Oil Search updates

[Gator]

Two new research reports on our Aussie friends in PNG.

[sydbod]

Thanks Gator ... much appreciated.

[Palm]

It's interesting to see especially Citi's comments on expansion. They and others make it cound like it is so difficult to get future trains going and possibly have different partners. They need to remember/take a look at the Atlantic LNG project in Trinidad and Tobago. This project has different partners in each of its trains and the expansions have been done quickly. There is NO logical reason things have to be any different in PNG. If anyone needs to get it done, it's Exxon. Let's see how they get this figured out.

http://en.wikipedia.org/wiki/Atlantic_LNG

[Palm]

From the Citi report:
"We think it is becoming increasingly unlikely that OSH and STO will be offered to
farm-in for the same % equity stake as they hold in the foundation project. The
newly appointed CEO of InterOil, Mike Hession, recently stated that InterOil is not
interested in just selling reserves, and it would like an equity stake in an expansion
train underpinned by Elk/Antelope gas.
We understand that OSH/STO have veto rights on bringing in any new gas reserves
into the PNG LNG JV, and so it will have to be an attractive scenario for OSH/STO.
However, it needs to be attractive to InterOil also. There may be a compromise
whereby OSH/STO receive a modest equity stake in an LNG train underpinned by
Elk/Antelope, but at a lesser % stake to make room for InterOil. Alternatively, we
could see the foundation JV partners toll process InterOil gas through an LNG
expansion train. While either option would be value accretive, these scenarios
would lower the valuation uplift from an Elk/Antelope expansion train versus our
estimates in Figure 2. Either of these options would also lower the funding burden
for Oil Search, which we highlighted as a potential issue for OSH."

"Compromise" as in part of negotiations. Hession has stepped things up in the negotiation game for IOC.

[sageo]

It's interesting to see especially Citi's comments on expansion. They and others make it cound like it is so difficult to get future trains going and possibly have different partners. They need to remember/take a look at the Atlantic LNG project in Trinidad and Tobago. This project has different partners in each of its trains and the expansions have been done quickly. There is NO logical reason things have to be any different in PNG. If anyone needs to get it done, it's Exxon. Let's see how they get this figured out. http://en.wikipedia.org/wiki/Atlantic_LNG

Palm - Thank you for that find....greatly appreciated ! This is a clear and concise example of how different trains can have expanded owners.( could easily be used in the PNG LNG plant.

[jft310]

It's interesting to see especially Citi's comments on expansion. They and others make it cound like it is so difficult to get future trains going and possibly have different partners. They need to remember/take a look at the Atlantic LNG project in Trinidad and Tobago. This project has different partners in each of its trains and the expansions have been done quickly. There is NO logical reason things have to be any different in PNG. If anyone needs to get it done, it's Exxon. Let's see how they get this figured out. http://en.wikipedia.org/wiki/Atlantic_LNG

Palm - Thank you for that find....greatly appreciated ! This is a clear and concise example of how different trains can have expanded owners.( could easily be used in the PNG LNG plant.

Reality is hitting OSH  and STO..IOC has always wanted a size able ownership position in the third train

[ArtM72]

Any reason why we wouldn't be happy with a tolling agreement? It isn't like IOC would have a particularly hard time finding buyers for the gas. Financing the pipeline, wells, CSP etc would be another thing but there's lots of money around and that could even be part of the package.

Did I forget we no longer have a CSP partner?

[petrengr1]

IOC will be in the non-operated LNG business. Our new partner will develop the fields, build the CSP, Pipelines and LNG plant. From selling down each field we will be able to fund our share of all of the above.

[Palm]

Well said Pet