What's changed when IOC was $106

[ArtM72]

That for highlighting that the joint operating agreement is not public. That is the issue. The agreement might read that "the parties will use best efforts to reach a mutual agreement on the construction on an LNG plant wherein IOC will have a 30% interest." (Rephrased, only an agreement to talk.) Alternatively, it could be an 100 page contract documenting all the details. You don't know. I don't know. I do know that one member of management when asked directly told me no such document exists.

I do know that in the proposed 2013 compensation plan for Hession words specifically reference  "a binding sale and purchase agreement for the sale and purchase of a working interest of not less than 30% of PRL 15". However, no "binding agreement" words were used when saying payments will be upon the "achievements of certain defined stages in the construction and development of certain LNG projects in which InterOil holds an equity interest." In fact, it implies to me that no payment will be made if IOC does not hold an equity interest. Why the need to clarify no payment in the event IOC does not have an equity interest? Why are the lawyer not as straight forward saying the payment will be made pursuant to a binding contract? Might it be the press release in December of 2013 was rushed and incorrectly implied that a JOA had been signed versus that a gentleman's agreement had be reached to move forward with each other.

As to the ease of funding the project, time will tell.

jFT's post highlighted all is roses as compared to last year. I am just highlighting risks that exist. You may think they don't exist. But the market might.

Here's a link to an authoritative discussion on what "best efforts" is generally understood to mean in a contract.  Not quite "an agreement to talk" as you suggest.

http://www.adamsdrafting.com/downloads/B...Lawyer.pdf.

Your other arguements are every bit as specious. I don't have any idea why Total would pay IOC hundreds of millions of dollars up front, and then pay IOC another $100+ million to drill wells drilled with the express purpose to incur additional near term obligations involving hundreds of millions or possibly billions if Total didn't intend to honor the rest of the terms of the contract.

It is hard to imagine Total doing any of this without the clear intent to realize a major return on its investments through the construction of an LNG plant along with equity partner IOC..

I'm led to the belief your posts are disingenuous.  Your dogs don't hunt, not even close.  Sorry to bother you.

[kommonsents]

Once again, thanks for clearing that up

I am not clear on what was cleared up.  Please clear that up for me.

[jft310]

More important is yes there are risks today but there were a heck of a lot more risks when IOC was trading at $106 . That was the purpose of this post .
Further it's clear there is a misunderstanding amongst some market participants about the Total Interoil deal and the legalese language is confusing to them .
We are in the best shape of the companies history .
The risks are Ant 4 and 5 long delays .
Assume the worst the GCA estimate stands At 7.1 T's and GLJ stands at 9.1 T's that's an average of 8.1 T's . More than enough to build a 2 train LNG which is why Total signed the deals they did .
Total must pay off p-50 numbers !!! Who thinks Ant 4 and 5 will not prove out something ??
A 2 train LNG plant with 30 percent interest the size originaly proposed yields $1.6 billion in cash flow to a interoil yielding a $10 billion market cap at minimum. Thus the Credit Suisse $200-300 price objective at plant open . See the report.
All the math for their price objective is in their report .
Those reports are not legalese but do need to be read .
It's easier to read yahoo and see their nonsense that's true . Real due diligence requires printing out the reports and reading them . Digging through the SPA's language eliminates many of the risks David detailed . He is not alone . Like Antelope is not alone .
The fact Antelope is not alone will not go unnoticed by the market in 2015 ..
A bit of tax loss selling occurring now and plenty of misunderstood of material information .

[Tree]

Dave's premise is absurd.

IOC-PacLNG and IPI owned PRL15 and were governed in it's commercialization by E-A JVOA.  A stake sale by any PRL15 JVOA owners integrates new owners into the JVOA.  

IOC sold a gross 40.1% PRL15 stake to TOT and PacLNG sold 100% of their stake to OSH.  

The arbitration results will dictate participants and the route but not the interests in PRL15 and the LNG project of JVOA participants.  Interests are set.  

Elk-Antelope Joint Venture Operating Agreement

Singapore and Port Moresby, March 28, 2014: InterOil (NYSE: IOC; POMSoX: IOC) has received notification from Oil Search (ASX, POMSoX: OSH) of a dispute under the Joint Venture Operating Agreement relating to Petroleum Retention License 15 in Papua New Guinea. We will be responding in accordance with the terms of that agreement.

Any proceedings commenced by Oil Search seeking to set aside the transaction completed with Total S.A. (Paris: FP, NYSE: TOT) on March 26, 2014, in which Total acquired a 40.1% (gross) interest in PRL 15, will be strongly defended.

http://www.interoil.com/iocfiles/documen...elease.pdf

(www.interoil.com).

Insight into the commercial agreements and ownership rights negotiated prior to a sell -down, resulting in an SPA agreement was offered June 25, 2013 at the AGM.  To believe and to argue there is no 'New PRL15' JVOA governing IOC's LNG participation rights which are stated around 30% is beyond absurd.

"At the meeting a management presentation was provided with an update on our business and strategies. Highlights regarding our previously announced proposed transaction with ExxonMobil Papua New Guinea Ltd. in the presentation include:

• The sell-down is progressing on schedule as planned.
• InterOil signed a detailed term sheet with ExxonMobil Papua New Guinea Ltd. (EMPNG), after major items, both commercial and technical, had already been agreed.
• EMPNG, InterOil and Pacific LNG are engaged in finalizing a binding agreement.
• The proposed transaction would monetize sufficient resource to cover our share of infrastructure costs and fund exploration while retaining maximum upside for IOC equity interests.
• Post-negotiations, InterOil and Pacific LNG have clear path to resource monetization.
• The purchase of an interest in PRL 15 is not contingent on resource recertification.
• InterOil believes the best strategy to develop its resources is a dual-development path; which includes EMPNG at its PNG LNG facility, and an LNG facility in the Gulf Province."

Equally absurd would be the argument that OSH  cut a $900 million check, currently has no PRL15 JVOA LNG rights and is operating on a handshake agreement.

[admin]

Dare I say, thanks for clearing that up, Tree..

[jft310]

With the stock price weak some look for what's wrong ?? Better to look at the line up of 2015/16 events and check them off as completed on the path to monetization.
To monetize the Elk/Antelope gas
We must:
Drill and complete Ant 4 and 5
Agree on reservoir engineers and get their completed certification.
Receive the Total payment . Expected second half 2015.
Decide on which type project design. Down to 4 designs .
Start and complete FEED a 9-12 month process
Declare FID
Expected completion all above events mid 2016
As each event is successfuly completed the stock price will accrete. As risk is reduced .
Finding more gas can only accrete today with another seperate monetization agreement . Which based on the IOC tie-back slides appears to be the path forward . This means another pay day for Interoil investors . Use that money and find more gas .
Listening to people who refuse to read the research reports , to read the SPA , to read the Pressers to read the IOC investor presentation transcripts begs the question. Why do they attempt to say they are still long the stock???
Having a high cost basis has a cure . Play the tax game . Or just wait . Using options has risks .

[Palm]

The only thing missing here (I believe) is that 2126 leaves out an important part of 3.10 in the SPA. The last paragraph there states that both parties to the SPA will use their best efforts ASAP after the execution/closing of their deal to get other parties subject to the existing JVOA to sign the new JVOA and vote to have Buyer (Total's sub which holds the PRL 15 interest) as the new operator of PRL 15. To date we have not seen where a new JVOA has been executed, nor do I believe Total has been designated as Operator (I think IOC is still the Operator). Assuming this is all true it would mean that they are still governed by the old JVOA and if management has stated "there is no such agreement", it would be a reference to the new JVOA.

Since IOC has used the standard JVOA (which I pointed out some time ago along with a link to such an agreement), whatever is in the original JVOA regarding an LNG plant would still govern.

[jft310]

They need to insert the final names on the final JVOA and we off and running . Who think OSH wouldn't want to monetize the gas they paid $900 million plus for ??..IOC shareholders get paid either way .

[2126]

Palm is correct that Section 3.10 refers to the desire of Total and IOC that Total be Operator for the development of PRL 15. The second paragraph commits IOC to supporting Total as Operator, and the third paragraph requires both Total and IOC to use their best efforts to ensure that 'any other person holding an interest in PRL 15 Title' both execute the New JVOA and also support Total as Operator. Since PAC LNG was party to the original JVOA and held an interest in PRL 15, upon the sale of its interest to OSH, OSH then became holder of an interest in PRL 15. Since OSH immediately filed for arbitration after the SPA was signed by Total and IOC, we, perhaps, may be able to assume that OSH has neither signed the New JVOA nor yet supported Total as Operator of PRL 15.

The main purpose of my replies to Daveontb were not to rehash the entire SPA, but rather to point out that Total and IOC have a clear and detailed agreement that is designed to lead to the eventual construction of a LNG plant. Every part of the SPA, including the references to the execution of the New JVOA, are directed to that end. My replies were an attempt to refute Dave's arguments that the current pps problems were related to 1) unreasonable expectation of the sale price for gas to a major, 2) that IOC is NOT in an agreement to build a LNG plant, 3) that should IOC lose arbitration, IOC would have to negotiate a new deal with EXXON, and 4) it will be very hard to raise the capital to build a new LNG plant.

Of course there are many steps yet to be achieved, but all of those steps (and the exact actions necessary to achieve them) are clearly detailed in the SPA. IOC has been diligently working on those steps since March of this year, while also preserving its interests in its other lease areas by drilling exploration wells in Bobcat, Raptor, and Wahoo. IOC clearly has a whole lot of plates in the air, but so far, although they have bobbled a few, they have yet to drop one.

Again, as has been noted many times on this board, if SHU members would read through the various publicly-available documents, including the SPA, and the analyst's reports, most of these questions would not come up.

[efi426hemi]

The only thing missing here (I believe) is that 2126 leaves out an important part of 3.10 in the SPA. The last paragraph there states that both parties to the SPA will use their best efforts ASAP after the execution/closing of their deal to get other parties subject to the existing JVOA to sign the new JVOA and vote to have Buyer (Total's sub which holds the PRL 15 interest) as the new operator of PRL 15. To date we have not seen where a new JVOA has been executed, nor do I believe Total has been designated as Operator (I think IOC is still the Operator). Assuming this is all true it would mean that they are still governed by the old JVOA and if management has stated "there is no such agreement", it would be a reference to the new JVOA. Since IOC has used the standard JVOA (which I pointed out some time ago along with a link to such an agreement), whatever is in the original JVOA regarding an LNG plant would still govern.

Hey Ducks,

I clarified this point at the last AGM.  You are correct, IOC is still the operator and they will remain so until the additional Ant wells have completed drilling.  The reasoning for this is that you should have the expert making the decisions on the key operations that are being undertaken at that specific time.  And at this point in time, IOC is the most knowledgable about the drilling that needs to be completed.  I expect that the operator title will be transfered during FEED to Total as they a considered the expert in LNG plants.

H&H,

Hemi

p.s. 2126: It was most refreshing to read your comment below and it was a nice change of pace from the whining and complaining that dominates this board.  Thank-you for taking the time, it is most appreciated.

Again, as has been noted many times on this board, if SHU members would read through the various publicly-available documents, including the SPA, and the analyst's reports, most of these questions would not come up.