I did not understand Hession's comment on this. What vested, tangible "reward" did they actually get right now for this undiscovered gas? My understanding was that they would only be getting money for this undiscovered gas...if and when it is actually discovered. So if there's no discovery...they get no reward. And if there is a discovery...they have now pre-agreed to sell the newly "discovered" gas for $100M per tcf. Isn't that an "unheard of" price (on the low end) for would be, at that time, fully discovered gas?
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CAC - I would suggest that you spend some time to try and find out how many other NG asset sales have occurred where there was a payment structure for gas that hasn't been discovered yet. This rarely or never happens. Our deal SHOULD have been for ONLY the known gas in E/A TODAY.
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That makes sense. I guess another option (and one that might make our deal more in line with what you say is typical) would have been to sell only the E/A discovery (i.e. the "known" gas); keep the rest of the PRL until the new gas was discovered; and then sell the newly "known" gas for the higher price. Doing it the way they did is a reasonable choice. I just don't know that I see it as an economic coup.