'petrengr1' pid='16583' datel Wrote:
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!
Interesting thoughts Pet, and something we have kicked around at various times. A couple of questions:
1. Does your /mcf price consider just the gas ("for the gas"
or does it include the condensates as far as real value?
2. The stated premiums have been a bone of contention several times as far as a debate on whether a SM might be "encouraging" the push down of IOC's pps for the purpose of a buyout. Premiums on buyouts vary greatly depending on the economy and stock market valuation levels. Today we sit at near record highs which tend to reduce premiums paid because companies are considered more fully valued. As retail investors gain confidence and re-enter the stock market after being on the sidelines for so long we are seeing higher and higher markets. When will it end? Who knows? But this is when bubbles begin to form as well as corrections. So if I am that SM my thinking would be to strike very soon for a buyout because I might be able to reason a smaller premium as an initial offer because of the markets being high right now. Might be able to steal the company if others do not follow. If others do join, then I can up my bid. These guys will likely not throw out a 50-75% premium right out of the gate while the market is heating up.