THE DEAL

[johnwgrant]

Thanks Itinvest for sharing !!!

[Investor1979]

So the Deal with Exxon doesn't include any share of condensate?

[ltinvest]

Interoil and Exxon will be partners in the CSP. Located at E/A of course and scheduled to start production in 24 months.

[Getitrt2]

Some additional impressions I have:

- IOC may also get some ownership in PNG LNG.
- I think JFT is right in that XOM will probably be spending another $1 billion or so on additional drilling in PRL 15, starting probably with Elk 3 and Antelope 4, and there may also be some drilling in other prospects in the PRL such as Mule Deer, a formation adjacent to E/A.
- Probably 22.5% of the gas sold to XOM will be from the government, in addition to part from Pacific LNG, leaving IOC a larger portion for future deals beyond the proceeds from this deal, and much more flexibility in how it proceeds from here.

Comments Itinvest?

[tarulestheday]

Can we "bump" good posts here on SHU like some of us do on Yazoo?

Well, I just did. Superb post ltinvest - all facts, no speculation.

60 days? We don't need no stinking 60 days.

[admin]

Can we "bump" good posts here on SHU like some of us do on Yazoo? Well, I just did. Superb post ltinvest - all facts, no speculation. 60 days? We don't need no stinking 60 days.

A bump from the options master, no problemo, Tarules.

[Hoosier1]

The deal is going to be what it is going to be & I could be way off base here - I'm one of the crap longs - but in regards to Itinvest's 10 points... won't the market react most significantly to where point #5 ends up ($/mcf)?

Points #1, 2, & 3 are understood

#4 - as to any upfront payments... the improvement to cash will have to be offset on the balance sheet

#5 - if it is only $1.00-$1.20/mcf then I wouldl not expect much of a share price appreciation (short term). IMO, the market is expecting more. The simple story would be... with all of the SM's, NOC's, etc. in a bidding war, all IOC could get was $1.00

#6-10 are just expected logistical results of the deal, but will not be quantifiable (to the market) until sometime in the future

I have not spoken to Houston, but I have had direct conversations with some who have... and this does not seem to correlate with the consistent response that this is the best deal anyone could imagine (there's been a lot of imagining " border="0" class="smilie" src="http://shareholdersunite.com/mybb/images/smilies/tongue.gif" />...

Anyways, I appreciate all of SHU posters... good stuff.

[Petro2458]

Market is currently expecting $0.60 cents. Respectfully, all the talk of big $/mcf values are impossible. The numbers required to get NPV's over $2/mcf are fantasy land. To be clear I am talking after 30% tax, net of gov 't take, and with very realistic production start dates.

$1 to $1.2 to $1.50/mcf for first train and reserves booked this year make this a perfect analog to OSH...and a double from here.

[Palm]

"#4 - as to any upfront payments... the improvement to cash will have to be offset on the balance sheet"

However, there will be the addition to the balance sheet of reserves at FID which will come very soon. That's a major accomplishment.

[ltinvest]

"- IOC may also get some ownership in PNG LNG.
- I think JFT is right in that XOM will probably be spending another $1 billion or so on additional drilling in PRL 15, starting probably with Elk 3 and Antelope 4, and there may also be some drilling in other prospects in the PRL such as Mule Deer, a formation adjacent to E/A.
- Probably 22.5% of the gas sold to XOM will be from the government, in addition to part from Pacific LNG, leaving IOC a larger portion for future deals beyond the proceeds from this deal, and much more flexibility in how it proceeds from here."

Get. I'm not as clear on these details as I am on the others. Certainly sounds plausible.

As for the valuation comments, It doesn't appear the market is pricing anywhere near the true value of this deal. I consider the $1-$1.20 to be quite attractive....and without having to build an LNG plant!!! As STP often points out......think of the value this first deal creates going forward! It's important to view this deal as a starting point and not a finish line. It is transformative to IOC, unlocks tremendous value and significantly derisks the stock. Tremendously accretive.

1) IOC will receive staged payments in a transaction valued at $4B to $5B.

2) IOC will have ownership in a gathering system, pipeline, and CSP plant.

3) Cash flows from CSP starting in 2015.

4) Ability to do future deals with 4.5T to 8T (TBD) of gas and liquids at E/A.

5) As Palm states, FID and booked reserves.

6) Accelerated exploration.

etc...

I completely agree with Petro......."$1 to $1.2 to $1.50/mcf for first train and reserves booked this year make this a perfect analog to OSH...and a double from here"