Legal row looms for Oil Search as rival strikes deal

[Thylacine-2]

Art, we will get more info on the issue soon. OSH has been claiming they have pre-emptive rights. The new deal with Total was structured to circumvent such rights. (If they exist.) OSH is apparently unhappy.This just the first day after the deal. There will be more info in the next few days. There is no material event up to the point where OSH actually takes legal action.

[sydbod]

For those people wanting to argue about these points.
http://www.oilsearch.com/Media/docs/1403...faca-0.pdf
This is the latest document from OSH and was released yesterday on their site.
Taken from Slide:17
*****************************************************************************
» As JV partner in PRL 15, OSH has industry standard rights,
including minority interest protection, work programme and
capital commitments voting rights and pre-emption rights:
–

Ability to influence how resource is commercialised

» PNG Government has expressed desire that Elk/Antelope be
developed in earliest practical timeframe
******************************************************************************
It appears that OSH does stress " pre-emption rights ".
Will they do anything about it or have any plans for it, or are they mistaken ........ I personally don't know, but it does exist in their latest sponsored document.

[Palm]

"Doesnt matter whether or not I believe it Puts, but it's hard to believe that there's nothing to it when there are rumors out that OSH actually filed an injunction." Yeah, the US faked the lunar landing and the Earth is flat. I've heard those rumors so it's hard to believe they're not true.

Yeah, and yet when Galileo countered that Copernicus got it right (that the sun was the center of the universe and not the earth) he was ridiculed for many many years and put on trial. "It can't be". Few would side with him. But he was right in the end. Sometimes what must be isn't and what can't be is. It's always easier to be the Monday-morning quarterback but when you're in the middle of the game, each side says they're going to win.

We're in the middle of this and soon the game will be over. The game is being played and on "Monday" we can look back and know for sure. Not worth getting bent out of shape over (again).

[sfiaes]

"But yesterday, InterOil chief executive Michael Hession said the Oil Search pre-emptive right had not been triggered. "The deal is done -- we used a very similar structure that Oil Search used to buy into the venture, which we did not believe we could pre-empt," Mr Hession said."

Pre emptive rights go both ways. Hession states that OSH bought out the IPI in a way that did not trigger IOC's pre emptive right to buy out the IPI. I believe if they could have TOT and IOC would have done so.

They structured the deal just the way OSH did, so it would not trigger the pre empt.

If XOM was going to buy IOC they should have done it before this deal was signed.

[Putncalls]

http://en.wikipedia.org/wiki/Pre-emption_right

I don't see where IOC diluted the OSH share of PRL 15. I don't think the "right" prevents IOC from doing what it wants with it's share of PRL 15. OSH get's first bid on new shares. It looks like TOT is buying an "old share".

[Palm]

That appears correct. This was the original OSH statement on their purchase:
"Oil Search is to acquire a 22.835% gross interest in PRL 15, containing the Elk/Antelope gas discoveries, through the acquisition of the Pac LNG Group Companies...." So they bought the companies in whole and didn't reach into the companies and buy just the rights.

IOC and Total structured their deal the same way:
"Under the revised agreement signed today, Total has acquired – through the purchase of all shares in a wholly owned InterOil subsidiary – a gross 40.1% interest in PRL 15."

So the IOC/Total legal beagles appear to be saying that buying the company and not the rights does not trigger a preemptive right. Is this what we are dealing with?

[Putncalls]

That is a good point Palm. If that means that OSH now owns all of the PAC interests in IOC's PPLs then why would they do anything to slow down future exploration?

[sydbod]

Palm, you have expressed it very clearly.
From my very limited understanding of the issue, the problem is not one of Total buying a unique holding company of IOC that holds equity (that would not trigger the pre-emption rights) but the issue of IOC putting that equity into a new entity ( IOC holding company) in the first place (this part would possibly trigger the pre-emption rights). Maybe I am totally wrong here.

[Palm]

In reading a couple of cases on this quickly it's as someone else has said; the preemptive right is likely tied to the PRL15 JVOA which we have not seen. So I'm leaving it to IOC Total and OSH and their attorneys to sort through. We are swimming in quick sand trying to figure out something we only know a little about. Those guys get paid to sort this chit out.

[mikesioc]

PNG strangely mute on the deal today. There seem to be enough conspiracy theories to go around now. Back door deals, fraudulent transfer claims, plotting, scheming, politics, lines in the sand being drawn. Economics of owning it all rather than a token piece still apply. All is well that ends well.