05-22-2016, 02:24 AM
(This post was last modified: 05-22-2016, 02:58 AM by Indoreservoir.)
Been reviewing the OSH deal and still don't know if it's fair IMHO, but maybe it is. Agree with Stavros and others that we should have fought for more (maybe we did, however, we don't know).
And the question remains as to why sell now? Can't cipher on that one. But we're here now with an accepted cash-out or share deal.
Seems to me the key question as all know is cash now, or risk for more $ per share in 1-5 years.
A few random comments, which try to put the deal in perspective.
1. Lest we forget, TOT cert/FID/first cargo money would not be distributed to shareholders - it would be in corporate for our twits to piss away. So how much would the payment affect our share price? Dunno, but my quick calcs post from yesterday compared the OSH vs TOT pmts on a cash/share basis, and TOT was higher in each calculation but not spectacularly so, dependent on share value as we moved to reserves cert/payment, FID, and first gas.
2. We have to pay our share of the LNG plant construction. Say $10-12 billion and we're on the hook for 30% equity up front (rest financed) times our share (36.5%?) of that. For argument sake let's say $12B*.3*.365 equals 1.3billion. Adjust if u believe $10B is the number given weak construction market, which might happen.
We have to burn $100 million/yr (?) on our corporate overhead FEED etc so that's 6 yrs till Jan 2023 first LNG or $600m.
So we need $1.3+.6 eq $1.9 billion cash in the bank to get us first. LNG. I\'m guessing we get that or more on certification and FID. So we could make it to first LNG as a standalone company, but we'd be a weak partner.
3. Folks are worried about playing with cert nos. Don't think it will happen on a large scale. Reserve certifiers can be induced to add 5% or maybe 10% by a hard-working Client, having done these exercises before. You basically get to work with the certifiers and review the work and final draft, and you comment (hard/soft) on it, and might get these % increases. Maybe. Also be aware that the certifiers are getting all their data from the Company/Client so would they withhold? Don\'t think so but possible.
We may get screwed by OSH/TOT here, but not by 20-30%, 10% tops IMHO.
Remember 7T will support 2 trains. They will not build 3 trains even if they have 10T, IMHO. Too much up front risk money. Could be wrong . Maybe they'd go for 2 x 5mtpa trains. Possible
4. XOM's plant NPV10 is approximately $13B now, if u believe WoodMac and thats rough and VERY dependent on oil price/lng price assumption. So say our fields are closer to the plant and give us $14B NPV10. At startup we get 36.5% of that (ignore the PNG Govt buy in) which means our NPV10 value is $5b and spread over 49.86 mill shares that\'s $102/share which of course would be discounted in our share price.
If they go for larger LNG plant then our NPV10 is larger, but so is upfront spend.
5. Most oil and gas M&A deals are now done on a 2-stage bid process - invite two highest/best bids and let them compete in Stage 2 bids. Did IOC do that? No idea. I know they had a dataroom in Sing but I didn't see the Info Memo / bid rulesand don't know the process. Could check but it's academic now methinks.
6. As some have said, what\'s the alternative? Kill the deal and put our hands in way overpaid pink shirt hands, or take the cash/OSH?
Soooo, is it fair? Hate to say it but I think it may be given the numbers above. Cash now versus promise of cash later, or you can hang onto OSH to capture the later value.
Correct any of the above coz may made errors. Saturday night so sorry for the randomness of the points.
GLTAL, and good night.