'<strong>ArtM72' pid='13851' datel Wrote:I don't see how PNG can be motivated to have a higher $/M buy-in. That simply makes no sense when they look to control their own costs and maximizing the margins when gas is sold to others. The big question is whether PNG is taking a laissez faire position with respect to IOC negotiations in the selldown. Human nature tells me the chances of that are pretty slim. IOC's best deal would be to give/sell PNG a total of 4 TCF from E/A, with any remaining in the formation above 8 TCF the 77.5% property of IOC. That gives PNG all the gas they will need for a long time but leaves IOC with an upside. Triceratops seems to be a clean agreement with PNG at this time although there was already some suggestion new licenses will be negotiated on terms more favorable to PNG. More favorable than what? So many questions.
Hey Art,
Consider this: In round #s, Mitsui CSP deal valued E/A at about $20 Billion. Mitsui to receive 5% E/A for a Billion dollar CSP swap. Roughly $2.4/M from memory. PNG had rights to 22.5% E/A for sunk costs and those are in the hundreds of millions, or $.70/M tops. That 22.5% chunk is worth about 4.5 $Billion. Not bad equity position. Spend less than a billion, receive $4.5 Billion assett. Tremendous borrowing power for PNG and that is the benefit for a high buy in price.
If PNG opts in an additional 27.5% at any price above $.7 it increases their collateral position. Even if PNG pays $2.5/M for that 27.5% their blended cost is still miniscule and their borrowing power remains. PNG likely will flip that 27.5%, or a large chunk of it, to a third entity and that will place an even higher value on their E/A ownership %.
A high $Mcf today also sets precedent for future in country sales and that is more reason for PNG to help settle IOC's stake sale at a high $Mcf. The more it sells for, the more they can borrow and loans are re-paid by flipping chunks or from future LNG revenues. Basically not much out of pocket needed for PNG in these transactions. Make sense now?