Exxon raised $5.5 billion this week

[jft310]

• Bond sale for acquisitions

  xom sells 5.5$ billion in first bond sale in decades to use to finance capital spending, for acquisitions, or to refinance commercial paper.

  Might interest some.

[Putncalls]

• Bond sale for acquisitions

  xom sells 5.5$ billion in first bond sale in decades to use to finance capital spending, for acquisitions, or to refinance commercial paper.

  Might interest some.

This is a good time to sell bonds but XOM did say that they were cutting back on expendertures to build resources by 15% during their last quarterly report.

[Stavros]

XOM has said that building Train #3 in PNG is one of the highest return projects for the corporation.
I don't think they've changed their conclusion.
When Rex wields his axe, it won't be chopped off the project list.

FID for PNG LNG Train #3 comes when:

1. Sufficient gas has been identified to feed the plant for 20 years
2. Definitive offtake agreements for 70% of the production are inked
3. The Capital Cost is known to an accuracy of +/- 10% (being a duplicate of Trains 1 & 2, this is already known)
3. Cash to cover 30% of the Capital Cost is allocated by each Partner
4. Loans are lined up for the remaining 70% of the Capital Cost

The total Capital Cost for Train #3 should be on the order of $6 Billion to my opinion.
So XOM doesn't need to allocate a lot of CA$H to put the concrete and steel in the ground.

What they DO need is the gas!
For the right price they can have all the PRL 15 gas they want!

[Putncalls]

Welll........ Total is willing to pay 1.30$/MCF if there is more than 6Ts. What will XOM/OSH pay for?

[mikesioc]

Why would anyone pay $2.1 billion for 61% of 6.5T's or $4.2 billion for 61% of 9.89T's or $5.3 billion for 61% of 11.79T's and give IOC 30% of a new LNG facility when the entire company is presently valued at $3 billion? The question is what premium will someone pay above $3 billion to own it all? With no material news on progress with the Total SPA by 3/31 we may be back to a premium above $2.5 billion or lower. Anyone think Total/Exxon/OSH are just waiting to see what happens in another 12 days? Surely they wouldn't do that, right? Silver lining is looking more like $100. Exxon now has the fresh cash to do it themselves ($5.5 billion...Hmmm), bring in Total for $2 billion and start expansion plans.

[Stavros]

Mike ... you're on the right track to my view.

OSH paid Pacific LNG $900 Million for 22.8% of 7 TCF GROSS ... before PNG takes their 22.5% share.
They've fork over more $$ if there's more than 7 TCF in the ground.
That values the remainder of E/A (which is basically owned by IOC) at 0.772/0.228 x $ 0.9 = $3.05 Billion + Extra
That's the current IOC Market Cap

So the ubiquitous omnipotent Mr Market is putting zero value towards IOC's other assets.
In addition to PRL 15, IOC has:

+ Triceratops (Believed to have a significant amount of gas)
+ Wahoo (Drilling to establish the resource)
+ Bobcat (Drilling to establish the resource)
+ Raptor (will be spudded shortly)
+ Other leases
+ Refinery/ fuel distribution (valued at about $8 per share of IOC as I recall)

IOC wants to get the drilling results BEFORE a takeover bid ... can they survive that long?
Maybe not.

To my opinion, it makes sense that a takeover of IOC by a Super Major is structured as an all stock deal.

Use or flosh

FWIW ... Bond Details:
March 18, 2014
Exxon Mobil Corp.

Exxon Mobil Corp. has sold $5.5 billion in its biggest bond offering on record, according to Bloomberg. Exxon Mobil issued fixed- and floating-rate notes in a five-part sale. The company may use proceeds to finance capital spending, for acquisitions, and to refinance commercial paper borrowings.

The new securities will add to the company’s $22.7 billion of total debt, which accounted for about 39%t of its trailing 12-month cash flow at year-end, according to data compiled by Bloomberg.

Exxon Mobil sold $1 billion of 10-year 3.176% coupon bonds that yield 48 basis points more than similar-maturity treasuries; $1.75 billion of five-year debt with a 1.819% coupon and a yield spread of 25 basis points; and $1.5 billion of three-year 0.921% debt that pays 15 basis points more than benchmarks. A basis point is 0.01 percentage point.

Bloomberg says that the deal also includes $750 million of three-year floating-rate securities that pay four basis points more than the three-month London interbank offered rate and $500 million of five-year floating-rate debt yielding 15 basis points more than that benchmark. Libor, the rate at which banks say they can borrow from one another, was set at 0.23 percent Monday.

Exxon Mobil last issued bonds in 1993, according to Bloomberg data based on dollar-denominated sales of at least $250 million and restricted to US units.

[Putncalls]

Let us just say that OSH is buying a minority interest from a party that has few options for 56 cents/MCF. Let us also say that IOC, GLJ and KR are wrong and there is only 7Ts at E/A. Let's just leave the PNG out of it for now since they get their 22.5% cut from "who ever".

That leaves IOC with 5.5Ts. At 56 cents/MCF that works out to the Starvos number of 3 billion US dollars.

BUT!!
Who at IOC believes that there is only 7 Ts at E/A?
Who at IOC is aware that the IPI owners were "stuck" and .9 to 1.1 billion is a great ROI for them?
Who at IOC is aware that Total is willing to pay 1.30$/MCF for anything over 6Ts at E/A?

77.8 percent of 9 Ts is at 56 cents is 4 billion dollars.
56 cents per MCF is an absurd price! If you use the Total average of a buck/MCF and 9 Ts we get 7 billion dollars.
RJ values E/A is 5 billion dollars.

I do say one heck of a dance though. If I could only be a creepy crawly on the wall.

I do not see how IOC's value can be based on a non controlling share of a low balled resource estimate?

[jft310]

Puts-the largest shareholders would never sell all of IOC at fire sale prices.But bring on the offers and make em public.

[Movieguy]

Why would anyone pay $2.1 billion for 61% of 6.5T's or $4.2 billion for 61% of 9.89T's or $5.3 billion for 61% of 11.79T's and give IOC 30% of a new LNG facility when the entire company is presently valued at $3 billion? The question is what premium will someone pay above $3 billion to own it all?

Yes, Mike, you are exactly right.  It has always made very good sense for a larger company to buy all of IOC, yet no offer (formal enough to require disclosure) has ever come.  Why?!  Even now, at this bargain basement price, still no offers.  Why?!  I and many others here are baffled.  Is it really about it needing to be the "exact right moment," whenever that is?  We've all heard it has to be "before the deal (choose whichever deal you like)," "after the deal," before/after this/that announcement," "before/after drill results," etc.

The only answer that I have found makes sense to me is that many companies can be part of good deals at reasonable prices if IOC is independent, but that to buy the whole company, the acquirerer would have to pay a substantial premium (due to other bidders not letting them get away with a steal), and thus the acquisition plan is less profitable.  Other ideas?

[trans]

Yes,  for whatever reason, the price of IOC is being rigidly controlled.  Last 8 days show the shorting picking up noticeably again.  For whatever reason, it appears the "controllers" do not want the stock north of $60 by too much.   The computer algos have been churning again, putting larger offers than bids when needed and split the offers between 1-4 dark pools.  Been going on since time began and still is......trans     Very simple but the  majority of holders are led to believe this is "free market forces".  BAH Humbug!