Another Try at the Legal Catalyst

[2126]

It is somewhat unclear if IOC's position is that the current SPA with Total is actually a 'revised' version of the original December agreement, or was 'replaced' with a new agreement. IOC refers to this agreement in both ways. This may be an important point in arbitration regarding OSH's claim of pre-emptive rights to the first agreement as they did not meet the necessary deadline to challenge that agreement.

In April, IOC referred to the March 2014 agreement as a 'revised' SPA:

"... on March 26, 2014, we signed and closed with Total a revised sale and purchase agreement, under which Total acquired through the purchase of all shares in a wholly owned subsidiary."

Source: IOC YE Dec 2013 Management Discussion Analysis.pdf available at: http://www.interoil.com/conference-call-...ence-call/

However, in May, IOC referred to the agreement as being 'replaced' with an SSA that changed the IOC party to the agreement to its wholly-owned subsidiary SPI (200) Ltd:

In Definitions section of the MD&A:

"Total SPA” means the sales and purchase agreement signed on December 5, 2013 with Total where we agreed to sell a gross 61.3% interest in PRL 15, which contains the Elk and Antelope gas fields. This agreement was subsequently replaced on March 26, 2014 with the Total SSA.

“Total SSA” means an agreement under which Total acquired, through the purchase of all of the shares of SPI (200) Limited, a wholly owned subsidiary, a gross 40.1275% interest in PRL 15."

Source: March_2014_IOC MDA.pdf available at:http://www.interoil.com/conference-call-archives-2/2014-2/interoil-q1-2014-financial-results-conference-call/

This is even though the new agreement is actually titled "Share Purchase Agreement" on its face. Source: Share SPA.pdf available at: http://www.interoil.com/iocfiles/documen...%20SPA.pdf

[Palm]

Seems like the language in the March 26th SPA would rule, not comments in MD&A etc. Section 13.14 states,

"Entire Agreement
This Agreement embodies the entire agreement between the parties and supersedes any prior negotiation, conduct, arrangement, understanding or agreement, express or implied, with respect to the subject matter of this Agreement."

[Putncalls]

So. The worst case is that IOC loses PRL 15?

[Palm]

No, IMO the "worst case" is that OSH somehow convinces the government that the "best" monetization of PRL 15 gas is for it to be fed to PNG LNG to max it out ASAP. And that in itself is a bit of a pill for OSH to swallow for several reasons. The fact that they felt the need to pay a premium for the IPI interests, and then controversially sold an interest to the PNG government already has them being looked at questionably. And now we have Citi labeling OSH as a "sell" after all of this maneuvering. Botten may end up not making his own decision as to when to "retire" if things don't turn quickly in his favor. These moves are looking more desperate by the day.

[jft310]

My opinion on OSH is they will have boatload of spending to do for train 3 and for Antelope build in the next few years which will greatly impact their net cash flow and profits. That will affect the PPS in a negative way. Citi sees the negative of all this spending.

[sydbod]

Can some one please explain to me about how OSH paid a premium for their slice of PRL15 gas. A premium with regard to what price, by who?

[sydbod]

My opinion on OSH is they will have boatload of spending to do for train 3 and for Antelope build in the next few years which will greatly impact their net cash flow and profits.

If one looks at it fully, OSH will no no longer have to spend on the full PNGLNG project as it is currently finished and will only have to spend as a replacement on a single train 3. A huge spending decrease ballanced against a much smaller spending increase. On top of that, OSH will be reaping the benefits of a much increased income streem from the now production of PNGLNG. I see it as a positive impact on cash flow and profits.

[Palm]

Can some one please explain to me about how OSH paid a premium for their slice of PRL15 gas. A premium with regard to what price, by who?

Easy Syd; here's a couple of instances; even one from Botten himself:

1. "Question: Dale Koenders - Citigroup - Analyst : Hi, Peter. Just following on from prior questions, on my calcs if it is a 7 tcf resource, you've paid sort of 15% above what the Total deal would have implied. Just wondering, you spoke about the pre-emptive rights and the value of those pre-emptive rights. Is that the key reason why you sort of paid a little bit over? Total obviously had flagged they were looking to sell-down a 19% interest. And then with the pre-emptive rights are you actually looking to buy a larger interest in the project?"

2. "Analysts said Oil Search was paying a "ritzy" premium compared to what Total agreed to pay.

"You've obviously paid a premium to ensure you get access to this resource," Scott Ashton, an analyst at broker BBY, told Botten on a conference call.

Botten said that was based on the company's desire to get a seat at the table to decide how the resource would be developed and based on its bullish view on the potential reserves yet to be confirmed in the area around the fields."

[jdeo1969]

My opinion on OSH is they will have boatload of spending to do for train 3 and for Antelope build in the next few years which will greatly impact their net cash flow and profits. That will affect the PPS in a negative way. Citi sees the negative of all this spending.

I am having trouble with this comment JFT.  if that is the case for OSH, why wouldn't it be the case for IOC when the time comes to start paying for the build of the IOC/Total plant?  Respectfully, your comment doesn't sound...well...very sound.  What am I missing please?

Good luck longs

Jdeo

[sydbod]

Thanks for that Palm. I know the "premium" comment has been bandied around a lot on the net and on some forums but I have never seen the numbers to confirm this. What I am trying to figure out is the actual numbers.
What did OSH actually pay or still have to pay for their involvement compared to what others like Total have to pay or still have to pay for their involvement.
I could well imagine that OSH may have paid a premium for their holding compared to what XOM may have wanted to pay, but I have no way of finding that information.
The only comparison the public can make at the moment is: Did OSH pay a premium compared to Total or did Total actually pay a premium compared to OSH?
Does some one here have these numbers easily available please.