REPORT: Hession Changed The Deal on XOM

[efi426hemi]

No kidding something has changed, in fact I posted this 2 months ago here: http://shareholdersunite.com/mybb/showthread.php?tid=4488.  Hey Russell Searancke, you should read SHU and you could have broke this story when it was current.

Keep it on Ice,

Hemi

[CAC]

Last Dec. at the time some were organizing e-mail campaigns to BoD to demanding them to 'quit holding out for a great deal' and 'take a deal' I posted this which was met with venom by malcontents: "The last thing we need is seller's remorse by selling cheap as many prescribe." Well, it appears that perhaps the BoD may have been battle weary and were pressured to 'take a deal' and that can explain why Phil resigned or was fired. Enter Hession who apparently re-set the terms and brought over trusted Woodside negotiators to max IOC's deal. This has all been mentioned on SHU and none should be surprised it is now publicly reported that Hession did re-visit the terms of a crappy deal with XOM. And he opened the process up to a few other SMs. The last thing we need is seller's remorse.

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I've been looking at this whole thing the wrong way. I have been thinking, for three years, that getting a deal done was what I wanted. Now I see that "not having the deal done" is actually better.

[jft310]

This is a FWIW post. I was told after the Exxon deal was announced this was NOT just a NG sale but an LNG participation deal. Two sources both employees of Interoil. Seems that Byker thought he had a deal that included LNG participation but Exxon had understood that the deal didn't include an equity interest in PNGLNG. I have no idea who did what to whom but it became a problem. Byker was clearly over his head fact! Further there always was an agreement for Exxon to pay for the delineation wells desired by Exxon and then a further payment for additional NG found with those wells. Sounds like we now have equity interest clearly spelled out and further drilling contemplated so no matter what happened Hession is fixing it and quickly with the technique well if you will not do this Exxon then we will do this with X or Y. Exxon can't afford to miss out on this IOC NG . There is zero reason today to bank on OSH finding more NG for an expansion. They have had 4 years plus and havn't found the goods. Exxon will not spend Billions on possible NG!!The economics of the third train drive the deal. Its all about money when...

[Tree]

FlyOnThePile publishes their take.  Since No deal is better than a deal then this is good news.

http://finance.yahoo.com/news/interoil-e...40213.html

[Tree]

Well-placed sources said the latest twist is that InterOil has made new proposals to Exxon­Mobil that the US player is taking its time to absorb and respond to.

In effect, InterOil’s new management would like to receive more in exchange for their 4.6 Tcf of gas from Elk-Antelope than originally envisaged.

It is understood the initial terms were based on a sales and purchase agreement of the gas, but InterOil now favours a traditional farm-in type scenario, and that an equity stake in any subsequent LNG train would also be desirable.

PNG-based sources said that, despite the apparent impasse, there is cautious optimism that a deal can be concluded before December.

The consensus is that InterOil is in a strong position, for several reasons.

"InterOil has, evidently, a significant gas resource and the financial returns on an expansion train at PNG LNG are lucrative.

Other LNG majors including Shell and Total are understood to be waiting in the wings for Elk-Antelope gas, and the government is anxious for a deal to be finalised.

If ExxonMobil is successful in securing Elk-Antelope gas, it looks likely that those reserves will underpin the third train at PNG LNG following recent revelations by project co-owner Oil Search that resources such as P’nyang and Juha North and the Hides field expansion are still two years away from being ready for a final investment decision."

[Kaliboo]

I strongly agree.  Something like this has happened.  Hession arrives.  He studies the portfolio in detail to firm up the beliefs he already has developed prior to signing on.  He sees E/A as  two birds in the hand and Triceratops as 1 bird in the hand.  The exploration portfolio has several similar looking opportunities waiting to be tested.  He can follow his predecessor's slow path which was to get bogged down in building LNG plants OR he can apply 100% of what the company does best  finding large volumes of hydrocarbons.  The quickest path to adding value is adding more discoveries.  Thus resuming exploration at Wahoo.  Firming up volumes at Triceratops also is top priority to get the next big deal teed up and in the deal making queue.  Other than government imposed restrictions, there's no rush to do a E/A deal.  First he had to do a lot of delaying to allow the XOM exlusivity period expire.  Done!  Next he has to open it up to more bidders.  Done!  Now is a complicated evaluation/negotiation process - in progress!

Except for the government/people of PNG and the global LNG market prices, neither which appears threatening at this time, all events announcements going forward are likely to have only positive stock price impacts unless there is an infavorable drilling results somewhere.  Reportedly he learned from his first CC and will make good efforts to not disappoint us again.

The question the Longs should be asking themselves is whether their position is large enough to prevent the regrets that will follow for those underinvested when the log jam of coming good news bursts wide open.  I suppose some will be saying, "How could I not see this wonderful thing coming?"

[Getitrt2]

Kaliboo, I basically agree with the article, but disagree with much of your interpretation and conclusions. With respect to an E/A deal, they do need to "get it right" as opposed to being in too much of a "rush", but that nevertheless IS the top priority, as stated by the CEO, as opposed to Tri or any other exploration or discoveries, as important as those are. Monetizing E/A is the "quickest path to adding value" now, not adding more discoveries. Furthermore, IOC needs a cash infusion to really accelerate exploration and development, and monetization of current resources is the key to that. Hession knows getting back on track with appraisal and exploration is also very important, thus Wahoo. Further exploration success on top of monetization is what will really build value.

The government also needs monetization and regards that as top priority. Happily, I think they and IOC are in sync at this point, but I doubt patience is unlimited.

[Palm]

So it is Hession's fault.  

He put the skids on Byker's undervalued deal with XOM for 4.6 T gas sale and then Hession has the gonads to up the ante to XOM for an equity stake and more $.  Take your time Dr. Hession, get it right.  December will be fine if that is how long it takes.  I don't know if it's comforting or scary that it appears Russell does his DD on SHU.  

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ExxonMobil runs rule over InterOil gas proposals

By RUSSELL SEARANCKE Wellington

 25 October 2013 00:00 GMT

Talks between ExxonMobil and InterOil over feedstock gas supplies into the Papua New Guinea liquefied natural gas project have slowed while the US supermajor takes stock of changes proposed by InterOil.

The pair agreed on major terms five months ago for ExxonMobil to purchase 4.6 trillion cubic feet of gas from InterOil’s Elk-Antelope field in Block PRL 15 to be used as feedstock for an additional train at the ExxonMobil-operated PNG LNG project.

The talks ebbed and flowed for the first couple of months, but the dynamics of the situation changed in July when InterOil made several management changes, including the appointment of a new chief executive.

Since then, InterOil has invited other interested parties to bid for Elk-Antelope gas while continuing to try to finalise a deal with ExxonMobil.

Neither ExxonMobil nor InterOil are commenting on the process.

Well-placed sources said the latest twist is that InterOil has made new proposals to Exxon­Mobil that the US player is taking its time to absorb and respond to.

In effect, InterOil’s new management would like to receive more in exchange for their 4.6 Tcf of gas from Elk-Antelope than originally envisaged.

It is understood the initial terms were based on a sales and purchase agreement of the gas, but InterOil now favours a traditional farm-in type scenario, and that an equity stake in any subsequent LNG train would also be desirable.

PNG-based sources said that, despite the apparent impasse, there is cautious optimism that a deal can be concluded before December.

The consensus is that InterOil is in a strong position, for several reasons.

InterOil has, evidently, a significant gas resource and the financial returns on an expansion train at PNG LNG are lucrative.

Other LNG majors including Shell and Total are understood to be waiting in the wings for Elk-Antelope gas, and the government is anxious for a deal to be finalised.

If ExxonMobil is successful in securing Elk-Antelope gas, it looks likely that those reserves will underpin the third train at PNG LNG following recent revelations by project co-owner Oil Search that resources such as P’nyang and Juha North and the Hides field expansion are still two years away from being ready for a final investment decision.

Oil Search managing director Peter Botten said this week that his company is keeping a close eye on the InterOil bidding process “for a majority share in PRL 15”.

“We are following the sale process closely and are engaged with key players on potential development options for the gas, “ he said.

“The Elk-Antelope resource could potentially be a source of gas for LNG expansion or could underpin a new LNG development.”

“We continue to believe that being an owner of core gas and liquids infrastructure in PNG places Oil Search in a strong position, as new developments take place in the country.”

In August, InterOil chief executive Michael Hession said his company’s focus is on furthering a non-operated liquefied natural gas project in PNG.

“We will not be operating an LNG project in the immediate future,” said Hession.

“We are all about working with an appropriate partner on a non-operated LNG project going forward, and that’s evidenced by our negotiations (with ExxonMobil).”

Hmmm, seems Mr Searancke was right on most points when he wrote this back in October.  Or maybe Dr Mike read this article and thought it would be great regurgitation for the CC to appease the masses.  No, I think the first is the best; and now that Dr Mike has confirmed it in the CC, it's a very good thing.