Best Possible Scenario under the circumstances

[petrengr1]

It sounds like IOC plans to spud Elk-3 imminently. They had also hinted previously that Rig 2 would (might) drill Antelope-4 next. That sounds like IOC is still in charge of drilling at least the next two wells in Elk/Antelope. They have now put out the new Rights Plan and By-laws. I think they are positioning themselves to survive and expect to remain in the drilling and exploration business in PNG.

So my speculation is as follows:

1. The new partner will buy a significant percentage of the PRL-15 license and become the operator of that license. They apparently will require IOC to drill at least two more wells at Elk/Antelope before moving Rig-2 out to another prospect. Rig-3 may remain at Elk/Antelope since it is not heli-portable. The new Partner will be responsible for development work in PRL-15, including drilling, CSP, Pipelines and LNG Plant.

2. IOC will remain an independent Company and will continue to be the Operator in PPL-236, PPL-237 and PPL-238. After completing the commitments to the new Partner in PRL-15 Rig 2 will be available for drilling in the other license areas.

3. IOC may contract for additional rigs to accelerate the exploration in PPL 236 and PPL 238. NGE has two heli-portable rigs in the Country that may be or may become available.

4. PRE says they plan to drill 3 wells in 2013 and 7 wells in 2014 in PPL 237. This is not possible without more rigs. At this point I must assume that PRE will arrange for 1 or more rigs. This could be the NGE rigs mentioned above.

5. If the NGE rigs (or other rigs arranged by PRE) go to Triceratops, Raptor and/or other PPL 237 wells then Rig 2 will probably move to either Tuna-1 in PPL 238 or Wahoo-1 in PPL 236. Hopefully, as part of these negotiations, the Government has agreed to the extension of the drilling commitments in PPL-236 and PPL 238. If that is the case we should be hearing about those approvals imminently.

6. IOC will have the option of additional sell down and/or farm-outs at Triceratops (PPL 237) and, hopefully we will get some new farm out partners at PPL 236 and PPL 238.

Of course there is still the possibility of a complete buy out of the company. With the Rights Plan in place I do not think the IOC Board will accept a “friendly” offer of less that a 100% premium to the current stock price. If I am right about that then the bidding for a hostile takeover may start at about $160/share.

All of the above is strictly speculation and dreaming on my part. Just another scenario for you to consider while we wait for an announcement.

The next two PR’s may be the announcing of the spudding of Elk-3 and the Government approval of the drilling commitments for PPL 236 and PPL 238.

[johnwgrant]

Wayne Andrews said that the spudding of Elk-3 would NOT commence until the partner selection was complete. I think his reason was that the partner may want a say in the well plan (depth, pipe size, ???).

We also have the news article quote where Phil Mulacek indicated that they would spud the well in a few weeks (right around this time frame). Since Phil has announced his retirement, I am assuming that his statement can be discounted (since someone else will be running the day to day operations.)

That being said, I would love to be wrong ! I am anxious to see 3 or 4 rigs drilling at the same time too !!!

[jft310]

Maybe they have a partner and they are deciding on monetization methods for 15. Makes sense with all these BOD meetings. Whichever monetization they chose still requires drilling more wells at E/A

[johnwgrant]

JFT: does anyone know if the BOD has finished their overseas meeting(s) and headed back to the USA?

It would seem to me that when the meetings end and they head back, that would be a "tell" that no news should be expected until perhaps about a week later. (just my guess - the winning bidder would have to get back to their board for final approval of any changes/amendments).

[davidhmtk]

Maybe they have a partner and they are deciding on monetization methods for 15. Makes sense with all these BOD meetings. Whichever monetization they chose still requires drilling more wells at E/A

Not sure, but I think you're wrong JFT on Elk drilling pre-deal.  If necessary, why have they delayed spudding?  Also. there are several serious clues that 237 (Triceratops) is being sold (probably what Phil hated doing).  PRE said so, the JVOA was approved, and the Thais were promised access to gas exploration opportunities.  My read is O'Neill has decided to use 237 gas and push the drilling.

By the way, the immediate pricing of 237, which was assigned no value by the Raymond James model, will power the share price at announcement.

[jft310]

David- The PRE slides state they are dilling 3 wells this year and 7 more next year. That therefore must mean PRE plans to drill those wells and also they expect to sell a slice of what they already own to someone else. Why can't Shell or Exxon or Total buy into 237 and PRE sell a portion to the winner at a premium to what they paid.

[davidhmtk]

David- The PRE slides state they are dilling 3 wells this year and 7 more next year. That therefore must mean PRE plans to drill those wells and also they expect to sell a slice of what they already own to someone else. Why can't Shell or Exxon or Total buy into 237 and PRE sell a portion to the winner at a premium to what they paid.

We're saying the same thing.  PRE owns 10% of 237.  One of the bidders convinced the PNG gov't to push IOC to sell a serious chunk, presumeably to guarantee gas supply for both a Gulf plant and for extra trains for Exxon.  My point - we don't need Elk results to complete the deals, we have the gas from 237.

[Palm]

Agree David; there has often been talk of gas from Tri feeding a project at Gulf. PRE would love to be involved in that. We have also often seen slides with pipelines going from Tri to EA, and we've also heard mention that Tri might be added to PRL 15, though I doubt that would happen as there is a limit on the number of blocks contained in a PRL/PDL. But IOC/PRE are in the process of applying for a PRL for Tri, but it is still not filed. I wonder why? Maybe to wait for this very decision? I think that's a good possibility.

[Getitrt2]

I don't think you're both saying the same thing. As highly as PRE seems to regard 237 and given the commitment they've made to it for just 10%, why would they want to sell off part of that, especially since they would not be likely to get a premium to what they paid at this point, imo. What might make sense would be for IOC to bring in another partner on 237 to help explore and develop it, while they have multiple interested parties at hand in a competitive situation after working with three investment banks for a year and a half.

[davidhmtk]

I don't think you're both saying the same thing. As highly as PRE seems to regard 237 and given the commitment they've made to it for just 10%, why would they want to sell off part of that, especially since they would not be likely to get a premium to what they paid at this point, imo. What might make sense would be for IOC to bring in another partner on 237 to help explore and develop it, while they have multiple interested parties at hand in a competitive situation after working with three investment banks for a year and a half.

Whatever % of 237 is farmed out, PRE is entitled to 10% and IOC 90%.  They are in the same boat.  And a boat has one captain.  Captain O'Neill, not Mulachek.