Why should Total buy IOC?

[petrengr1]

1. They would be buying back the SPA agreement,  removing the risk that they may have to pay Exxon $1.00/ MCF for an unlimited resource volume.

2. They could probably buy IOC for less than they may eventually have to pay Exxon ie unlimited upside on resource payment.

3. They could proceed with Papua LNG and benefit for 20 - 30 years of LNG sales. If they proceed with Papua LNG they would no longer owe the FID payment, the first cargo payment and would not have the risk of having to pay more for the certification after production has commenced.

4. They would get 4 million acres, 35 prospects including Triceratops, Bob Cat and Raptor. That would give them a use for the millions of dollars worth of seismic and gravity data that IOC has acquired.

5. They could continue to benefit from the work they have already done in France and with the people they have brought to PNG. If Exxon prevails they will probably be reassigning personnel.

6. They would not have Exxon and OSH controling where the gas will be processed.

There are probably many more reasons that you can think of.

[AU74]

If I was TOT, I'd wait a month or more, then submit a superior bid. Msanwhile, I'd drill A7 ASAP. If XOM coutered, I'd have probably get A7 results before deciding to keep bidding.

[cybersssss]

Many reasons, especially financial motivated ones, where total should not sit idly by and allow Exxon to control the gas in png.

So why is total rolling on their backs???? Beats me. Perhaps that is how they do business. Not the smartest way. After all, they did sign this open ended contract that will end up costing them heavily. Seems to me that they are hiding this from shareholders. That is not financial discipline that they claim to have.

[calvin grad]

Almost all of you know more about oil and oil companies than I do but I read a book that stated that the majors do not bid against each other. That seems like the best maybe only explanation to me.

[CAC]

'cybersssss' --  Many reasons, especially financial motivated ones, where total should not sit idly by and allow Exxon to control the gas in png. So why is total rolling on their backs???? Beats me. Perhaps that is how they do business. Not the smartest way.[/quote]

*****

I believe I can propose a logical answer to your question. I don't think they are rolling on their backs. Their best case scenario at this point is to have IOC survive, because they likely believe they can reduce or minimize certification payments. I think they believe this to be the case if IOC stays independent and also if OSH owns IOC. This may not be the case if XOM wins. So, if you're TOT, and convinced you can't let XOM win, you have to bid? Maybe eventually, but not yet. Why not wait and see if the IOC shareholders vote down the deal? If they do, then you're back in the catbird seat (tot against IOC) without having to buy IOC. If the shareholders approve the sale, that's when they need to make s move. If I were TOT, I'd hope IOC shareholders vote the deal down...but I'd pounce after a vote that approves XOM.

[Crippsfl]

Almost all of you know more about oil and oil companies than I do but I read a book that stated that the majors do not bid against each other. That seems like the best maybe only explanation to me.

Obviously not bidding against another major is not on Exxon's list of things not to do.  In reality, the OSH bid was a Total backed offer.  Exxon was bidding against Total.

i cannot believe that Total is going to sit back and let Exxon to destroy their plans for PNG and pay them to do it.  If the resource estimates come in where we believe they belong, Total will finance the Exxon purchase. If I were a Total shareholder, I would be going ballistic!

[Palm]

For the attorneys on the board, Section 13.7 of the SPA has to do with Assignment:

"Assignment

A party may not sell, assign, encumber or otherwise dispose of its rights and obligations under this Agreement without the prior written consent of the other party provided that if, after Completion, the Buyer wishes to sell, assign, encumber or otherwise dispose of its rights and obligations under this Agreement, it must give notice to the Seller and further such sale, assignment or encumbering shall not be effective unless and until the proposed transferee expressly undertakes in an instrument reasonably satisfactory to the Seller to perform the obligations of the Buyer under this Agreement in respect of the interest to be transferred."

Does this mean that Total must sign off on the sale of IOC?

[katytrader]

For the attorneys on the board, Section 13.7 of the SPA has to do with Assignment: "Assignment A party may not sell, assign, encumber or otherwise dispose of its rights and obligations under this Agreement without the prior written consent of the other party provided that if, after Completion, the Buyer wishes to sell, assign, encumber or otherwise dispose of its rights and obligations under this Agreement, it must give notice to the Seller and further such sale, assignment or encumbering shall not be effective unless and until the proposed transferee expressly undertakes in an instrument reasonably satisfactory to the Seller to perform the obligations of the Buyer under this Agreement in respect of the interest to be transferred." Does this mean that Total must sign off on the sale of IOC?

No, I think this is legalese to provide that a new entrant must assure in written form that the SPA terms will be executed.  Hey, but I'm not an attorney!

[jft310]

A name less PR person says Total needs to let the air clear on the OSH deal . Companies do not broadcast their forward intentions . The denial statements are typical and not worth much .
His opinion is before Exxon closes we will hear from Total . He is a large IOC stock holder and certainly can't say 100 percent Total makes an offer .
A former Senior IOC exec also feels Total will make a run before it's over .
I agree with PET and hope all of the tummy pulls prove to be successful .

[Palm]

WA once said, "Think cereal"