And The Dream Comes True

[jft310]

Lets look at PNG and Oil Search and Exxon. In order for Oil Search to participate in the Exxon project they had to do a capital raise that killed the stock price per share, Oil Search raised the money true but the stock price dropped 30% from where it was trading for the secondary to get bought by the insitutions.

IOC has pulled the rabbit out of the hat. Call it "The Hat Trick" if you must. There will be no capital raise for Interoil. There will be a loan because rates are so low.Thats zero dilution of the current shareholders. IOC will receive a pile of cash upfront with more staged payments. Exxon will fund future drilling, build the infrastructure, build the CSP, build the pipeline and IOC may have to pay $200 million in costs. So IOC monetizes its NG for $200 million and has zero dilution to current shareholders. The Price for IOC sharehlders is the price per mcf is perceived as low but in reality is robust. The PRE price was $3.85 discounted by the bankers see the Morgan report to $2.85 today. The Exxon deal is in the same range.

Thus the title the dream. Why is this happening?? IOC has the current assets that Exxon needs and the best prospects for finding more assets that Exxon might want . Bronte Capital is long Oil Search and short Interoil betting against Interoils NG being used by Exxon today. Problem is Oil Search can't find the assets and Exxon needs NG now. Or bad bet for Tilson and Bronte Capital etc. The PPS will cme around as the deal closes.

[Movieguy]

Lets look at PNG and Oil Search and Exxon. In order for Oil Search to participate in the Exxon project they had to do a capital raise that killed the stock price per share, Oil Search raised the money true but the stock price dropped 30% from where it was trading for the secondary to get bought by the insitutions.

IOC has pulled the rabbit out of the hat. Call it "The Hat Trick" if you must. There will be no capital raise for Interoil. There will be a loan because rates are so low.Thats zero dilution of the current shareholders. IOC will receive a pile of cash upfront with more staged payments. Exxon will fund future drilling, build the infrastructure, build the CSP, build the pipeline and IOC may have to pay $200 million in costs. So IOC monetizes its NG for $200 million and has zero dilution to current shareholders. The Price for IOC sharehlders is the price per mcf is perceived as low but in reality is robust. The PRE price was $3.85 discounted by the bankers see the Morgan report to $2.85 today. The Exxon deal is in the same range.

Thus the title the dream. Why is this happening?? IOC has the current assets that Exxon needs and the best prospects for finding more assets that Exxon might want . Bronte Capital is long Oil Search and short Interoil betting against Interoils NG being used by Exxon today. Problem is Oil Search can't find the assets and Exxon needs NG now. Or bad bet for Tilson and Bronte Capital etc. The PPS will cme around as the deal closes.

Amen, brother!

[Petro2458]

JFT. Good post. I'd like some thoughts and discussion on the following:

- operatorship? Who gets it
- if enough gas is there for 2 trains, why are we only talking about 1?
- what's the deal with govt't take and threat to take or buy up to 50%

[jft310]

PETRO-
*Ownership I don't know others might.
*Even GCA in their first report stated enough NG for 2 trains. So 3 reservoir report companies stated IOC has enough NG for two trains
That second train is very expensive for Exxon me thinks. IOC has permission per the Presser to go independent or can use EWC and that gets IOC 85% of the revenue from that train. Exxon must beat the EWC terms. Will they??
*The govt wanted a Super Major and to compel IOC to use a Super Major used that threat of taking 50%. IOC agreed to use Exxon and got what it wanted the right to go independent. The PNG govt can't afford to buy even 22.5% from Interoil. Thus they will be a seller of part of their interest in the finds.
All pictures in time subject to change.

[Palm]

Here's my take on the dream
1. Exxon will be the operator. This came out of the bid process and the winner had to be an experienced operator.
2. Byker says 4.6 Ts. Exxon has OSH as a partner and ISH has found 2-3 Ts in the Highlands. My guess is they will use that, add enough gas from EA to complete a train and take another full train from EA to add 2 trains to PNG LNG immediately.
3. IOC will prove up lots more gas and like JFT says Exxon will build an additional subsea pipeline that likely will cost $600 million or so. The gov loves Exxon and will only opt in for their 22.5% or maybe a little more. Some of the PRL 15 gas will be taken in kind to feed the EWC gas -fired power plant for POM.
4. The next LNG plant will either be in Gulf or at Napa Napa.

[ArtM72]

Any reason why Total SA would not operate an EWC plant in Gulf, other than by the time such a deal is worked out the resource might already be too big for the EWC modules to be competitive? Any reason why Total could not JV with XOM? Lots of opportunity here folks.

I think I'm actually hoping for a short attack today.

[jft310]

Art-The original EWC plans called for 4 modules and 8 mtpa. Is that where we are today?? Start with 2 mtpa??? Add on??Or will Total do it? That first EWC module is in Indo , 100% paid for ready to go. Waiting for a home. Add Chandler buying all this IOC stock and one must ask why??Or buying out the EWC option would yield robust prices for IOC shareholders. Who cares in reality.

[Palm]

I think there are a few possibilities as to location of plant(s) and wo participates. We know that Japan and SK need to secure LNG, so I think with Exxon as an operator they might partner in still with a plant either in Gulf or at Napa Napa. I'm not concerned with the Napa Napa idea as far as timing because IOC will have production and monetization with very healthy cash flows from any trains it first supplies to Exxon. Modular is something that can be done at mid-scale (EWC-type) or large scale (been done in Australia) and can happen rather quickly at either location.

Total certainly is still a possibility as they have expressed strong desire to be a player in PNG. As an operator it seems it's less likely they would be someone Exxon would want to partner with, but it has happened elsewhere in the world. Exxon will likely have first dibs on a plant as far as being the operator and if there is enough gas (which we all have great confidence in) it seems Exxon would want to be king in that development and they can pretty much pull in who they want as partners. I think it's a higher possibility that JKM would be involved.

[jft310]

Whoever the partner is they will pay dearly to buy out the EWC idea and thats good for an IOC shareholder.Bring em on.

[admin]

I'm getting a little dizzy here, to be honest:

1. OilSearch and Santos just rolling over and accomodate IOC into the project
2. OilSearch and Santos just rolling over and accomodate IOC getting some ownership stake in the additional train(s)
3. I can't find it anymore but I even saw someone suggesting OilSearch taking a stake in IOC's field (or something to that effect)
4. Someone else was talking about three train FID

Entirely possible that the authors of these statements (if I got them right in the first place) know way more than me, but aren't we're getting a little ahead of ourselves here? I would say all of the above might be possible, but I have a feeling we're not there yet..

The first seems a pretty good bet as Exxon wouldn't be the final negotiating party if they thought their partners wouldn't go along with it and OilSearch and Santos have stakes in the LNG plant which will deliver better economics with more trains. The second and third, I have no idea, I guess if it would have to be made attractive to OilSearch and Santos.

The fourth, possible, but I think we need to drill more wells for that, especially in T2.