09-17-2014, 12:28 AM
If you want a "near term" number and are saying you think that's $360/share I think we have visions of Cove still dancing in our heads. There have been none of those since, and there are lots of reasons for that. A big one is that projects have proven to be much more expensive and/or many have been cancelled; as well $/mtpa has come down. The LNG industry is maturing as reality hits. Value will be most realized once a plant has been built and shipments commence.
It's nice to think that just drilling one well will get us a certified # or Ts, but we know with Ant that's not the case. A buyer of raw gas is paying the approximate $8.50/T as they have to look at costs/well (which I figure is at least $3/T for IOC's share of drilling 6 wells at Ant to prove up the estimated 7 Ts). Hession can say $20/T but where has he done that to date? That's more of an after cash flow starts amount. Again, read the Berenstein report where they say it could hit $200-$300/share. It's after a plant is built and starts production. Not near term. When I run numbers of what someone might pay near term and assuming what costs would be to delineate and get certified numbers of Ts I come very close to what Bernstein says their price target is; $90-$100 if all goes according to plan near term.
Bernstein Page 2:
"Our valuation of US$90/share is based on the net asset value of a two-train LNG development with a 25% discount to NAV. Using a DCF model of a two-train development (8.5TCF reserves) and a 25% discount to NAV implies InterOil is worth US$90/share. Benchmarking to Oil Search's recent acquisition of Pac LNG implies a minimum value of US74/share (inc. cash), which is above where IOC is currently trading (US$56/share). Blue sky upside by 2022, using a P/CF multiple of 7-10x (where LNG peers are trading) and a cash flow of US$30 per share implies a value which could ultimately reach US$200-300 per share."
It's nice to think that just drilling one well will get us a certified # or Ts, but we know with Ant that's not the case. A buyer of raw gas is paying the approximate $8.50/T as they have to look at costs/well (which I figure is at least $3/T for IOC's share of drilling 6 wells at Ant to prove up the estimated 7 Ts). Hession can say $20/T but where has he done that to date? That's more of an after cash flow starts amount. Again, read the Berenstein report where they say it could hit $200-$300/share. It's after a plant is built and starts production. Not near term. When I run numbers of what someone might pay near term and assuming what costs would be to delineate and get certified numbers of Ts I come very close to what Bernstein says their price target is; $90-$100 if all goes according to plan near term.
Bernstein Page 2:
"Our valuation of US$90/share is based on the net asset value of a two-train LNG development with a 25% discount to NAV. Using a DCF model of a two-train development (8.5TCF reserves) and a 25% discount to NAV implies InterOil is worth US$90/share. Benchmarking to Oil Search's recent acquisition of Pac LNG implies a minimum value of US74/share (inc. cash), which is above where IOC is currently trading (US$56/share). Blue sky upside by 2022, using a P/CF multiple of 7-10x (where LNG peers are trading) and a cash flow of US$30 per share implies a value which could ultimately reach US$200-300 per share."