Citi gets it wrong our Stavros gets it right

[jft310]

Poor Citi analyst saying we would sell our Total payment with our 36.5 Percent . Talk of $44 a share for all . Idiot !!!

Hession made a point of saying directly to James , shareholders will receive all of the Total payment . Singled him out for his nonsense . Field keeps getting bigger . Appears 7 may get drilled . Several times it was said all appraisal work completed this year. Seven yes or no this quarter .

Our  Stavros used a sum of the parts model including all payments and came up with $125 a share as minimum value . Citi totally embarrassed !!!!

Thank you Stavros .

[wapitidropiti]

Poor Citi analyst saying we would sell our Total payment with our 36.5 Percent . Talk of $44 a share for all . Idiot !!!

Hession made a point of saying directly to James , shareholders will receive all of the Total payment . Singled him out for his nonsense . Field keeps getting bigger . Appears 7 may get drilled . Several times it was said all appraisal work completed this year. Seven yes or no this quarter .

Our  Stavros used a sum of the parts model including all payments and came up with $125 a share as minimum value . Citi totally embarrassed !!!!

Thank you Stavros .

Are you delusional? IOC is at $30.00

[jft310]

Add the parts up . The Total payment , the 36.5,percent we still own , the TBR value , the value of an additional 30 prospects. Yes this is a future value. As uncertainty is removed we get there ..

[admin]

When responding to a message via the reply function, make sure one writes AFTER the [/quote] sign, otherwise one cannot distinguish the quote from the comment..

[Stavros]

Sum of parts repeated ... assuming drilling A-7 imparts "surprises" to the E/A upside:

1. 11 Tcfe - engenders a payment of $2,145,000,000 from TOTAL for 40.1% of E/A = $42.90 per share
2. FID Payment of $517,000,000 from TOTAL to be made in early 2018 = $10.34 per share

NOTE: TOTAL previously paid $401,000,000 downpayment = $8.20 per share; Not counted but needed to get #3 below

SO, TOTAL will have paid IOC a total of $3,063,000,000 = $61.26 per share for 40.1% of E/A; GUARANTEED PAYMENTS @ 11 Tcfe with the project moving to FID

Now let's see what that comes to per mcf: $3.063 Billion / 11 Tcfe * 0.401 = $ 0.6944 per mcf
This figure is reasonable. It's what the anal-ists said gas was being sold for when Oil was far lower than $100/bbl

Now let's proceed:

3. Value of the 36.5% of E/A that IOC has retained = 0.365 * 11 Tcfe * 0.6944 = $2,788,000,000 = $55.75 per share
We should discount this somewhat. Let's say by 25% = $55.75 * 0.75 = $41.81

4. Triceratops, Bobcat and Raptor "Discoveries" @ 6.4 Tcfe. Let's give it a value of $0.05 per mcf with 80% IOC ownership = $250,000,000 = $5.00 per share

5. Sunk costs on E/A to-date = $5.00 per share

6. All other PNG assets = $5.00 per share

So let's now add it all up for the price someone should pay to acquire IOC:

1. Certification payment from TOTAL = $42.90
2. FID Payment from TOTAL = $10.34
3. IOC's retained 36.5% of E/A = $41.81
4. IOC's equity in TBR = $5.00
5. Sunk Costs = $5.00
6. Other Assets = $5.00

Add up the above #1-6 = $110.05 per share

I would not consider any offer for the Company below $125.00 per share, adding $15 for "Good Will"

So then we go back to the original question:

WHY DOES THE MARKET VALUE IOC AT $30 PER SHARE?

The reason is that no one, including the illustrious CEO Dr Hession and the MIA Chairman Finlayson, have been able to convince anyone that E/A contains more than 5.1 Tcfe ... which would mean Certification Payment of $ZERO

Shameful

[freddiekingman]

....
Thank you Stavros for your work..

Use or....

[admin]

There are a few other reasons why the stock price is not close to figures in Stavros calculation, besides that the 11Tcf could be too optimistic an assessment for many.

• Energy sell-off. Stocks are brushed with the same brush, no matter that the Total payments do not depend on the energy price or the fact that IOC, at present, doesn't produce any oil or gas.
• The big decline in the LNG spot price is also affecting the the economics of LNG projects.
• There are a couple of dozens of new LNG projects proposed (mainly in the US and Canada), although few will probably make it due to the LNG price crash.
• Slower LNG demand, at least for now, has made it more difficult to sign offtakers.
• Uncertainty about the timing of the payments and the LNG project, although Total provided very helpful guidance on this recently, but there is still no great hurry for investors to load the boat..
• The significant cash bleed at InterOil (and lack of activity) and the need for financing (especially financing for its part of the LNG project).

We should have more clarity on the certification and resulting Total payments, I think that will be the best disinfectant. I really hope they're not going to drill Antelope 7, this is not necessary as even if it does increase the size of E/A, IOC has the opportunity for a later additional resource evaluation to reflect that.

[MartiniStocks9756]

After reading the transcript sure seems like they are leaning that direction. Well pad construction and talking about the available rig. 1 + 1= Ant 7. Now your suggestion would be the prudent business decision so that we could begin exploration and get a clean balance sheet. But, that does not seem to matter to the BOD and management at this moment.

[Movieguy]

Could the decision on whether to drill Ant 7 be so simple that the BOD firmly believes IOC will be acquired after certification, so the higher amount of certified tcf, the higher the acquisition price?

[admin]

Could the decision on whether to drill Ant 7 be so simple that the BOD firmly believes IOC will be acquired after certification, so the higher amount of certified tcf, the higher the acquisition price?

Actually, thanks, I hadn't thought of that, at least not in this context. I surely hope not..

I still think IOC is considerably undervalued (the extent of which depends on the certification) and was very happy when Total came out with firm support and some sort of timeline not so long ago.

There is still room for the ideal model, using cash flow from an LNG plant to finance new exploration and development, but time is a critical factor here, which is why I'm not against selling gas to Exxon.

The alternative is selling more gas in the ground, or part (or, even whole) of our LNG stake, or do a very large financing, some of which will be necessary anyway, but I hope we can minimize the damage.