It's worse than the SPA

[sfiaes]

We get $40.25 in OSH stock up front, that's $2.2 billion completely de-risked.

What price do you think IOC will sell at if the cert comes in at 7.1 T's a year from now and deeper in debt?

[oliver.gump]

We get $40.25 in OSH stock up front, that's $2.2 billion completely de-risked. What price do you think IOC will sell at if the cert comes in at 7.1 T's a year from now and deeper in debt?

Actually today its US$39.58 which may de-risk $1.979 Billion and its dependent on two things: AUD-USD exchange rate, and the trend of OSH stock:

[sfiaes]

You are quite the busy boy Gump. You seem to be everywhere at once. Admin in another thread was curious about "bloviating", perhaps you could show him the ropes.

In the meantime, I'll inquire again - What price do you think IOC will sell at if the cert comes in at 7.1 T's a year from now and deeper in debt?

[HhoseBoy]

Don't forget that we also get to contribute to Civelli's final payout, so I guess you could put us 21% responsible for that.

[kommonsents]

It isn't necessary for IOC go deeper into debt, although that is not necessary a problem. They can easily pare expenses to about a third of what they are presently spending, even less. Of course, management has to be motivated and competent to do that the right way.

[oliver.gump]

It isn't necessary for IOC go deeper into debt, although that is not necessary a problem. They can easily pare expenses to about a third of what they are presently spending, even less. Of course, management has to be motivated and competent to do that the right way.

I have been calling for a reduced spending for a long time.

I have been in contact with several former employees that were based in PNG, Australia, and Singapore; and they have all said one thing. When they approached management with evidence of waste due to management oversight, they were firesd within one month of that meeting. The reason was the same: "You are not part of the team".

Setting that aside and looking at the financials, their current rate of burn is just over $60mm/Q and that is almost entirely made up of management & contractor compensation and cost of living allowances / rent. We cannot get around the fact that Singapore is a very expensive place to live as an expat. At least one apartment currently being rented there costs around S$40k/month. Another staff member has two children in a private international school and that is almost S$50k/term. All part of the running costs of the business. Most of these costs could have been avoided by keeping skilled staff in the Cairns office for example.

There is no reason that the opex costs could not be reduced to between 15-25% of what they are now.

A complete revamp starting at the top and working down could change InterOil from a desperate fire-sale situation to a careful forward march.

[ioc.aussie]

I say we vote Oliver as Vice President Interoil ... as it should be run.

Oliver seems to have his ear on the ground.

[ArtM72]

Don't forget that we also get to contribute to Civelli's final payout, so I guess you could put us 21% responsible for that.

Good point. That I suspect comes out of the Total selldown at 100%rather than 21%.  I was wondering whether the reason for the $400 million line of credit was to get IOC liquid enough to pay our crack management team and directors their change of control bonuses before they leave.

[Stavros]

Consider the payments from the InterOil-Total SPA (see attachment)

However, two deductions have to be made:

1. The intial payment ($401M), we already had that
2. The drilling carry ($150M), this will be deducted from the total
3. Ideally, one should also discount future payments, but since most of the payout will be on the certification (next year) this effect is small so I'll leave it out.

If you compare this with the OilSearch CVRs we get, it seems like a no brainer. What we get from the Total SPA is much more at every level of Tcfe count.

However, we also become 21% shareholders in OilSearch, and as such we get 21% of the proceeds from the MoU between OilSearch and Total for the 60% sale of PRL15 and 62% of the other licenses. That is, we get:

1. 21% of $1.2B = $252M
2. 21% of two fixed additional payments ($141.6m on 1 July 2017 and $230m at FID) = $78M

Together this is $330M and this should be added to the different payouts at different Tcfe levels from the interim certification. Properly corrected for all this, we then get (all in US$):

Certification	SPA	CVR	Difference
7.1Tcfe	1069M	608.2M	460.8M
9.9Tcfe	2189M	1470M	719M
11.8Tcfe	2949M	2060M	889M

Feel free to correct (I'm not an accountant) add and/or comment.. For instance, I'm not sure the $330M should be added to the CVR. One could argue that there is another side to that, losing another part of PRL15 and the other licenses. If you leave it out the difference becomes considerably bigger.

OSH says IOC Shareholders get "14% to 21% Ownership of OSH depending on the CA$H portion taken up in the offer"

I'm counting on having 14% Ownership of the combined company, not 21%

[Putncalls]

I think OSH is betting on a "small" cash portion.