SIGH.....Not as much fun

[CAC]

You all crack me up. I'm not doubting Total and OSH are sincere about pursuing the LNG project and I do hope all the wildest expectations come true but not counting on it. Certainly not ready to pop an ambien and wait for 2020 on auto pilot. Did we add $529 million reasons for success today or $1? The true measure of success. $10/sh in cash added to the balance sheet and hardly a hiccup. All the buyers must be in the Hamptons already. Let's hope WBR drilling news yields better results, then re-certification, etc. and the market responds considerably more favorably. I did see Jaws at the midnight movie the other night but no jumping sharks. A great 4th to all my IOC brethren! Go USA! Go Hession! Go IOC! I won't even think about the dreaded "B" word all week. Maybe a little research on some mutual funds or ETF's though. I heard there are some really good ones. I may even fill a glass half full and listen to some Bob Marley. Don't worry, every little thing gonna be all right! Oh ya!

If there was anything that was valued close to actual in the pps (not the balance sheet as it would be there as cost less Accum Depr), it was the refinery.  Analysts have said (and one repeated yesterday) that the refinery/downstream is anything but the core function of IOC but it had an approx. pps value of $10.  RJ seems to feel the $525 million was possibly a bit of a premium on what they felt it was worth.  So if the refinery/downstream was in the pps at around $10 and it's sold for cash, all you are doing is swapping equally valued assets; cash for the refinery/downstream.  You don't assume selling something valued at approx. $10/share for that value should add $10 to pps.  That refinery and downstream is pretty easy to value as it's a known as far as what it produces; very easy.  We ended up with a little pop in pps; maybe that reflects some sort of premium on what it was valued at.  But we should not have expected a $10 pop unless there was $0 value in pps when it was sold.

If anything is undervalued in pps it's what now remains.  We know that EA, Tri and the prospects are undervalued, but as things are proven up pps will rise.  We know that the possible 30% share of a planned LNG plant as well as CSPs etc. are given no value right now, but as plans are executed (things MH's bonuses are tied to), pps will rise.  Etc,, etc, etc.

IMHO to make the statement that pps should have jumped by $10 is way off base.

++++++++++++++++++++++++++++

Agreed.  If it was a fair market transaction, we just swapped an asset worth $500M+...for $500M+ in cash.  I suppose it might affect the strategic outlook going forward...but it wouldn't really affect NAV.

[ArtM72]

Agree with Palm here, but I am surprised the analysts' models didn't respond to converting steel to cash. Whatever risk coefficient for the plant value was used, I can't imagine it was 1.00. That seems though to be the case.

By the way, I haven't yet heard about what land rights changed hands. Anybody know?

[Palm]

Have not heard whether IOC retained the leasehold on all or any of the Napa Napa site. I hope they retained at least the lay-down area and wharf that goes with it. Will do some digging and see what we can come up with.

[jft310]

Since we need cash to build the LNG plant and pay for drilling why borrow the money when we have assets we are not in love with. Sell em especially when the assets priced right.

Overall a net positive having the cash that has a new home already named .

[Palm]

Received an answer on the Napa Napa 99-year lease that IOC has. They evidently retained that lease but still trying to get answer on whether they retained it in whole or only on the lay-down area and new wharf by the lay-down area. Also trying to get answer on if IOC retained the whole area including the refinery, is there some sort of a sublease where IOC receives a lease payment from Puma. I've never seen any mention of lease payments by IOC to the PNG Government, so could be that as long as the refinery operates there is no lease payment because it's seen as national interest operation and the gov subsidizes it rent free. But the good news it appears is that IOC remains as the lessee on at least the remainder of the Napa Napa site.

This came from a very reliable and credible source.

Use or flush.

[Spartina]

Thanks for the inquiry Palm, and thanks to your source - Important stuff considering that could be the location of the new plant. My sources have dried up (smile).

[geologydude]

Since we need cash to build the LNG plant and pay for drilling why borrow the money when we have assets we are not in love with. Sell em especially when the assets priced right.

Overall a net positive having the cash that has a new home already named .

Hey, JFT last time I looked you were crowing about owning the refinery so we could process condensates???  Why the flip flop???

[Palm]

Thanks for the inquiry Palm, and thanks to your source - Important stuff considering that could be the location of the new plant. My sources have dried up (smile).

No problem Spartina.  In reviewing various documents (40Fs, etc) they make reference to lease payments to PNG for Napa Napa, but I see no amunts specified.  I would guess then that part of the deal with Puma would be lease payments to the government by them (if Puma somehow now assumes the refinery land lease), or to IOC (if IOC retained the whole Napa Napa leasehold).  Either way it appears that IOC at least has retained the leasehold on the land excluding the refinery.

[ArtM72]

Makes sense. Valuable property. Good to hear. Thanks.

[jft310]

Geology I have flip flopped that's 100% correct. Why?? Its the cash required to own a 30% interest in a 2 train plant. Looking back I was using the IOC slides and EWC estimates on the slides. The cash required for a traditional LNG plant is substantially higher than EWC. Phil had me convinced this vertical monopoly idea would work. Then Somare got sick and everything changed. Then Phil was canned and Hession came to our rescue. Hession will get our gas monetized and find us more. But it s gonna cost more but the certainty of the monetization makes it worthwhile. Lots of ??s about EWC not worth rehashing . Appears naïve today the EWC notion. But if Somare had lived would Phil have tried? Most likely!
Today we need to believe in Total and their ability to get this done.