Legal row looms for Oil Search as rival strikes deal

[cybersssss]

Full Article with Quotes from Peter Botten, CEO of Oil Search

Legal row looms for Oil Search as rival strikes deal

• MATT CHAMBERS
• The Australian
• March 27, 2014 12:00AM

THE struggle for control of Papua New Guinea's biggest undeveloped gas resource could be set for another twist, with Oil Search considering legal action to block a deal worth up to $US3.5 billion ($3.8bn) that French major Total has struck with field operator InterOil.

Total and New York-listed InterOil yesterday signed a revised deal under which Total has agreed to take a 40.1 per cent stake in the onshore Elk and Antelope gas fields for $US401 million upfront and a host of other milestone payments totalling up to $US3.5bn, depending on the size of the resource and whether a project is developed.

The terms are broadly similar to a December deal thwarted by Oil Search last month when it unexpectedly bought a 22.8 per cent stake in fields from minority partners Pacific LNG, which came with a pre-emptive right to acquire the Total stake.

But yesterday, InterOil chief executive Michael Hession said the Oil Search pre-emptive right had not been triggered. "The deal is done -- we used a very similar structure that Oil Search used to buy into the venture, which we did not believe we could pre-empt," Mr Hession said.

But that does not appear to be the belief of Oil Search, whose long-time managing director Peter Botten has said the pre-emptive right would be an important bargaining tool in how the Elk and Antelope fields were developed.

"This deal is an enactment of what InterOil announced in December," Mr Botten said.

"We're reviewing the documentation and seeking legal advice around that in the light of our rights under the joint operating agreement."

It will be up to lawyers to work out whether Oil Search has a case, but any challenge will probably revolve around whether the latest Total/InterOil deal was structured deliberately to avoid triggering Oil Search's pre-emptive right.

Elk and Antelope may contain up to nine trillion cubic feet of gas, which is enough for a two-train LNG project.

The fields would also be a major prize for ExxonMobil, which with Oil Search and Santos owns the nearby $US19bn PNG LNG plant. This would provide a cheaper route to market by sharing the plant's infrastructure. There was speculation Oil Search would use its pre-emptive right to try to bring Exxon in as a partner, increasing the probability the field would be used to expand PNG LNG.

Oil Search shares fell 24c, or 2.8 per cent, yesterday to $8.29, extending a fall from a record close of $8.92 on March 5.

BBY analyst Scott Ashton said the fall was probably overdone.

"Oil Search does have material exposure to an LNG-scale resource that may have repeat outcomes," he said.

"We think the share price weakness presents a buying opportunity."

[Palm]

Wow, guess we called that. OSH pulls preemption card, Hession says our attorneys are better than yours. OSH counters with same and the game is on. Attorneys will fight, things will get settled, then the attorneys will walk out the back with gobs of money in their hands, slap each other on the backs and say, "We all did well. Let's go drink beer together." And so it goes.

[Putncalls]

Palm,

I can't believe that you buy what MR Chambers is selling? OSH thwarted the IOC/TOT deal? OSH can use it's pre-emptive rights to give a piece of E/A to Total? Botten is quoted so MR Cambers must be correct? Let us look at the fallacious quote: "This deal is an enactment of what InterOil announced in December," Mr Botten said. Of course it's a re-enactment! Total wanted a 40 percent stake and got a 40% stake.

This article does increase my respect of certain hedge funds. It's better than an avi post on Yazoo. But?

[Putncalls]

Piece to Exon not Total. oops

[Getitrt2]

I don't have independent knowledge of a lot of facts here, and I'm not an attorney; but it sounds like:
- IOC and PacLNG were parties to a JVOA with certain pre-emptive rights.
- IOC signed a SPA with Total, and there was no triggering of any pre-emptive rights by PacLNG. Did IOC and Total also sign a JVOA in December, and is that relevant to this?
- OSH bought PacLNG's interests in PRL 15 and the JVOA and thought they were getting certain pre-emptive rights from them. IOC concluded that given the structuring of the OSH buyout, IOC could not exercise its pre-emptive rights per the JVOA to pre-empt that sale.
- Hession is saying the SPA with Total is structured in basically the same manner and did not trigger the pre-emptive rights acquired by OSH, and OSH could not pre-empt for the same reasons IOC could not do so.
- If OSH could structure their deal that way, it would seem IOC could do the same.

Any attorneys out there with relevant expertise/experience who could shed light on any of this? I would say Hession and his team and Total and all their attorneys probably knew what they were doing in both deals. From what I've heard, at least one energy analyst covering IOC does not think there is any substance to the supposed problems.

Could shorts in Australia be behind this press report? The article supposedly quotes OSH's Botten.

[Getitrt2]

Piece to Exon not Total. oops

Put, you can correct ("edit" your post, itself.

[Indoreservoir]

Pre-emptive rights are usually covered in the Joint Operating agreement.  A typical pre-empt clause from the AIPN 2002 JOA form document is outlined below in " ".

Depending what was in the IOC-PacLNG-IPI JOA, OSH may have preemptive rights.  Of course, TOT and IOC lawyers would have looked at this carefully and followed the JOA procedures.  Often a company wishing to sell their Participating Interest in a block will sell the entire company rather than a participating interest - this usualy avoids the pre-empt right depending on how the JOA is written.

The question will be what vehicle the 40.1% interest IOC sold is held in. Its very likely a participating interest so its quite possible OSH does indeed have a pre-empt right.

Having said that, IOC/TOT may have notified PacLNG of the deal on 6 Dec and the period for pre-empt may have lapsed.   We'll see.

"Any Transfer of all or a portion of a Party's Participating Interest, other than a Transfer to an Affiliate or the granting of an Encumbrance as provided in Article 12.2(E), shall be subject to the following procedure.

(1)           Once the final terms and conditions of a Transfer have been fully negotiated, the transferor shall disclose all such final terms and conditions as are relevant to the acquisition of the Participating Interest (and, if applicable, the determination of the Cash Value of the Participating Interest) in a notice to the other Parties, which notice shall be accompanied by a copy of all instruments or relevant portions of instruments establishing such terms and conditions.  Each other Party shall have the right to acquire the Participating Interest subject to the proposed Transfer from the transferor on the terms and conditions described in Article 12.2(F)(3) if, within thirty (30) Days of the transferor's notice, such Party delivers to all other Parties a counter-notification that it accepts such terms and conditions without reservations or conditions (subject to Articles 12.2(F)(3) and 12.2(F)(4), where applicable).  If no Party delivers such counter-notification, the Transfer to the proposed transferee may be made, subject to the other provisions of this Article 12, under terms and conditions no more favorable to the transferee than those set forth in the notice to the Parties, provided that the Transfer shall be concluded within one hundred eighty (180) Days from the date of the notice plus such additional period as may be required to secure governmental approvals.  No Party shall have a right under this Article 12.2(F) to acquire any asset other than a Participating Interest, nor may any Party be required to acquire any asset other than a Participating Interest, regardless of whether other properties are included in the Transfer."

Palm, I can't believe that you buy what MR Chambers is selling? OSH thwarted the IOC/TOT deal? OSH can use it's pre-emptive rights to give a piece of E/A to Total? Botten is quoted so MR Cambers must be correct? Let us look at the fallacious quote: "This deal is an enactment of what InterOil announced in December," Mr Botten said. Of course it's a re-enactment! Total wanted a 40 percent stake and got a 40% stake. This article does increase my respect of certain hedge funds. It's better than an avi post on Yazoo. But?

[ltinvest]

'It will be up to lawyers to work out whether Oil Search has a case, but any challenge will probably revolve around whether the latest Total/InterOil deal was structured deliberately to avoid triggering Oil Search's pre-emptive right.'

Much ado about nothing. IOC & TOT knew exactly how to structure the deal.

[Palm]

Palm, I can't believe that you buy what MR Chambers is selling? OSH thwarted the IOC/TOT deal? OSH can use it's pre-emptive rights to give a piece of E/A to Total? Botten is quoted so MR Cambers must be correct? Let us look at the fallacious quote: "This deal is an enactment of what InterOil announced in December," Mr Botten said. Of course it's a re-enactment! Total wanted a 40 percent stake and got a 40% stake. This article does increase my respect of certain hedge funds. It's better than an avi post on Yazoo. But?

Doesnt matter whether or not I believe it Puts, but it's hard to believe that there's nothing to it when there are rumors out that OSH actually filed an injunction. Again, let's see what comes out tomorrow. But something is going on. BOTH Hession and Botten are quoted and seem to be speaking to a conflict of some sort. To think that there is nothing to it is bit of sticking your head in the sand. Could be minor and nothing or could be something to deal with. But we don't know enough yet. I'm certainly not going to ignore it. Again, better to be aware than be in denial.

It's also a bit naive to think OSH came into this wanting to hold hands and be friends. Too many signs point elsewhere.

These 3 pending articles on SA likely will be out in the next couple of days or by coincidence on Monday or Tuesday. So do I believe the shorts have another coordinated plan in place? Crickets by main players to that on Yazoo today usually means something is coming. I'm sure it won't be congratulating IOC and admitting they were wrong.

[jft310]

Its a ?? of timing
Would be hard to argue that OSH didn't know about the deal with Total Dec 6th. It was a public deal. The deal with Total predated the OSH deal.
OSH would not need to be notified because they were not part of the Dec 6th deal. Their deal was later and everyone knew about the IOC/Total deal including OSH. If OSH wanted to use any pre-emptive right they needed to state such intent upon closing with the minority.If any such right even existed .OSH cut its own deal with the minority without Interoil.
The Total IOC deal predated the OSH deal therefore OSH has no case. Thus the IOC Dec 6th deal pre-empted the pre-emptive right of OSH IMHO
RJ agrees with my position FWIW dept.