What is IOC's 30% LNG ownership worth?

[Dr. Wu]

Interested in how others are viewing it.  I recall some discussion before - worth a revisit.

[Tree]

It is worth nothing if pps is marker. Ironic how the LT deal crafted for IOC upside makes IOC vulnerable to takeover. Is there a reason why the upside isn't more attractive to project starved regional's and SM's. With Hession and the newly headhunted Woodside COO and CFO the intention is to survive but will the low pps allow it?

[cybersssss]

Tree,

I think the low pps would not allow ioc to survive in it own. It may, but there is demand for large resources to be developed by companies like woodside and oilsearch. This will play out very soon, in my survey of the landscape, if it happens at all.

[Getitrt2]

Westlake Securities has the most detailed analysis and calculations on that I've seen. For a 9 mmtpa LNG plant, they calculate a NET PRESENT VALUE of NAV impact after CAPEX of $79.30 per share for just IOC's 30% interest in the LNG plant!

[Tree]

Tree, I think the low pps would not allow ioc to survive in it own. It may, but there is demand for large resources to be developed by companies like woodside and oilsearch. This will play out very soon, in my survey of the landscape, if it happens at all.

IOC is a $2.5 billion company slated to receive 25% of it's market cap (613$ mill)  in cash this Qtr.

If PRL15 is as fruitful as GLJ, KR, GC and Hession believe then IOC is slated to receive >$3.5 Billion cash after recertification in 2014/15.

If this resource has a decent chance of being real, IOC does not survive.

If I were the walrus running TOT, and I am already commited to giving IOC 25% of it's market cap in cash, I would double the 613$ mill, add in market cap and go after IOC with an $80 offer.

If there is no collusion, the likes of XOM, Woodside, RDS, CVX would jump in and likely bids over $100 would be made.

If there is collusion, well, we lose all that upside built into the deal.

[cybersssss]

That sure does make sense for Total. Lets say it ends up at 5 Billion, pps of 100, they offer the all time high and most of the big holders would probably agree to it. All they really need is Chandler on board to agree. What's his price? Give him 20% profit in two years he probably would take it.

To me this is logical. We lose out on much of the large speculative upside and/or can take a ride with Total shares and experience a diluted but positive upside with that.

How does the IPI fit in? I think they can probably push this kind of a deal. If they want out.

[Palm]

I think talk of takeover this soon is a bit premature. Comparisons to OSH have been made often with IOC and OSH is just now being talked about as a takeover target (over the last 6-9 months), and it's because PNG LNG is near production. SMs are being very careful in buying more resources and are stating such to shareholders. Hession and his team know this also and are positioning IOC to survive; at least to a similar poaint as what OSH has; production of LNG. Anything that might come near term will likely be low and not accepted (you would hope). And once the bits start to turn and we see even modest results, pps will start recovering to more reasonable levels. Hession coming in and the deal with Total has brought near-instant credibility and institutions who would not give IOC a look under the old regime are now getting very interested. If things go as planned, pps will recover and IOC likely survives for a good while yet. IMHO

As for value of the 30% interest IMO we should expect similar to what OSH has experienced. Today IOC has been given $0 in value for it. They have a 29% interest in PNG LNG. And from FID to pre-production they have doubled. From production to adding another train by 2020 they are expected to roughly double again ($15-$18 are estimates out there). I believe that IOC will have much more gas proven up at FID than what OSH did and that we could have at least a 3-train startup. Assuming this, we should be $85-$90 at FID and $170-$200 pre-production. This assumes IPI interests closed as expected, the deal with Total closes as expected and we have moderate results with the driling program this year.

[mikesioc]

LNG is presently worth nothing. This has been the case since December 6th and IOC is ripe for a takeover by just about anyone and posted as such. Total has done the math and realizes they can lead a group to take the whole company cheap. $100-$120 gets it done, I believe. Why the sudden change of sentiment is my biggest question?

[Relker]

LNG is presently worth nothing. This has been the case since December 6th and IOC is ripe for a takeover by just about anyone and posted as such. Total has done the math and realizes they can lead a group to take the whole company cheap. $100-$120 gets it done, I believe. Why the sudden change of sentiment is my biggest question?

The 30% stake in the LNG plant values USB 7.5 B according to my calculation.

[Getitrt2]

LNG is presently worth nothing. This has been the case since December 6th and IOC is ripe for a takeover by just about anyone and posted as such. Total has done the math and realizes they can lead a group to take the whole company cheap. $100-$120 gets it done, I believe. Why the sudden change of sentiment is my biggest question?

You can look at it that way if you want, but I feel sure the Company/stock is worth more with the 30% LNG project interest in partnership with Total than without, especially after the final closing, and I think it would be a factor in any buyout attempt.  I agree that little of it if any is currently in the stock.