'Gator' pid='22881' datel Wrote:[quote='jft310' pid='22866' dateline='1369306993'] If I were a fund share owner and I found the fund manager sold something that was worth well more than $400 in 2-3 years(monetization of the assets with a CSP) for $150 today I would see he was fired . Fiduciary respondsibility cuts both ways short and long term. Everyone wants a deal and thats a start on proper valuation work(gets those short term fund owners off your back) and then to drill more prospects and with those drilling results we can get a better resource estimate and then can get a Net Present Value for IOC based on the new assets. With this first deal closed and FIDed IOC is worth quite a bit more. Drill several more wells and we can talk takeover then. Or the two spike theory works for me.
Three years ago you said it would be over $400 by now. You have also told us we would be getting 2 XOM shares for part of E/A. You have told us IOC has received takeover offers in the past, but they were “verbal” therefore never presented to shareholders. So when you said “they voted those top 10 to not sell the company” that is not true. Maybe to BoD voted not to sell (in the past) but shareholders have never had a vote on a buyout.
I am looking at the real world. Right now IOC is taking bids for xx% of E/A at a price of $y.yy per mcf. We don’t know what x or y are, but currently z (IOC stock) is $92.34. Any buyer in the real world is looking to buy at the lowest cost they can. There are also a limited number of buyers because the PNG government is making the rules. Bidders might be going back and forth and y might be going up. When they buyers see the total cost of x% vs. the cost of z*T (where T is a takeover premium) the buyers are at a tipping point. Do I raise my bid to outbid one other buyer, do I buy the whole company, or do I walk away? So like it or not, InterOil is for sale. As the old joke goes, now we are negotiating price.
Shareholders buy stocks to make money. 7 of the top 10 shareholders are in the business to make money for other people. If given the choice they might be willing to sell at a 50-70% premium to today’s price vs. waiting and hoping for an unknown down the road. Three to five years is a long time in this economy. With the heave concentration of shareholders, IOC stock maybe has become a one way ticket. The only way some shareholder will be able to exit, is a complete buyout of the company. As I said, InterOil is for sale.
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I agree 100% with Gator. This is an optimistic group (JFT, especially so) and I supose that $400 per share could eventually materialize, but let's remember that a lot of things have to occur in the manner that is expected/hoped in order for Tri (and the other pearls) to have any value at all. Is it conceivable that the drilling at Tri might not lead to monetization and that the "two aces' that is just commonly assumed to be in our poker hand is really an ace and a seven? I think that has to be considered as at least possible in valuing IOC right now.
So, what's the known ace worth? Pavel guestimates a conservative NAV (based on $1 mcf) at a little over $100 for E/A. Maybe the selldown bidding will blow that mcf number completely out of the water (an optimistic hope...not a given), but for the sake of a reasonable hypothetical...a 50% increase over Pavel's mcf-guess would give a NAV of $160ish for E/A. An offer now of $200 would, therefore, include an extra $40 above proven NAV. The other assets could, of course, turn out to be worth double or triple the E/A figures...but what if they don't? Then we've waited years; diminished the NAV by the cost of the future drilling/operating costs; and still don't have any additional pearls. The time value of money also becomses a factor and the $200 offer, in retrospect, might seem like a missed opportunity. I certainly get the argument for staying independent, but I think a lot of shareholders would see the argument for cashing out as well.
I don't think the Board is going to ask for my opinion though...