10-19-2013, 04:21 AM
Notes on my discussion today
Spoke to Wayne today. Very useful call. Here are my notes based on MY interpretation of our discussion.
(1) First I am reassured. It appears XOM is at the table and eager. It appears IOC is not asking anything unreasonable. An equity stake in PNG LNG sounds like it's definitely part of the package. The citi report is not a bad guide where the guy used $1 an mcf to estimate an 11% stake in 4 trains. I get the impression XOM wants to eat all the gas at E/A. 1 train is a given and the negotiations should include delineation drilling for 2 or more trains.
I suspect about $1 an mcf will be the price in a final transaction.
(2) The ship is now run very tight by Hession. In particular, Pacific LNG is not at the table and they were the source (apparently) for a lot of leaks. The I bankers are also not at the table. Hence the dearth of leaks and info. Hession fully understands that he didn't support shareholders in the last call, and I expect things to be different in the next call assuming a deal is not already announced. I still hope we get a deal prior to our conference call.
(3) Apparently it's down to the fine details. Hession has brought in a lot of expertise from Woodside and they are negotiating away to get us the best possible deal. Most importantly, it appears there are no objections from Duma or Kavo, and we already know the national government is on board.
(4) Everybody wants it done. I do believe it will get done now. The BOD fired Phil basically because he was running amateur hour with lots of overpromising and underperforming. That has swung the other way. Hession doesn't want to say anything; he appears to want his results to speak for themselves. We shall see.
(5) They do not believe that PRL or PPL retention will be an issue. Expiration is in March 2014, and so far, licenses have been renewed for companies in good standing in the PNG. I tend to agree.
(6) Oct 31 XOM conference call; the week of Nov 11 for us. I expect it to be handled much better than last time.
(7) They have enough money to continue exploration. Wahoo should still spud in November and a PRE joint well at Triceratops in Q4 or Q1 of next year. They are running seismic with oil exploration at triceratops, and they've also seen a new anomaly between Tricer and E/A. That's exciting.
(8) In terms of other possible partners: they are all majors. I get the feeling Total is the main player interested in IOC, which also makes sense in terms of their land position and failure to hit with Oil Exploration. If they top XOM, it will have to be a damn good offer since it will be a green field project versus XOM's excellent economics of adding to their existing infrastructure. XOM's pipeline can already support 3 trains.
Summary: I think we have been smacked around by lack of data. It sounds like negotiations are on a reasonable track to the extent that Wayne knows what's happening. I expected a sell-off around the debt ceiling issue as I posted before. I also expect a strong rise going into the XOM call; a prediction I hope comes true!
I think the call confirms my view that this is a different IOC. It's run by a serious crew. We are trading at less than 1/2 my expected price for E/A alone. The company will be massively rerated if or when they close the monetization deal. Let's see some results by our conference call please!
Wiggling