ANT 6 & 7

[Palm]

Also not quite correct. Carried drilling costs will be deducted (using the formula in Section 3) from the Interim Resource Payment, so it will be a net payment.

[ArtM72]

Isn't it true the resource Päyment comes in two 50% installments, the second half at FID? That's what I read in the SPA anyway.

Not quite correct. There are many additional payments delineated in the SPA: The next upcoming payment is the Interim Resource Payment, which is a variable amount depending on the amount of gas certified by the appraisal process. For example: if 7.1 tcfe is certified, this IRP will be $907.1 million, which will be payable within 10 days after the appraisal reports are filed with IOC and Total [appraisal reports are due 90 days after the trigger date, which is the end date of the testing of the appraisal wells). The second upcoming payment is a fixed payment which is payable at FID, and which is set at $698.71 million.

Thus, if 7.1 tcfe is certified, the total of the two payments will be $1,605.81 billion, with this total increasing with higher certified gas amounts, payable at $1.00/mcfe. All indications are that the total certified amounts will be significantly higher than 7.1 tcfe, and thus, the IR payment portion will be higher as well.

Also, don't forget that there will also be a First LNG Cargo payment of $100 million; a later Final Resource Payment and that there may also be a Discovery Bonus payable under the SPA of $100 million/tcfe for any gas discovered within PRL 15, but outside of the existing PRL 15 E/A field (ie. Ant South). [Source: Total/IOC SPA: Schedule 6: Determination of Interim Resouce Payment and Final Resource Payment]

Yeah, that's what I thought until I read 3.3 c) and 3.3 d).  Here's the link to the SPA: http://www.interoil.com/iocfiles/documents/investorrelations/presentationanddocuments/2014/Share%20SPA.pdf.

[2126]

Also not quite correct. Carried drilling costs will be deducted (using the formula in Section 3) from the Interim Resource Payment, so it will be a net payment.

That is correct. Thanks, Palm

[ArtM72]

Isn't it true the resource Päyment comes in two 50% installments, the second half at FID? That's what I read in the SPA anyway.

Not quite correct. There are many additional payments delineated in the SPA: The next upcoming payment is the Interim Resource Payment, which is a variable amount depending on the amount of gas certified by the appraisal process. For example: if 7.1 tcfe is certified, this IRP will be $907.1 million, which will be payable within 10 days after the appraisal reports are filed with IOC and Total [appraisal reports are due 90 days after the trigger date, which is the end date of the testing of the appraisal wells). The second upcoming payment is a fixed payment which is payable at FID, and which is set at $698.71 million.

Thus, if 7.1 tcfe is certified, the total of the two payments will be $1,605.81 billion, with this total increasing with higher certified gas amounts, payable at $1.00/mcfe. All indications are that the total certified amounts will be significantly higher than 7.1 tcfe, and thus, the IR payment portion will be higher as well.

Also, don't forget that there will also be a First LNG Cargo payment of $100 million; a later Final Resource Payment and that there may also be a Discovery Bonus payable under the SPA of $100 million/tcfe for any gas discovered within PRL 15, but outside of the existing PRL 15 E/A field (ie. Ant South). [Source: Total/IOC SPA: Schedule 6: Determination of Interim Resouce Payment and Final Resource Payment]

Thanks.  Got confused reading 3.3 c) and d) where they were handling reduction of payment due to repayment of the carry.

[Getitrt2]

As far as I know we don't have access to the agreement between OSH and Pac LNG, but my impression is that the drilling of an A7 will not have any effect on their calculations of the additional payment due Pac LNG. It comes down to whether Total agrees to an A7, and I personally do not give much credence to the conspiracy theories here; but maybe I am too naïve.

[Thylacine-2]

.......there may also be a Discovery Bonus payable under the SPA of $100 million/tcfe for any gas discovered within PRL 15, but outside of the existing PRL 15 E/A field (ie. Ant South). [Source: Total/IOC SPA: Schedule 6: Determination of Interim Resouce Payment and Final Resource Payment]

Thanks, 2126. Isn't it the case that the Discovery Bonus is limited to the gas proven by the (one) exploration well?

[Palm]

Thy,

When looking at the SPA it is crucial to look at the SEC filing and not at the preliminary SPA agreement on the IOC website. The Discovery bonus is not paid unless the parties agree on the volume (or disagree and pay for the Experts to come up with the volume). Then the Discovery Bonus is only paid on the volume IN EXCESS of 1.0 Tcf, and then the rate is $65,471,208/Tcf in Excess of 1.0 Tcf; not $100 million. The final agreement was tweaked by the change in % that Total ended up purchasing after OSH "intervened" in the process. Here is the language from the SEC official SPA agreement. Also the Discovery is not paid until "within 10 Business Days" of the first LNG Cargo leaving port; well down the road. And per mgmt. it IS based on the 1 Exploration well.

"3.9 Discovery Bonus
If the Carried Exploration Well identifies an accumulation of Hydrocarbons outside the PRL 15 Fields but within the PRL 15 Area, the existence of which until that moment was unproven by drilling, and such accumulation contains 2C Hydrocarbon Gas or 2C Condensate in excess of 1.0 Tcf, then the Buyer shall pay to the Seller a Discovery Bonus of sixty five million four hundred and seventy one thousand two hundred and eight U.S dollars (US$65,471,208) for each 1 Tcfe of 2C Hydrocarbon Gas and 2C Condensate in excess of 1 Tcf (or pro rata for part thereof) discovered outside the PRL 15 Fields but within the PRL 15 Area by such Carried Exploration Well (“Discovery Bonus”). If the parties cannot agree the volume of the 2C Hydrocarbon Gas or 2C Condensate discovered by such Carried Exploration Well then either party may request that Experts be engaged in accordance with the procedures in Schedule 4 to certify the 2C Hydrocarbon Gas or 2C Condensate upon which the Discovery Bonus is to be calculated. The Discovery Bonus shall be payable within ten (10) Business Days of the First LNG Cargo leaving port."

[Thylacine-2]

Thanks, Palm. So the discovery bonus will likely be small, compared to the other payments. And fairly late in the game.

[2126]

Correct again, Palm. Thanks.

[jft310]

Getit=disagree if they find more gas before their appraisal process within PRL-15 is complete then Oil Search pays more.Thus OIl Search would not want to start on Ant 7 before their deal is complete with PACLNG. Oil Search has zero incentive right now to approve Ant 7. Since we have enough gas for a two train then Total would be best served to defer Ant 7 so any gas found with required payment would roll into the second appraisal.Additional gas helps with trains above two. Hession would love to receive more money on this first payment but has not convinced the others . Been talking about it for months but no approval yet. Easy to see why no approval yet.