Well, we'll just have to see. I'm assuming that the IPI's and Civelli are also on the hook here so the absolute worst case scenario is we lose what? 20% of E/A, thereabouts. That would quite surprise me, it's against their own law, there isn't any precedent for it on PNG, it goes against the everything we've heard of a cooperative relation, etc.
The most probable case is it would be sold at commercial terms, that is, the same terms as the partner buy-in. There might be a few other concessions on tax regimes, but I can't see this as something terrible:
- Much of it has been priced in already, exactly on this fear did we go from $90 to $60
- I've long argued in favor of, when necessary, conceding on terms and/or selling more of E/A in order to be able to explore and develop more of these possible reefs. There are quite a few of these..
Liam Fox argued it was a $3B deal. Yes, he also argued that it's not clear where that money will come from, but there are more than one possibility here: Shell, Exxon, offtake agreements, to name a few. My money would be on Shell, they came to PNG for a purpose, but who knows. What I do know is that half E/A contains more gas to power PNG several times over, they clearly have a customer for it, or at least in mind.
Little of that is likely to be upfront, but IOC will get enough money from the other sell-down to accelerate exploration, and they could do a few more PRE-type farm-ins as well.
In exchange, much of it will be derisked, we'll have a path to monetization and accelerated exploration. The only ones who will be really disappointed are the ones who counted on a super dividend, but I wasn't amongst them, I have to say.