A7

[MartiniStocks9756]

If it is a go on A7 then I would think two things happen. One certification will get pushed to first or second quarter 2017 if they make that decision. Let's say they make the decision January 1, 2016, I heard here it takes six months for the pad and then 90 days to drill and then the testing and then the 4-6 months for certification evaluation. Second they will hopefully negotiate a deal for some of the assets outside of E/A to generate revenues. Or, they will need another creative method of revenue generation to ensure they can make the company operate through certification. They have enough to get through this year so they said in their quarterly call. So I am sure many here will offer me a better time line. We are heading to serious crunch time with decisions and the JV should communicate with shareholders of all three investor groups on how much we have in the ground so far etc. Perhaps we get more from Total.

[Putncalls]

That is a big FID delay.

[MartiniStocks9756]

Well the question is, is it worth a $400 milllion to a little over a billion to delay a year or 9 months. Is that worth the gamble? Will they have the revenues to sustain through that period? Lot of unknowns.

[calvin grad]

I would like to make three assumptions and believe them to be true.

1. Total and IOC are partners and are cooperating with each other

2 Total is focused on developing the lowest cost project and minimizing as much risk as possible

3Total and IOC have enough information to know that there is 12.5T of resource without A7

 What would reduce costs and minimize risks?    Build the pipeline for four trains instead of two trains. Prove that there is 14T with A7 and sell  7T at lets say a 40cent  per T profit. This could be to either  Exxon or Woodside with a 30 percent partner. It could

be a  resource sale with no participation..Lets say the deal has a 2 billion down payment and the balance adjusted for interest is paid when extracted..Pretty sweet for IOC. More certification money, 30 per cent of 2 billion for participation and  more cash flow to the project as the extraction payments are made..

The above is all speculation but we do not know what possibilities M Hession is entertaining. I trust that if we knew we would likely make the same decisions

[jft310]

Morgan Stanley addressed the liquidity issues stated there were none . Per Morgan Ant 7 with a go moves payment from 2nd quarter to 3rd quarter 2016. Handicap the source your way .

[ArtM72]

Well the question is, is it worth a $400 milllion to a little over a billion to delay a year or 9 months. Is that worth the gamble? Will they have the revenues to sustain through that period? Lot of unknowns.

The gamble is the present value of the newly-found 2T minus the present value of a producing LPG plant evalulated for the one year delay minus the present value of the corresponding reduction in the balancing certification whenever that certification is called for by IOC.  I haven't done the math but  there would likely have to be some extraordinary combination of interest rates necessary to provide an economic justification for drilling A7.

A far more rational well location drilled to assure gas would be available to justify 10 MTPA would be Antelope South or the eastern flank of Raptor.  Either would be carried. Either could potentially provide 3 TCF.  All they need is a test well.  And likely both sites have been cleared.

[Getitrt2]

Morgan Stanley addressed the liquidity issues stated there were none . Per Morgan Ant 7 with a go moves payment from 2nd quarter to 3rd quarter 2016. Handicap the source your way .

That is an erroneous reading of Morgan Stanley.  They called the timing on Ant 7 "unclear", depending on various factors (decision, site, rig, etc.).

[Getitrt2]

Well the question is, is it worth a $400 milllion to a little over a billion to delay a year or 9 months. Is that worth the gamble? Will they have the revenues to sustain through that period? Lot of unknowns.

The gamble is the present value of the newly-found 2T minus the present value of a producing LPG plant evalulated for the one year delay minus the present value of the corresponding reduction in the balancing certification whenever that certification is called for by IOC.  I haven't done the math but  there would likely have to be some extraordinary combination of interest rates necessary to provide an economic justification for drilling A7.

A far more rational well location drilled to assure gas would be available to justify 10 MTPA would be Antelope South or the eastern flank of Raptor.  Either would be carried. Either could potentially provide 3 TCF.  All they need is a test well.  And likely both sites have been cleared.

An additional 2 Tcfe would provide huge "economic justification" for drilling A7.  Neither Antelope South nor Raptor would provide the additional certification being discussed per the SPA.  Raptor would not be carried, and I feel sure neither site has been cleared.

[Getitrt2]

How many share owners want IOC to get bought out before A7?

Puts, to me, that is not the question at hand.  The question that scares me is, "when does the appraisal wells stop?"

We have not been given any guidance on that question.  Let's take Pet's previous post that stated we may need up to 3 additional wells to define the extent of the gas boundry.  IOC has no additional money coming in, but we have the Phil hope that another deal is in the works.  Let's assume 3 wells, one year to perform.  That puts certification at about 1.5 additional years out (and I being aggressive on the timing) and of course not having adverse effects on FID timing.  Where do you think IOC's share price will be in 1.5 years with let's say $400MM in debt?  Will we still have all of the majors holding their shares?  If not, we have the possibility of the share price going much lower.  My prediction is we never get to certification because Total will simply come in at the 50% markup to the current share price and buy IOC for the price of the certification payment. And please don't tell me that can't happen. Prior to certification, the only estimates we will have will be from TOT, IOC, and OSH. Clearly, the market does not believe IOC's estimates, and TOT/OSH are not going to speak up and support those estimates.

And where does this put the IOC business model of discover, sell down, and repeat?

MH needed to give us a very clear picture of the future of IOC in the call.  We are reducing spending down to $10MM plus our share of drill costs or something to that effect, but I have not seen that at all.  So we do not have a clear picture of IOC moving forward either in spending rate or business model.  So one can clearly understand why people are frustrated.  Being a poker player, a good starting hand is ace, king in texas holdem.  However, when going up against pocket queens, ace, king is just a hope and a prayer.  If they don't hit, you are losing alot of chips.  That to me, seems to be IOC at the moment.

Good luck longs, I still believe in the resourse but also believe this contract with Total is not genius.

I feel sure you do not need to worry about ANY appraisal wells beyond A7, even IF it is drilled, nor any of the other issues you raised.

[ArtM72]

Morgan Stanley addressed the liquidity issues stated there were none . Per Morgan Ant 7 with a go moves payment from 2nd quarter to 3rd quarter 2016. Handicap the source your way .

That means in 3 months they have to site and spud a well.  Haven't seen evidence of that capacity demonstrated to date.