Well..

[sageo]

Sam-- Thanks for your post. would like to think I was smart,but in truth ,probably just a stroke of good luck. Sure do like your idea of some for long term, and some for a trade once every now and then. We have "Tusker's pearls" and sure would like to see that eventual necklace !! GLTY,sir.

[CAC]

[quote='jft310' pid='22866' dateline='1369306993'] If I were a fund share owner and I found the fund manager sold something that was worth well more than $400 in 2-3 years(monetization of the assets with a CSP) for $150 today I would see he was fired . Fiduciary respondsibility cuts both ways short and long term. Everyone wants a deal and thats a start on proper valuation work(gets those short term fund owners off your back) and then to drill more prospects and with those drilling results we can get a better resource estimate and then can get a Net Present Value for IOC based on the new assets. With this first deal closed and FIDed IOC is worth quite a bit more. Drill several more wells and we can talk takeover then. Or the two spike theory works for me.

Three years ago you said it would be over $400 by now. You have also told us we would be getting 2 XOM shares for part of E/A. You have told us IOC has received takeover offers in the past, but they were “verbal” therefore never presented to shareholders. So when you said “they voted those top 10 to not sell the company” that is not true.  Maybe to BoD voted not to sell (in the past) but shareholders have never had a vote on a buyout.

I am looking at the real world.  Right now IOC is taking bids for xx% of E/A at a price of $y.yy per mcf. We don’t know what x or y are, but currently z (IOC stock) is $92.34.  Any buyer in the real world is looking to buy at the lowest cost they can. There are also a limited number of buyers because the PNG government is making the rules.  Bidders might be going back and forth and y might be going up.  When they buyers see the total cost of x% vs. the cost of z*T (where T is a takeover premium) the buyers are at a tipping point.  Do I raise my bid to outbid one other buyer, do I buy the whole company, or do I walk away?  So like it or not, InterOil is for sale.  As the old joke goes, now we are negotiating price.

Shareholders buy stocks to make money.  7 of the top 10 shareholders are in the business to make money for other people.  If given the choice they might be willing to sell at a 50-70% premium to today’s price vs. waiting and hoping for an unknown down the road.  Three to five years is a long time in this economy.   With the heave concentration of shareholders, IOC stock maybe has become a one way ticket.  The only way some shareholder will be able to exit, is a complete buyout of the company.  As I said, InterOil is for sale.

*********

I agree 100% with Gator.  This is an optimistic group (JFT, especially so) and I supose that $400 per share could eventually materialize, but let's remember that a lot of things have to occur in the manner that is expected/hoped in order for Tri (and the other pearls) to have any value at all.  Is it conceivable that the drilling at Tri might not lead to monetization and that the "two aces' that is just commonly assumed to be in our poker hand is really an ace and a seven?  I think that has to be considered as at least possible in valuing IOC right now. 

So, what's the known ace worth?  Pavel guestimates a conservative NAV (based on $1 mcf) at a little over $100 for E/A.  Maybe the selldown bidding will blow that mcf number completely out of the water (an optimistic hope...not a given), but for the sake of a reasonable hypothetical...a 50% increase over Pavel's mcf-guess would give a NAV of $160ish for E/A.  An offer now of $200 would, therefore, include an extra $40 above proven NAV.  The other assets could, of course, turn out to be worth double or triple the E/A figures...but what if they don't?  Then we've waited years; diminished the NAV by the cost of the future drilling/operating costs; and still don't have any additional pearls.  The time value of money also becomses a factor and the $200 offer, in retrospect, might seem like a missed opportunity.  I certainly get the argument for staying independent, but I think a lot of shareholders would see the argument for cashing out as well. 

I don't think the Board is going to ask for my opinion though...

[admin]

Yes, CAC, it's pretty healthy to remind us now and then that it hasn't yet panned out and that there is quite a bit needed for that to happen.

Personally I think that the sell-down is a near given. I don't have the background to assess the chances of Triceratops to become another E/A, (please, others with more join in here!), but I'm thinking in statistical terms based on:
- PRE arguing that they see plenty of 5-10T structures
- We know there are 10 other possible reefs identified so far
- Reefs have a habit of arriving in clusters
- Dave Holland has a proven track record (he was right, Ross Smith was wrong)

While this doesn't lead to certainties, and you're right to remind us of that, it leads to pretty good odds..

[Petro2458]

CAC - spot on. This is a high risk business...and its prudent to recognize that some exploration failure will happen.

[admin]

And here is something else to consider. Finding another whopper post-deal will be much more beneficial to IOC as:
- LNG plant and infrastructure already under construction from E/A development
- No need for IOC to do another big sell down

So they can keep more of it while incurring much less cost.

Many think Tri is that other whopper already. I think we're not quite there yet with Tri, but then again (considering GLJ's first assessment), I'm not a resource engineer and it does look promising (size of structure, PRE comments, etc.). One good well could make this story materialize before our eyes.

[kommonsents]

And then there are the taxes if one takes profits by selling shares. To sell or hold.....

[sageo]

And here is something else to consider. Finding another whopper post-deal will be much more beneficial to IOC as: - LNG plant and infrastructure already under construction from E/A development - No need for IOC to do another big sell down So they can keep more of it while incurring much less cost. Many think Tri is that other whopper already. I think we're not quite there yet with Tri, but then again (considering GLJ's first assessment), I'm not a resource engineer and it does look promising (size of structure, PRE comments, etc.). One good well could make this story materialize before our eyes.

FWIW I sure agree with your thinking . When I look at the maps (all types) that Pet and others provide for us, the odds greatly increase the chances of success in our coming endeavors. Also, I don't think Oil Search is expecting to be disappointed when they are willing to fund our upcoming joint leases (237 & 338) seismic program.

[CAC]

And here is something else to consider. Finding another whopper post-deal will be much more beneficial to IOC as: - LNG plant and infrastructure already under construction from E/A development - No need for IOC to do another big sell down So they can keep more of it while incurring much less cost. Many think Tri is that other whopper already. I think we're not quite there yet with Tri, but then again (considering GLJ's first assessment), I'm not a resource engineer and it does look promising (size of structure, PRE comments, etc.). One good well could make this story materialize before our eyes.

********

Very good point, Admin.  If I'm a bidder for the whole company, I have to know that the next couple of well results may cost me (or save me) a huge amount of money as far as what a buyout would require. That's a lot or risk (and a lot of money) to consider and I suppose it could make suitors squeemish about bidding right now.  On the other hand, if the bidders feel confident that the drilling results will be positive, then they might be pressing to get a buyout deal done before the "uncertainty leverage" is eliminated.  If, behind the scenes, the real game is down to "what's a fair price", then I can see how both sides would look forward to, but also be scared of, those drilling results.

[admin]

And here is something else to consider. Finding another whopper post-deal will be much more beneficial to IOC as: - LNG plant and infrastructure already under construction from E/A development - No need for IOC to do another big sell down So they can keep more of it while incurring much less cost. Many think Tri is that other whopper already. I think we're not quite there yet with Tri, but then again (considering GLJ's first assessment), I'm not a resource engineer and it does look promising (size of structure, PRE comments, etc.). One good well could make this story materialize before our eyes.

********

Very good point, Admin.  If I'm a bidder for the whole company, I have to know that the next couple of well results may cost me (or save me) a huge amount of money as far as what a buyout would require. That's a lot or risk (and a lot of money) to consider and I suppose it could make suitors squeemish about bidding right now.  On the other hand, if the bidders feel confident that the drilling results will be positive, then they might be pressing to get a buyout deal done before the "uncertainty leverage" is eliminated.  If, behind the scenes, the real game is down to "what's a fair price", then I can see how both sides would look forward to, but also be scared of, those drilling results.

Thanks, yes, quite, it makes quite a bit of difference..

By the way, this is also why I'm not necessarily against a sub-par E/A deal because as long as IOC gets its clock ticking toward monetization and funds for accelerated drilling, we're set up to greater things with every new discovery (as we benefit from the twin advantages of keeping more of it and having to spend less to develop it). There will be some noise from the shorts if that happens and the price might take a temporary hit, but I can live with that, as IOC becomes greately derisked even with a somewhat disappointing deal, provided we stay independent. But others might differ, and have a feeling the deal won't be all that disappointing..

[efi426hemi]

We have a potential 1 mile (okay 90% of a mile) possible vertical pay zone in Tri that is not very far off the beaten path from the T2 well.  Sell the company and not drill that well??!!  Insanity!!??

Okay I will turn off the broken record and get back to losing my money at the roulette table.