Where will IOC get its project money? What?!!

[bam]

If the correct number needed is $500mm, I agree we shouldn't be worried about that.  However, I do have an issue with some of the assumptions above.  I'm not sure how anyone is going to put a $22bn valuation on E/A with this few wells drilled.  My sense is that people don't pay $2/mcf for a project in its infancy like this (I hope I'm wrong!!), when everyone knows they need to sell a piece to appease the local government.  And as much as I hate to agree with Bonk and his clown friends on yahoo, claiming that the PRE deal was at $3/mcf just isn't correct, imo.  So much of that number is back end loaded and has risk attached to it, you cannot value it in today's dollars.  There needs to be a big discount.  The way I've approached IOC from a takeout standpoint, the best case scenario i'm hoping for is this.

1) Assume someone pays $1.10-$1.15/mcf

2) Give IOC 4.5tcf net at E/A, and 2.5tcf net at Triceratops

3) Pay $1.5bn for the refinery and remaining land leases

So I get to about $185/share

If someone can show me an example of majors coming in and taking over projects like this at higher valuations, I'd love to see it.  But I don't think someone coming in and buying a piece of a project where a major is already involved, or where there's been far more extensive drilling, are applicable here.  I'm talking about a very small company doing an early stage independent project that gets bought by a major.  I'm more than happy to be wrong on all of this as it means more $$$ for everyone.

I raised this point on an earlier thread and don't think i ever got a response.  But if we look at the COV deal, that looks like they got bought out for under $1/mcf.  Yes, I know it's offshore mozambique, but it's also a huge field being operated by Anadarko.

If someone is willing to pay anything close to $2/mcf, I can't understand why we wouldn't sell it all.  To me, the point of these things are to make discoveries and sell them for $2-$3/mcf, and move on to more exploratory drilling.  Why would we want to stick around for all the operational risk?

bam-bam,  Mitsui valued E/A at 22$ Billion by agreeing to swap a $550mill CSP for a 2.5% stake in E/A in Aug. 2010.  Me thinkie we get blown away as Phil has alluded to, with the $5-$7/M deal, with just how valuable E/A is to the bidders.

Tree, I don't think you're understanding of that deal is correct.  The estimated costs are $550mm, and Mitsui is responsible for arranging the financing.  They are not responsible for paying for all of it.  I think that IOC was simply looking for assurances that Mitsui would use their huge balance sheet get the best terms possible for debt deal.  The actual debt will be shared equally by all the partners.  In addition, they paid $6.3mm for the option to acquire an additional 2.5% of the E/A field (on top the the 2.5% they own from completing the structure).  So a couple things here - in the end, IOC will not own the 58% of the field that they currently state - because the Mitsui option has not been factored in.  And in no way did the Mitsui deal imply a $22bn valuation on E/A.  Here is an exerpt from the 2011 10K

On August 4, 2010, we entered into a definitive Joint Venture Operating Agreement ("CSP JV" (see

“Material Contracts&rdquo for the CS Project with Mitsui, which agreement replaced the preliminary agreement

entered into in April 2010. The capital cost for the condensate stripping facility was then estimated at $550.0

million, with approximately $32.0 million of this to be expended for FEED. Under the CSP JV, Mitsui is

responsible for arranging or providing financing for the capital costs of the CS Project in the event that a

positive FID is made in respect of the CS Project. An option deed was also executed with Mitsui under which

Mitsui was granted an option to acquire up to 5% of the Elk and Antelope fields, and in our proposed

liquefaction facilities. Mitsui paid $6.3 million in exchange for this option, with such amount to be refunded in

the event that positive FID is not reached by the agreed upon date and the option is not exercised. An

adjustment is to be made against the final acquisition price in the event the option is exercised.