Citi on OSH: PNG LNG on track

[Palm]

Thanks Gator and Getit. This makes absolute sense when you look at how other LNG projects are structured. Entities such as a MLPs are used to hold partnerships which start out with the original partners. However, since exploration and expansion are very speculative partners agree to consider pullbacks/clawbacks when it's necessary to bring in a new partner. The operator (in this case XOM) has the duty of being sure any expansion is feasible and keeps other partners informed as necessary. Usually existing partners go along with the plan, especially in this case when the economics of PNG LNG are "greatly enhanced" by bringing in IOC's gas and/or liquids. All of this is being worked out between XOM and IOC as each knows what works for them.

OSH's risk in all of this of course is prospects such as P'nyang, Juha North, Kimu, SE Gobe, Barikewa, Uramu and Pandora are marked on their own "Requirements for LNG train growth in PNG" as "Non PNG LNG Gas Resources", then they have many others such as Flinders, Pasca B, Hides FW, Mananda Attice, Korka, Huria, Hedinia FW, Gobe Deep, Barikewa Deep, and some others which are marked as "Exploration Gas Resources". Any costs they have in drilling these are on them and drilling partners until/unless they are brought into an LNG project. They need to keep things looking as positive as possible to hit that magical $8.55 price by next March to keep things whole for PNG. The ideal would be that Woodside buys them out at $10-$13, but that is less likely when drilling has "moderate" expectations.