Indicates a second deal is simultaneously in the works and provides a good overview of how well positioned Hession is to close with Exxon...
Companies and Markets
Hession works up new vision for InterOil in PNG gas
Angela Macdonald-Smith
15 August 2013
The Australian Financial Review
New InterOil chief executive Michael Hession has unveiled a streamlined strategy for the Papua New Guinea refiner and explorer that will cost jobs but could also bring in a new partner for exploration and gas development.
In his first earnings announcement since taking the top job a month ago, the former Woodside Petroleum senior executive told investors the US-listed company will refocus on exploration where it has been particularly successful and ditch ambitions to operate its own liquefied natural gas project.
Dr Hession left Woodside in May after 14 years, most recently heading up the Browse LNG venture that was shelved in April in its original form.
He joined InterOil last month, taking up the role vacated by founder Phil Mulacek, who retired in April.
In some quarters, Mr Mulacek was seen as an obstacle to InterOil's push to find a major partner to commercialise its Elk and Antelope gas fields in the Gulf Province of PNG.
Advised by Macquarie, Morgan Stanley and UBS, InterOil ran a lengthy process that attracted companies including Shell, Total and Woodside potentially interested in developing the circa 4.7 trillion cubic feet of gas fields.
The process culminated in InterOil's announcement in May it had entered exclusive negotiations with ExxonMobil for the sale of gas from Elk-Antelope.
The gas would potentially be used in an expansion of Exxon's $US19 billion ($20.88 billion) PNG LNG project, currently under construction.
In a teleconference with US investors on Wednesday night Australian time, Dr Hession said exclusive negotiations with Exxon on Elk-Antelope were continuing.
But he also said InterOil was seeking a partner for exploration that could lead to a separate LNG venture.
"We've got what can only be described as a world-class exploration address around the existing discoveries and I think that's been recognised throughout the industry," he said. "And so what we will be looking for would be a strategic partner who would want to work with us to deliver on that potential upside."
Dr Hession's comments came as New York-listed InterOil reported a net loss of $US13.2 million for the second quarter, compared with a loss of $US31.7 million for the same three-month period a year earlier.
InterOil shares sank 10.1 per cent in the US on Wednesday amid suggestions some investors had hoped the company would pursue its ambitions to operate its own LNG venture, despite its relatively small size.
However Dr Hession, who has also worked at oil major BP, is regarded as well placed to seal a deal on Elk-Antelope with either ExxonMobil or another major partner.
While heading Browse LNG, he oversaw Woodside's $US2 billion sale of a stake in the venture to Mitsui and Mitsubishi and helped with two other deals, including BHP Billiton's sale of its stake to PetroChina.
Meanwhile, InterOil has dropped previous plans for a condensates venture with Mitsui and is making payments to the Japanese trading company to compensate.
It is understood to have taken steps to close down its development and construction divisions, while exploration will be beefed up to support a revived drilling program.
Net jobs losses are expected to number about 50 out of total staff of more than 1000. The refining division will be little affected.
Dr Hession is also strengthening LNG expertise within InterOil. Former senior Chevron executive Isikeli Taureka has been appointed executive vice president of corporate development, while other appointments are pending.