its close proximity to Moresby, 167 kilometers from Moresby. It's near infrastructure. It's a very exciting, significant multi-TCF gas prospect, and it's something we're looking forward to drilling in the very, very close future.

Raptor, that's a PPL 237. That's Slide 20. That is 10 kilometers west of Antelope. Now there's something that I learned in my days working with the Shells and the BPs is one tends to find hydrocarbons in close proximity to discovered resources. So 10 kilometers west of Antelope, we've also got another multi-TCF resource prospect.

I have that looked at. I've at Wahoo looked at by renowned globally significant explorationists, and they tell me these prospects would rank in any company's portfolio in any mega major's portfolio.

Bobcat 238. That's on Slide 21. That sits between Antelope and Triceratops. It sits between 2 existing discoveries. So what we're looking at is a world-class exploration province. What gives me more confidence about this, I talk about independent verification a lot, I talk about delivery a lot. What we see is independent verification from the GCAs -- sorry, from the Gaffney Clines of the world to the GLJs, independent verification of a team that I've brought in -- and independent verification, I think, comes from the fact that these assets have been sought by a number of the highest-quality oil and gas companies on the planet, the mega majors. They covet these assets, and we are very, very pleased to be owners of 3.8 million acres that surrounds these assets and include these assets."

"Equally, we need to understand that the Wahoo, Raptor and Bobcat are going to be discoveries." (not appraisal wells) "I mean, their exploration, exploration will succeed and we feel positive about it, but also let's be clear: exploration wells do fail, yes."

"I think I mentioned earlier, one tends to find gas and hydrocarbon accumulations around existing accumulations, and we've identified a series of prospects in PRL 15. And the way things are at the moment, we obviously think that some of those prospects are worth testing, and we'll be undertaking exploration at PRL 15, no doubt about it."

Somehow, I feel sure that Dr Hession sees their POS as much greater than 10-20% in this situation and would strongly disagree with the applicability of Indoreservoir's 10-20%, or anything close to that, to them now. That's not 100%, or any guarantee, but I think those statistics are irrelevant to IOC in this situation at this time, especially after E/A and Triceratops.

[jdeo1969]

Getitrt2.

Thank you for finding those comments. That is precisely what i was trying to state here this morning.

Good luck longs

[Getitrt2]

The deal is structured in order to "preserve the upside.". We have all heard that comment from Hession, and I have heard it unsolicited from others who know a lot more about this transaction than myself, and have a lot more money invested as well. So I think, with all due respect, I'm going to be cautiously optimistic that there is more gas there, rather than cite statistics that dont really amount to a hill of beans. We are talking about an area that has been studied explicitly by Dave Holland and IOC, so to say track records in other areas of the world are relevant here is a Serious leap IMO. Good luck longs

jdeo, I agree that the statistics cited by Indoreseroir "don't really amount to a hill of beans".  Stavros' post was right on.  The people at IOC running the exploration program are going about it like they think there is a good chance of success.

My guess doesn't amount to a hill of beans either, but just for fun, here goes:

Bobcat...right in the trend, bracketed by productive reefs on each side.  POS....  high.

Raptor...adjacent to Elk/Antelope.   Deeper.  Reef or sandstone?.....POS ...?

Antelope Deep....Beautiful Structure. Huge.  Needs a closing fault on north side....POS...?

Wahoo....A step out down the string of pearls...POS....medium

Right on, Thylacine.  One correction I think might be needed.  I don't think Antelope Deep "needs" a closing fault;  without a fault on the north side, it may be in communication with Antelope, which would be even better.

[petrengr1]

The deal is structured in order to "preserve the upside.". We have all heard that comment from Hession, and I have heard it unsolicited from others who know a lot more about this transaction than myself, and have a lot more money invested as well. So I think, with all due respect, I'm going to be cautiously optimistic that there is more gas there, rather than cite statistics that dont really amount to a hill of beans. We are talking about an area that has been studied explicitly by Dave Holland and IOC, so to say track records in other areas of the world are relevant here is a Serious leap IMO. Good luck longs

jdeo, I agree that the statistics cited by Indoreseroir "don't really amount to a hill of beans".  Stavros' post was right on.  The people at IOC running the exploration program are going about it like they think there is a good chance of success.

My guess doesn't amount to a hill of beans either, but just for fun, here goes:

Bobcat...right in the trend, bracketed by productive reefs on each side.  POS....  high.

Raptor...adjacent to Elk/Antelope.   Deeper.  Reef or sandstone?.....POS ...?

Antelope Deep....Beautiful Structure. Huge.  Needs a closing fault on north side....POS...?

Wahoo....A step out down the string of pearls...POS....medium

Right on, Thylacine.  One correction I think might be needed.  I don't think Antelope Deep "needs" a closing fault;  without a fault on the north side, it may be in communication with Antelope, which would be even better.

Antelope Deep has a fault on the north side. See http://www.interoil.com/iocfiles/documen..._FINAL.pdf slide 18. The purple line north of Antelope Deep is a fault.