Canadian firm stops LNG projects

[Kaliboo]

Putz: You said "No one knows if Papua get's funded, delayed or shelved." I guess what you meant to say was "The PPS is trading as if many people are concerned that Papua LNG may be delayed or shelved, but I'm not worried."

That's correct. I might be a little bit worried about the time frame though. I wish I had insight into LNG demand at 10 bucks versus 20 bucks?

Can't say I've thoroughly followed this but I think the "sentiment meter" on this board is that Total will move to drill A7, more for delay reasons than for technical data needs.  However, on projects of this scale, more data is always useful.

Some things that likely are in their thinking should include the following.  Anyone want to build/take away from the list - have at it.  But at least in my limited knowledge, I see lots of potential reasons to drill well 7 and delay, than to trigger the recert process.

1.  Balance sheet concerns to survive a protracted downturn and sustain the dividend. Cash is king, so hold onto it until the picture improves or at least gets clearer.

2.  PNG is a bird in the hand.  Deferral of the required payment above helps the balance sheet for a few more months which is helpful to get a better forecast of where the market is heading.  E.g., how fast will US shale developments rebound?  The well 7 cost is covered by income gained by deferring the CAPEX for the recert.

3.  Supposedly according to EIA and others, oil prices should be rising by late 2016 and forward.  Verifying this via the delay will give more confidence for an FID and may help secure better LNG pricing and financing.

4.  If prices are in fact going to be rising later this year, then the window of opportunity to buy attractive fire sale, distressed assets around the world may start to close as others with cash move in to seize the opportunities. Many companies are trying to sell assets to raise cash, so it may not be this good of a buyers market for a while.  These opportunities may be better than or comparable to PNG on a profitability scale.  So holding onto the cash a while longer would be smart to allow decisions on these opportunities and determine how they fit into the CAPEX landscape as well as other related concerns.

5.  Possibly other deal making with IOC may include modifying the terms on the E/A sales purchase agreement.  E.g., to something that gives IOC a steady stream of smaller annual payments over many years to come and/or Total picking up a higher  percentage of the CAPEX on joint projects going forward, including E/A.  Of course all of this must consider the PNG gov't and OSH stakeholders.  Shareholders and the market might like the idea of these terms of steady, significant income stream bridging the gap between now and first LNG shipment.

6.  Not on this list, in my opinion, is any consideration of divesting the deal with IOC.

Others?

Kaliboo