InterOil Corporation: A Conversation with the CEO MS

[steve3752]

Actually the original the 2013 Press Release talked about a farm agreement with Total outside PRL15 . Further the Interoil slides show tie backs to PRL15 from Triceratops, Bobcat and Raptor . Now Hession states he is in negotiations with someone not named to monetize TBR. Not hard to imagine a deal to make those tie backs a reality . The type of deal and when to be determined . Hession further states should take him 6 months to negotiate a deal which would put an announcement before we receive the Total money .

JFT:  He says next deal is at least a year a way or more.  That does not appear to be before certification  as scheduled.

[Palm]

Total let those rights expire, which for them was wise given all circumstances. Those tie-backs are most likely for any expansion and Total's primary focus now is getting Papua LNG designed and accepted, then to FID. They will be cool to sign a deal like Hession says he will do; on same or better terms than the current deal with Total. Markets have changed drastically and it will be tough for Total to stomach coughing up the cash they will owe at Certification. They are not desperate and know it's to their advantage to wait as IOC will likely be the one to bend on a deal. Just because Hession says he will only do a deal on similar terms doesn't mean he can command such a deal. IOC is still a minnow in this industry and the sharks will always wait for the right time for them.

I'm not betting on a deal before we get Certification money. If one comes, great; they will have exceeded expectations.

[Stavros]

Low oil price saved China, Korea and Japan from deep recessions.

Their economies have now bottomed and turned up.

Oil/gas demand will now rise across the board.

Oil/gas supply has now turned over and will continue to reduce.

When oil was $100 per barrel everyone was wildly optimistic.

Now that oil is $45 per barrel everyone is overly pessimistic.

Oil at $75 will be JUST RIGHT GOLDIE.

T Boone Pickens recently said the only way oil price is not $70 per barrel by January 2016 is if it is higher than $70.

[jft310]

All one has to do is look at the PNGLNG pipeline to see how Super Majors think . That pipeline was engineered and built without gas discovered for 3 trains . They only had enough gas for 2 trains but built 3 trains of capacity . Why did they do that because it's cheaper .!!
Interoil has discovered gas at TBR right now , not just a hope and a prayer like Oil Search has but real discovered gas . To think that additional gas outside the current gas will not be part of the plan ignores the fly in your face of what Exxon did .
Would you plan without a deal to monetize that gas ?. Sure that's possible .
That ignores for now Total's original intent to do a farm agreement with Interoil in 2013 and Hession's AGM comments "Let me clear we are in negotiations over TBR right now ."
Hession further stated the Total deal took 4 months to negotiate so use 6 months as a goal but the deal must be as good or better than the current Total deal his words to those that read page 19-20. The problem is Total ready to cut another deal of some type at some price??? we know that Interoil is ready per Hession and their must be some interest to have negotiations . The question is what's the status of those talks??? How interested is Total now???we don't know those answers today . We do know their are negotiations . How long for those negotiations ??

[Palm]

Planning for possible expansion and actually doing another deal within 6 months are two completely different subjects. Exxon put a spur at Kerema just in case. Years later, still unused. PM hinted to me at the AGM years ago that they may have put in spurs further down the coast (Wahoo etc) because each one was "pocket change" to do then. Again, they sit unused. I have no doubt Total will do some planning for expansion, but that's waaaaaaay different from signing a same or better terms deal than they did in 2013.

[jft310]

Palm per multiple sources this is the cheapest LNG build in the world . All the Super Majors have very expensive LNG projects in different stages of development that will get built it appears . The analysts look at it this way LNG projects for a Super Major are a portfolio of projects . If you were a CEO and you had multiple very expensive projects way above Papua what would you do to lower your average costs of your portfolio ?. You would lock in today's lower costs to build and certainly lock up supply . To state the obvious very very hard to imagine anyone else doing a deal for TBR gas besides Total . But if there was no interest then the term negotiations would not apply . Total has a strong motivation to lock up this cheap project the question is at what price or at a price attractive to Hession ? More than fair to say the cheapest to monetize has a HUGE premium price wise to the more expensive to monetize projects . That's how Total and others see it where's the cheapest to monetize gas???Even paying the price Total paid last time makes this project the cheapest to build . How much of the cheapest to build LNG would anyone want ?..answer as much as you can get . This is when Super Majors spend money on assets to lock in low prices . Hint this is the cheapest to monetize and the gas cost is a fraction on the other costs . Can't monetize without the gas .

[jft310]

Actually the original the 2013 Press Release talked about a farm agreement with Total outside PRL15 . Further the Interoil slides show tie backs to PRL15 from Triceratops, Bobcat and Raptor . Now Hession states he is in negotiations with someone not named to monetize TBR. Not hard to imagine a deal to make those tie backs a reality . The type of deal and when to be determined . Hession further states should take him 6 months to negotiate a deal which would put an announcement before we receive the Total money .

JFT:  He says next deal is at least a year a way or more.  That does not appear to be before certification  as scheduled.

steve be more specific where do have you read the next deal is a year away?.. Do you have a link to a different report than this Morgan interview . Hession in this interview has an illustration for well less than 1 year on page 20 .

[Palm]

JFT, you keep wanting to quote Hession, and he has said he will do a deal in 6 months only on the same or better terms. You want to know what I'd do if I were the CEO of Total or any other SM? Ok, the last thing I'd do now is make it look like I HAVE to lock up this miracle low-cost gas. I'm not the desperate one, IOC is and everyone knows it. They have to sell more because it's their ONLY source of revenue and cash flow until a plant gets up and running. If nothing else I bluff that I have other places to develop without appearing desperate.

IOC need the money they get from Total at Certification to pay their way in the project, pay for operating costs and continue drilling in their other license areas. Or of course they can tap LOCs and shelf offerings, which we'd like to see them avoid.

Total can wait and likely will. If negotiations get going somewhere in their licenses, Total will know and can at that time join the party, but they really have no need to be desperate or appear desperate. This is a big boys game and those big boys know how to negotiate from the position of power that they occupy. We should have learned that by now. At the best times to strike a deal in the last 10 years we finally got one in 2013. And that was just under the wire as time and money was running out. We are still a very small player and tbe Bigs know how that game is played.

[jft310]

You miss the current deal surely appears to give us adaquete money to survive and pay our share of the LNG build . Receipt of money sometime in 2016 which averts a cash shortage if there ever was a shortage . The loan was created as a bridging mechanism . If this is the cheapest LNG build in the world then this gas sells at a premium not a discount . Per Hession other are interested in our gas . The gas cost is less than 15 percent of a projects costs . Many Super Majors have very expensive builds in their book and need cheap to build projects to balance out the books . Total would know of the interest from others and they have their share of expensive builds . History shows this is when Super Major lock up future supply .

In fact Hession states they are in negotiation now who here can call the CEO a liar and know the status of those negotiations ???

[steve3752]

[quote='steve3752' pid='61288' dateline='1438608197']

[quote='jft310' pid='61281' dateline='1438603324'] Actually the original the 2013 Press Release talked about a farm agreement with Total outside PRL15 . Further the Interoil slides show tie backs to PRL15 from Triceratops, Bobcat and Raptor . Now Hession states he is in negotiations with someone not named to monetize TBR. Not hard to imagine a deal to make those tie backs a reality . The type of deal and when to be determined . Hession further states should take him 6 months to negotiate a deal which would put an announcement before we receive the Total money .

JFT:  He says next deal is at least a year a way or more.  That does not appear to be before certification  as scheduled.

steve be more specific where do have you read the next deal is a year away?.. Do you have a link to a different report than this Morgan interview . Hession in this interview has an illustration for well less than 1 year on page 20 .

My mistake.  Was reading Palm and thought it was a paraphrasing of Hession.