Few quick notes from call

[petrengr1]

Thanks, Pet. I understand the issues and opportunities to the south and east. Given the prominent nature on previous seismic of the formation peak to the west, would you not think it would still be there, on one side of the fault or the other, and a primary target of Antelope 5?

Getit- Regarding the high point on the west side of the map http://tinyurl.com/ovpaevl page 10, if it was ever there it is still there. From what we can see it looks like the high was thought to be in the same block as Antelope-1 and Antelope-2. The present map, http://tinyurl.com/l3zo9jc page 7, shows that Antelope-5 will be drilled directly West of Antelope-2.

A better map might be the GLJ interpretation of the Antelope Block as seen on http://tinyurl.com/lrjknkq page 53. Based on this map, yes it does appear that Antelope-5 may be targeting the high point of the structure near the fault. The next map, page 54, is IOC’s interpretation and it shows the high point slightly further to the North.

[Getitrt2]

Very interesting again, Pet. On pages 53 and 54, do you think the left edge of the layout was interpreted at the time (y/e 2009) as a fault line?

The most interesting things to me about those maps are as follows:

1. They seem to agree with the other 2009 presentation page 15 slide, showing relatively little extension to the south, with a relatively quick decline in the formation to the water line.

2. For the Elk formation, those early maps show very little extension of the formation above the water line north of Elk 1, much less than even the page 15 slide of that time. Based on that, Elk 3 would have been a loser.

Apparently, additional seismic since then indicates more extension of the Antelope formation to the south, not to mention Antelope Deep, and much more extension of Elk to the north.

[jft310]

"Apparently, additional seismic since then indicates more extension of the Antelope formation to the south, not to mention Antelope Deep, and much more extension of Elk to the north
Never forget there was and is a data room. Phil based his statement about 15 T's at E/A on something. Henry Aldorf based his 2009 LNG Conference statement 12-16 T's at E/A on something.Why did Schlumberger say more than 10 T's at E/A?
Sure appears in 2009 those 3 persons saw more seismic details than was revealed on the slide presentations.
Now its coming into focus what those estimates were based on.
Why they chose to not reveal this level of detail is a matter of debate.

[mikesioc]

As CAC correctly pointed out there are no guarantees of specific amounts of known gas at E/A, even 7T's is an estimate. Otherwise we would already know exactly how much cash Total will pay which today remains unknown. Furthermore, why would anyone do a discounted cash flow from 2020 when 2022 is the estimated first cargo per Bernstein? FID isn't estimated until 2018. Given Hession's ability to estimate time lines and provide guidance of expectations I'll use the more conservative dates and figures. Bernstein's numbers are as good as any I've seen. Staying invested for a buyout makes more sense than waiting 8 years for something still having so much risk and uncertainty. I have always believed in the resource but been skeptical of IOC managements ability to deliver long term, not to mention the PNG risk. Sorry if I tipped off the shorts pointing that out. A buyout has always been the end game and still is. Hession has done some things well and some things poorly. Ultimately the only thing that matters is the share price and there is no dispute of those results during his tenure. Time will tell if the wait for a buyout is overtaken by positive well results, additional resource payments, FID and PPS gains. A buyout now for a reasonable price carries less risk and at least equals any reasonable estimate of valuation in 8 years on a risk adjusted basis. So for my money I'll take the faster, less risky, equally profitable payout. If it doesn't happen and Hession is proven correct then we all probably still win. Sadly it seems for some even me. Many of you have privately agreed with some of my thoughts and wished us all well. I do thank all of you and share the same regards.

[jft310]

Mike
If you listened to the call with Bernstein you could answer your questions. The timing question was specifically addressed.
What matters is what will the banks lend to build a new LNG plant. The Japanese banks have a long standing formula that avoids problems. They have 5 reservoir engineering firms they loan money on based on their independent reviews. Exxon on PNG used Netherland Sewell and no they couldn't know 100% the gas was in the ground but they lent the money anyway based on the 30% equity and 70% loan formula that has proven successful over the years. The PNG govt hired GCA to do an independent review and they came back with 7 T's enough to get a 2 train plant. GCA is one of the 5 approved reservoir engineering firms they the Japanese banks will loan money on based on their work.Therefore using the GCA report we can get financing for the build. The amount to be paid by Interoil with 7 T's more than covers their cash needs for the build.
In the Oil and Gas business known is defined by best possible estimate from the engineering firms that have a conservative basis for their estimates. GCA got her dune.
All the rest is cream.Next problem.

[Getitrt2]

I believe Hession projected FID and start of construction in 2017, which I think they can do, and probably by early in 2017. However, if someone wants to buy the Company before then for $200+ per share, that may be fine with me, depending on how much more they discover before then.

On the subject of financing he spoke about contacts they already have with major banks around the world, and I believe mentioned already having indications of interest on involvement in LNG project financing. That is a major part in being able to reach FID, and I think is an early indication of how effectively this extremely experienced management team will be able to move toward that. I also think they have every intention of expediting that process to the maximum extent possible. Furthermore, Hession expressed high praise for the capabilities of Total in that regard, the high priority he expects them to give this project, and the way they are already in country and working toward that. He also discussed their recent meeting with PM O'Neill, who expressed his full support and his desire to move ahead with the project and get it done. I would say the PM is delighted to have the French international major in PNG and ramrodding this project, while IOC drills for more gas, and while OSH and Exxon are drilling for more gas for PNG LNG.

[sageo]

I believe Hession projected FID and start of construction in 2017, which I think they can do, and probably by early in 2017. However, if someone wants to buy the Company before then for $200+ per share, that may be fine with me, depending on how much more they discover before then. On the subject of financing he spoke about contacts they already have with major banks around the world, and I believe mentioned already having indications of interest on involvement in LNG project financing. That is a major part in being able to reach FID, and I think is an early indication of how effectively this extremely experienced management team will be able to move toward that. I also think they have every intention of expediting that process to the maximum extent possible. Furthermore, Hession expressed high praise for the capabilities of Total in that regard, the high priority he expects them to give this project, and the way they are already in country and working toward that. He also discussed their recent meeting with PM O'Neill, who expressed his full support and his desire to move ahead with the project and get it done. I would say the PM is delighted to have the French international major in PNG and ramrodding this project, while IOC drills for more gas, and while OSH and Exxon are drilling for more gas for PNG LNG.

Getit- Congratulations on your very concise and informative post. Shows no anger and producing good points. A pleasure to read so many respectful posts lately. Kindness goes a long way when some of our folks on our board endure waiting...."not very well". Best of luck to you and yours.

[jft310]

Good post Getit . Thanks