How to value ioc after a deal?

[cybersssss]

There are many ways to value stock such as ioc. Without seeing the deal numbers it is difficult to ascertain what ioc should be price at after a deal.  One can use the boe to extrapolate a number based on that, which is how many e+p companies are valued.  Once gulf LNG comes in board this will be easier to do because that gas can be monetized, however at this time it is premature.

i think that the easisest way to look at this BEFORE ioc has a monetization event, is using comps.  I know this has been mentioned before and in the MS report, but oil search seems to be the most apropo.  OSH currently has a market cap of 11 billion.  This is based mainly on png LNG coming on line I'm q3. IF the deal is done with ioc and ioc gets a similar equity percentage I. Png LNG as oil search, I think it would be fair to say that ioc should have a similar market cap.

OSH owns 29% of png LNG which is 6.9 tcf. This comes out to about 2 tcf of the project.  If ioc supplies 4.7 tcf of gas, let's say 70 % comes to ioc the company, which is 3.29 tcf and we throw in 1 tcf for infrastructure, we still have at least the same, if not more gas supplied to png LNG than OSH.

So valuing ioc based on oil search valuation, the pps comes out to around 250 for ioc. This is immediate pps, not five years out, IF ioc gets the equity stake in png LNG. Furthermore, ioc appears to have more upside as this calculation is really just for 4.7 tcf of elk antelope. There is around double the gas there and we have triceratops as well and further unexplored wells.

Please refute this and tell me why I'm wrong and how ioc isn't the buy of the year right now?

[jft310]

There are many ways to value stock such as ioc. Without seeing the deal numbers it is difficult to ascertain what ioc should be price at after a deal.  One can use the boe to extrapolate a number based on that, which is how many e+p companies are valued.  Once gulf LNG comes in board this will be easier to do because that gas can be monetized, however at this time it is premature.

i think that the easisest way to look at this BEFORE ioc has a monetization event, is using comps.  I know this has been mentioned before and in the MS report, but oil search seems to be the most apropo.  OSH currently has a market cap of 11 billion.  This is based mainly on png LNG coming on line I'm q3. IF the deal is done with ioc and ioc gets a similar equity percentage I. Png LNG as oil search, I think it would be fair to say that ioc should have a similar market cap.

OSH owns 29% of png LNG which is 6.9 tcf. This comes out to about 2 tcf of the project.  If ioc supplies 4.7 tcf of gas, let's say 70 % comes to ioc the company, which is 3.29 tcf and we throw in 1 tcf for infrastructure, we still have at least the same, if not more gas supplied to png LNG than OSH.

So valuing ioc based on oil search valuation, the pps comes out to around 250 for ioc. This is immediate pps, not five years out, IF ioc gets the equity stake in png LNG. Furthermore, ioc appears to have more upside as this calculation is really just for 4.7 tcf of elk antelope. There is around double the gas there and we have triceratops as well and further unexplored wells.

Please refute this and tell me why I'm wrong and how ioc isn't the buy of the year right now?

OSH has 2 trains and the NG contribution is lower with IOC 1 train vs OSH 2  trains. Unless we get a 2 train deal with Exxon of course. Those 2 trains are close to production and also less then 1 year away . When will train 3 produce ? What about a train 4?what  percentage will IOC get in the first two trains?Could IOC buyout part of the PNG interest in PNGLNG??So many possibilies. All good for shareholders short and long term. Targets unless conservative seem a waste of time. Most can agree today the most conservative valuation seems to be $100 for IOC and that's worst case . Upside from there with more information

[Stavros]

The best person to ask about IOC valuation is Richard Chandler who now owns 19.4999 percent of IOC.

Unfortunately Mr Chandler is a very private person and doesn't frequent the same restaurants as regular folks in Singapore. And he doesn't post on SHU so we can't send him a Private Message.

HOWEVER, based on the fact he just acquired additional 1 Million shares of IOC at $92 it's very safe to say that he values IOC far higher than it's current $4 Billion Market Cap. Perhaps double.

[jft310]

An old saying follow the money. Paulson at $90 and Chandler at $92 means they believe the deal metrics are quite favorable

[cybersssss]

Certainly encouraging to see Chandler's investment. However, just as he does, i like to make my own decisions and value basis.

JFT- You mention IOC will only be involved in 1 train so the valuation can be off. The numbers I gave were based upon a percent of the entire project based upon how much gas is supplied. Not on a per train basis.

[jft310]

Certainly encouraging to see Chandler's investment. However, just as he does, i like to make my own decisions and value basis. JFT- You mention IOC will only be involved in 1 train so the valuation can be off. The numbers I gave were based upon a percent of the entire project based upon how much gas is supplied. Not on a per train basis.

No one knows the project participation , if Tree is right that's what going on right now between OSH and partners and Exxon. The  OSH valuation includes cash flow from their 2 train participation. Today the IOC participation rate is unknown. Makes comparison difficult. Longer term all of IOC NG will be monetized but with whom, at what cost ,and when. The OSH metrics are known and close to reality and IOC is unknown. After the IOC metrics are known comparisons are much easier. Or will IOC have better metrics than OSH. ?I think they will have better metrics and understand the early bird will have much better returns than those that wait for the deal terms to be released. This is the best time to invest in IOC ever in my opinion.

[johnwgrant]

There has been speculation that IOC may get a "buy-in" percentage of PNG LNG Train 1 & 2. I have always thought that those ownership percentages are "locked in" and that would not be an option. Thus my thinking is that the negotiations with the PNG LNG partners would be about Train 3 and subsequent trains.

The only other similar situation that comes to mind is the Trinidad LNG projects. Again, this is just superficial knowledge, but, it was my understanding that the ownership percentage down in Trinidad varies according to each LNG train (or trains if they were built as part of the same expansion project). Does anyone know the for sure how Trinidad LNG plants were handled as expansion trains were added ? TIA..

[jft310]

Each Trinidad train had its own ownership percentage. All were different , I think they have 7 trains now all unique percentages

[johnwgrant]

Each Trinidad train had its own ownership percentage. All were different , I think they have 7 trains now all unique percentages

FWIW, that is what I anticipate for InterOil's deal - they will get a percentage of Train 3 (and any other train that their gas is the major feedstock for) but NOT for Trains 1 and 2.     Does this put me in the minority view with others on this board ?

[ArtM72]

Each Trinidad train had its own ownership percentage. All were different , I think they have 7 trains now all unique percentages

FWIW, that is what I anticipate for InterOil's deal - they will get a percentage of Train 3 (and any other train that their gas is the major feedstock for) but NOT for Trains 1 and 2.     Does this put me in the minority view with others on this board ?

I tend to agree with you but I think the point is pretty moot.  IOC will get upfront cash and then staged payments from their new partner(s) to get them to Train 3 production which they will have a stake in.  They will also be needing financing of some sort for Gulf LNG which they will have a piece of as well.

Hession said he couldn't say much about the selldown on his first CC because he and his people needed to understand the deal.  He now states they understand the deal and it is straightforward.  In my mind simple is a selldown of gas for cash and percentage in Train 3, and a selldown of gas for a carry on the CSP and Gulf LNG.  Partnering for exploration outside of PRL15 and PPL237?  I think that will wait and depend upon whether the IOC geologic model is confirmed in PPL236.  If Wahoo is a gas filled reef thing go nuts.  If it isn't I think IOC takes on a partner to share in the risk.

Flush.