I am a Super-Major. Let me see if I can understand why I should buy an interest in the Elk/Antelope Field instead of buying IOC.
IOC has a market cap of about 48 million shares x $61 or let’s just call it $3 billion. Most companies can be bought for a premium 50-75%. If I paid a 100% premium it would cost me $6 billion. If I paid 200% premium it would cost me $9 Billion. Let’s say Elk/Antelope Field contains 9 TCF and IOC own 58% or 5.22 TCF. At $6 billion I would be paying $1.15/MCF for the gas and at $9 Billion I would be paying $1.73/MCF. If I could buy the company for $9 Billion I would own 58% of Elk/Antelope (PRL15) or 5.22 TCF plus Triceratops and all of the 40+ prospects in PPL 236, PPL 237 and PPL 238 plus the refinery and marketing.
IOC would like to sell me a 35% interest in Elk/Antelope. If I buy 35% of 9 TCF I will own 3.15 TCF at Elk/Antelope plus anything else I can find in PRL 15. In the bidding process I am probably going to have to pay as much as $2/MCF (or more) for this gas or about $6.3 Billion for the 3.15 TCF.
Would I be better off to pay $6.3 Billion for 3.15 TCF or $6 Billion for 5.22 TCF, Triceratops, all of the license areas including 40+ prospects and the refinery and marketing?
After having all of my financial experts think this over I have decided it would be better to offer IOC a 100% premium for the whole company. This may start a bidding war but it looks like I can afford to raise my bid at least to a 200% premium and still come out better off than buying an interest in Elk/Antelope only (PRL15) since I know for sure there is quite a bit of gas at Triceratops and a very good chance of finding more in the other 40+ prospects.
I hope this works out well for me!