Another Try at the Legal Catalyst

[CAC]

sydbod, I don't think I've seen anyone here imply that it's a case of "my lawyers have bigger cahoonas than your lawyers", as you say; and I don't think that you know crap about how much of a "valid complaint" anyone has in this case. How about just dropping it at this point. I for one have heard all the negative speculation about it I want to hear. A request please, not an order, of course. You're just adding to uncertainty without contributing anything worthwhile to knowledge or understanding or in any other way, imo.

The uncertainty is already there and has been since OSH filed their claim.

Discussing it helps all of us to understand what is going on and how the various issues may play out.  I find it reassuring that after discussing the various parts and issues involved that It appears that IOC and therefore the investors , has little to be concerned about.

I can't imagine why any reasonable investor would try to stifle discussion about any factor involved in the OSH claim and the arbitration.  Or should we just close our eyes and ignore that the problem(s) exist?

Since the title of this thread explains what it is about, anyone that doesn't wish to read about it can simply ignore it.

I did NOT say anyone was creating uncertainty on something where there was none before.  I addressed some specific statements I thought were inaccurate and expressed the opinion he/they were ADDING further to uncertainty without any real benefit.  Don't distort what I said.  All this has been covered and discussed before.  What deserves "stifling" is inaccurate and repetitive negative speculation.  Also, in case you haven't noticed, there is plenty in this thread, as usual, besides the named topic.  The implied false accusation that I would advocate "closing our eyes and ignoring that" any "problem(s) exist" is totally unjustified and frankly absurd, but what I would expect from you toward me based on past personal attacks.

getit, that wasn't a personal attack post, however you may wish to categorize it.  It was simply a disagreement about your tactics of trying to control this board about who says what about what.  This isn't the first thread you have done so.

There has been nothing negative about the posts here unless you simply don't like what was said for some reason I can't fathom.  It's called analysis and discussion, exactly what this board is here for.

I suggest that your personal attacks, including the one above on me, are far more personal and intolerant.

Perhaps we should let the others decide what they wish to read and discuss?  I'm quite sure they are fully capable of doing so.

******

Kommon -- I like reading your opinions.  I also think most are tired of the hall monitor person after person what he thinks they should or shouldn't post.  FWIW... 

[Getitrt2]

The legal dispute ultimately is to try and get Exxon into Total's position per the article in The Australian. If OSH simply wanted in to another LNG project, they would have figured things out with Total, again per the article. Total was negotiating with OSH to sell them part of their 60% interest while IOC was negotiating with the IPI interest-holders. If the article is correct (which a good part of it makes sense), Exxon wanted/still wants to control EA for the purpose of piping the gas to PNG LNG. We don't know what all has gone on behind closed doors, but OSH has dealings with both Total and Exxon, so they likely were shown an opportunity where they can hardly lose. If somehow they can convince the arbitrators that Total and IOC played dirty and OSH should have the right to match the Total deal, then they would try and make that play and possibly flip the 40% to Exxon. Then OSH and Exxon have control of how things go. If that happens, what will Total see their legal rights to be? However, if things go the way most of us expect and the arbitrator says OSH has no pre-emptive rights, OSH becomes another partner in PRL 15 and Total/IOC likely push hard for a separate plant and maxing it out with gas from their license areas and if there is enough for everyone and Exxon still needs gas, IOC/Total/OSH can sell gas to PNG LNG as long as the price is right. Way too many "what if's" to try and get definitive right now. But if you want to see a bunch more what-iffing, see what happens when/if IOC announces finds in any or all of Wahoo, Bobcat and/or Raptor. The fur will fly and will fun to watch.

Palm

I expect OSH will win the arbitration, and they'll use the option to preempt TOT and deal with XOM or for some other option (force a gas sale at beneficial terms to PNGLNG?) or wait with that option until E/A delineation and then decide what to do.

I'm not a lawyer, and I've not seen the JOA but having seen a lot of JOAs most allow premption in the event of sale of a participating interest in the PSC (the buyer becomes a party to the PSC with the government).

Sale of a company holding the participating interest generally cannot be pre-empted.

However, the structure of the TOT deal was originally for a sale of some 61%, with that interest having been transferred to a wholly IOC-owned holding company for the purpose of the sale.

When the deal changed to 41% or whatever it was, IOC simply transferred/sold that amount to the holding company.

The problem with this approach is under english law (very likely the governing law for the JOA) you can't transfer/sell shares to a holding company for the express purpose of avoiding the premption right.

The arbitrators would clearly see this and rule in favor of OSH.

So OSH wins and draws-out the arbitration process until appraisal and then they decide what to do.  An option which they've bought for a few million $ in legal fees.

Now TOT and IOC are saying they have a strong case, but doubt that they do.  What else would they say?  We screwed up?  They wouldn't say that.

But they didn't really screw-up - many interest transfers are conducted in this manner and partners agree beforehand about pre-emption or the difficulty/cost of arbitration scares off possible preemptees.

The fact OSH closed on the PacLNG buy before TOT/IOC closed is the key - in this way TOT/IOC could have done better if they'd closed before OSH.

All IMHO.

GLTAL

Indo, you may well be right.....but I don't think we know what the arbitration rules are.  There is one form of arbitration which says that the arbitrator chooses one side's view or the other's.  But it may well be that the arbitrator can simply create a resolution from whole cloth.  I know of one situation in the US oil patch in which the "winners" were so shocked by the arbitrariness of the arbitrator that, along with the "loser", they decided never to include binding arbitration in future agreements.  It was too scary.  So.....the parties will continue to negotiate, probably right up to the deadline which might preempt a negotiated settlement.   fwiw

katytrader

A few months ago an expert in this kind of industry arbitration reviewed this situation and posted his findings on SHU.  His conclusion was that OSH  has little chance of winning this arbitration.  That corresponds with the strong confidence of IOC and Total managements and their legal consultants.  I am inclined to trust in those expert sources and think you are wrong, indoreservoir.  Let's drop it at that.  I don't think there is any benefit in further debate/argument.

Someone asked me by PM who that expert I referred to above was and where the posting might be found.  Therefore, I have found that posting and am posting a copy here:

"RE: What are these pre-emptive rights?? - eyeowecee - 03-28-2014 12:34 PM

As they say in NY sports radio, "long time listener, first time caller" I have been lurking here since August, but we now have a topic on which I have some expertise. I am a commercial litigator for 31 years, have been involved in international arbitrations, so can shed some light on the process. First, it was speculated by JFT that this might take 30 days. It could settle within that time period, but if it really goes to arbitration it is a much longer process- it will likely take longer than 30 days even to appoint the arbitrators. We haven't seen the JV document, but it will typically name the arbitral body to be used, quite often in these types of agreements this is a body called the International Chamber of Commerce ("ICC". Here is a link to their website http://www.iccwbo.org/about-icc/organization/dispute-resolution-services/icc-international-court-of-arbitration/

Under ICC rules, and other bodies as well, each party selects an arbitrator and the ICC appoints a "neutral" as the third. This process can take several weeks, although it can be expedited. Then OSH would file its Complaint and IOC/Total will have another 30 days or more to respond. Then the parties engage in limited discovery and a hearing is scheduled before the arbitrators. This can be 6-12 months after the arbitration is commenced. Then it can be several months before the arbitrators issue their decision. That is loosely the process.

Turning to the merits, it seems to me that OSH has little or no merit to its position. Having chosen a form of transaction designed to give it preemptive rights, it can't be heard to complain when IOC/Total take that same form to defeat preemption. It is likely that OSH has been told this by its lawyers, if they are any good, but is only doing this for negotiating leverage, on its own or on behalf of Exxon. That's how I see it, use or flush. BTW, thanks to all for contributing to a great forum, especially you O&G experts."

Thanks for that previous post, eyeowecee, and I feel sure everyone would be interested in any further comment you might have.

Regarding further comments toward me here since my last post, I refer you to my previous posts and see nothing worth further response.

[Indoreservoir]

I'm no expert on any of this, but now you seem to be contradicting yourself, indo. You say OSH could probably preempt IOC/Total, but could set up a new deal with Exxon in a way that would not allow IOC to preempt. If you think that would be so easy for OSH/Exxon, why are you so skeptical IOC/Total could have done it? Also, what about the issue Palm brought up of OSH not meeting the requirement of being a qualified LNG operator, which also happened to be a requirement of the PNG government? I would have preferred to have avoided all this imo needless speculation on this topic. Must be some really bored people on this forum, since I have no reason to suspect any ulterior motives!

Getit - OSH would certainly have to preempt by themselves, but where they get the money (sweeteart deal witth XOM having nothing to do with the preempting company ownership?) and what happens to the revenues from the preempting company can be decided much later, as could a buy-in by XOM.

Think why OSH might be doing this - what are their motives?  Purchase of the resource, or control of where/how that resource is monetized?  or both or other?  I dunno but I'm guessing they want the option on the 41%.

I think TOT/IOC took a chance (as most operators do) that no one would preempt their deal.  Look at PGN/Pertamina with Hess'Pangkah asset recently in Indonesia - Pertamina tried to buy Hess' 75% interest in Pangkah, but PGN pre-empted.  Happens but generally (don't know the %) partners don't pre-empt.

And to others on the qualified LNG Operator issue, that has nothing to do with the JVOA and the arbitration - it would not be mentioned in the JVOA.  The qualified LNG Operator would be terms laid-down by the government but has no bearing on OSH's case.  The arbitrators will ignore that issue, I think, and look at the legal documents only. (And again, OSH could bring-in XOM into the pre-empting company and satisfy the qualified LNG Operator issue, as long as OSH controls the pre-empting company.)

I'lll leave it at that and won't comment further.  I only originally commented as the Board seemed to think that OSH had no case, and I disagree with that and stated my reasons.

We'll see in the next year what happens.

GLTAL

[Palm]

I'm no expert on any of this, but now you seem to be contradicting yourself, indo. You say OSH could probably preempt IOC/Total, but could set up a new deal with Exxon in a way that would not allow IOC to preempt. If you think that would be so easy for OSH/Exxon, why are you so skeptical IOC/Total could have done it? Also, what about the issue Palm brought up of OSH not meeting the requirement of being a qualified LNG operator, which also happened to be a requirement of the PNG government? I would have preferred to have avoided all this imo needless speculation on this topic. Must be some really bored people on this forum, since I have no reason to suspect any ulterior motives!

Getit - OSH would certainly have to preempt by themselves, but where they get the money (sweeteart deal witth XOM having nothing to do with the preempting company ownership?) and what happens to the revenues from the preempting company can be decided much later, as could a buy-in by XOM.

Think why OSH might be doing this - what are their motives?  Purchase of the resource, or control of where/how that resource is monetized?  or both or other?  I dunno but I'm guessing they want the option on the 41%.

I think TOT/IOC took a chance (as most operators do) that no one would preempt their deal.  Look at PGN/Pertamina with Hess'Pangkah asset recently in Indonesia - Pertamina tried to buy Hess' 75% interest in Pangkah, but PGN pre-empted.  Happens but generally (don't know the %) partners don't pre-empt.

And to others on the qualified LNG Operator issue, that has nothing to do with the JVOA and the arbitration - it would not be mentioned in the JVOA.  The qualified LNG Operator would be terms laid-down by the government but has no bearing on OSH's case.  The arbitrators will ignore that issue, I think, and look at the legal documents only. (And again, OSH could bring-in XOM into the pre-empting company and satisfy the qualified LNG Operator issue, as long as OSH controls the pre-empting company.)

I'lll leave it at that and won't comment further.  I only originally commented as the Board seemed to think that OSH had no case, and I disagree with that and stated my reasons.

We'll see in the next year what happens.

GLTAL

Indo,

Thanks, but on the Operator issue I couldn't disagree more. The government absolutely required that the selldown IOC did was to a "qualified operator" and the gov was kept aware of who the bidders were and let IOC know whether they would fit the "Operator" bill. The history of IOC with bidders had stretched the government's patience beyond reasonable. OSH and the IPI investors rolled the dice on this issue. And for OSH to now come in with an Exxon when Total has acted in good faith and has been accepted by the PNG government as an operator on this project is more than a gamble by OSH.

As we have said, it will be interesting to see how this plays out.

[jft310]

Looking back OSH was required to get a SM partner and they chose Exxon. Interoil fought for years the SM thingie and was finally forced to chose a SM that being Total.
OSH may be a SM someday but that's not today.
Just because OSH is now participating in an LNG plant does not make them a SM.
OSH lack of capacity to fulfill the requirement of being a SM will weigh very heavily in any decision by the arbitrator. If they were to win the battle with Total they would lose the war with the PNG govt. That SM requirement.
So one has to ask to what end is this OSH arbitration?

[sydbod]

Folks ....... it has to be made clear, otherwise this discussion is just a case of all of us pissing up wind of ourselves.

Forget about using the words "OIL SEARCH" or the symbol "OSH".
No matter what is printed in the press, it is not OSH (OIL SEARCH) that is claiming and trying to enforce Pre emptive rights.
People may want to revisit the thread http://shareholdersunite.com/mybb/showth...p?tid=6304

The important part is
" It is not OSH that is trying to enforce its pre-emption rights .... we all know that OSH has NONE. After all,OSH is just a shareholder in the "Pac LNG" group of companies.

The "Pac LNG" group of companies DO have pre-emption rights ....... unless you believe that a change in share ownership of a company somehow extinguishes this contractual right?(if so can you please explain why)

It is the "Pac LNG" group of companies that are trying to enfource their pre-emption rights."

[Palm]

Well for crying out sideways! If that's the case, please refrain from using IOC/Interoil as the entity against whom the dispute has been lodged. We're making IOC look bad! Per the Dispute the complaint is against "an InterOil Corporation entity (SPI (208) Limited)" NOT Interoil itself.

So now that that's cleared up why are Hession and Botten wasting valuable time and money on this?!!! Get the LNG plant built and let these 2 rogue companies duke it out!

And actually the Dispute notice reads "Oil Search advises that it has, via the Pacific LNG Group Companies that were acquired by the Company on 12 March 2014, issued a notice of dispute......."

I think everyone will continue to call this a Dispute between IOC and OSH.

[sydbod]

Palm, the problem by calling it a dispute between IOC and OSH, is that people are trying to apply legal logic as if these 2 entities are actually the entities in dispute. We are talking about a legal dispute and the parties are not "IOC and OSH". One can not say " if it is good enough for OSH to do something then it is also good enough for IOC to also do the same. It is the actual understanding of who the real legal parties are in this dispute and what these 2 parties did, that will determine the outcome.

I don't know what the outcome will actually be, but we should try to keep our speculation within the realms of possibility by at least dealing with the correct legal companies, rather than companies that are legally not in this dispute.

You may be correct (I do not know) that we should not loosely use IOC as a replacement for the IOC holding company "SPI (208) Limited", although there appears to be a tie in between them. There is no such legal tie in between OSH and "Pac LNG" group of companies. OSH by law is treated only as a shareholder of "Pac LNG" group of companies, whereas InterOil Corporation entity (SPI (208) Limited) is treated as a holding company for IOC. It is this particular distinction in combination with what was transacted that will determine the outcome of the court case should it reach completion.

Apologies for being so anal about this, but without keeping this important distinction in our minds and taking them into account, we are just rehashing the same nonsense arguments that have occurred on this forum in earlier posts. Yes they are nonsense arguments because they are arguments that do not even exist. OSH is legaly NOT taking IOC to court.

It is still my understanding just the same, that "Pac LNG" group of companies is taking IOC to court for moving equity into/outof an InterOil Corporation entity (SPI (208) Limited) and then selling the whole of InterOil Corporation entity (SPI (208) Limited). It is the combination of "moving equity into/outof an InterOil Corporation entity (SPI (208) Limited)" in combination with the "selling the whole of InterOil Corporation entity (SPI (208) Limited)" that is the basis of the court action.

[Palm]

It's all soooooooo confusing; I want to yell "Mama!!!!" You may want to review the IOC structure. I pointed out things some time ago. SPI 208 Limited is not a holding company. A review of the very complex "IOC" structure might be in order.

[sydbod]

Palm, I agree with you, this topic is enough to do us all in.
We are all speculating and I am sure every one of us are only seeing a small part of the picture.
I was only trying to stop the speculation from spreading too far away from what could be considered within the realms of possibility.
It will be interesting to see what the final outcome will be from all this, but I am convinced that no matter what it is, IOC will be a great investment for those that are prepared to hold on till the LNG plant one way or the other gets built. It better get built as I have more than what I consider prudent invested in OSH and IOC combined because of my belief in the E/A deposit and its development.