Will we have a Tradable CVR?

[petrengr1]

Implied value of CVR:

Resource Volume               CVR Value US$

6.2 TCFe                                      0

7.2 TCFe                                      6.05

8.2 TCFe                                    12.10

9.2 TCFe                                    18.15

10.2 TCFe GLJ 2C estimate       24.20

11.2 TCFe                                   30.25

12.2 TCFe                                   36.30

12.4 TCFe GLJ 3C estimate       37.51

Here is what IOC’s independent resources certifier said: “GLJ Petroleum Consultants Ltd ("GLJ", an independent qualified reserves evaluator, prepared an independent evaluation of Contingent Resources for the Elk-Antelope Field as at December 31, 2015 which estimated the gross unrisked Contingent Resources for the Elk-Antelope field# of 7.7 Tcfe 1C, 10.2 Tcfe 2C and 12.4 Tcfe 3C.”

For what it is worth, which I think is not much, Hession said our high case has become our mid-case. So he has told us that if the fault is further west, as they think it is, then the GLJ 3C number becomes the 2C number. So 2C would be 12.4 TCFe.

So what might we do with this information?

We make a few assumptions:

1. Assume the OSH deal to buy IOC is approved.

2. Assume OSH puts up a tradable CVR shortly after the deal is approved.

3. Assume the drilling of Antelope-7 goes ahead prior to certification in September 2016 as they have told us it will.

What will the price of the CVR be when it is approved for trading? I would think it would be fairly low. Today’s implied value, at the moment,  is (41.63 -40.25) or $1.38/sh.

You have to decide for yourself what you think the certified resource number will be after drilling Antelope-7. If we find all of the high porosity rock like we had in Antelope-5 the resource number should be higher. If the Antelope-7 is too far to the west it could be a dry hole and the resource number would be back to where it is now... GLJ says 10.2 TCFe. If Antelope-7 is successful we should see the CVR increase in value. If Antelope-7 is a dry hole the CVR would probably decline in value.

Let’s say the CVR trades a little higher than it is now after the deal is approved. How about $6.05/sh or assuming 1 TCFe above the 6.2 TCFe cut off. Now you decide what you think the certified resource number will be after drilling Antelope-7. Will it be 7.2 TCFe or will it be something higher?

If you could buy it at $6.05/sh (7.2 TCFe) when it begins trading and we eventually find our the certified number is much higher than 7.2 TCFe you can see your profit margin depending on the certification out come.

I assume the CVR’s will be in your account when it begins trading. You will have to decide if you are a holder, a buyer or a seller.

I offer no advice!

Good luck

[sageo]

Implied value of CVR:

Resource Volume               CVR Value US$

6.2 TCFe                                      0

7.2 TCFe                                      6.05

8.2 TCFe                                    12.10

9.2 TCFe                                    18.15

10.2 TCFe GLJ 2C estimate       24.20

11.2 TCFe                                   30.25

12.2 TCFe                                   36.30

12.4 TCFe GLJ 3C estimate       37.51

Here is what IOC’s independent resources certifier said: “GLJ Petroleum Consultants Ltd ("GLJ", an independent qualified reserves evaluator, prepared an independent evaluation of Contingent Resources for the Elk-Antelope Field as at December 31, 2015 which estimated the gross unrisked Contingent Resources for the Elk-Antelope field# of 7.7 Tcfe 1C, 10.2 Tcfe 2C and 12.4 Tcfe 3C.”

For what it is worth, which I think is not much, Hession said our high case has become our mid-case. So he has told us that if the fault is further west, as they think it is, then the GLJ 3C number becomes the 2C number. So 2C would be 12.4 TCFe.

So what might we do with this information?

We make a few assumptions:

1. Assume the OSH deal to buy IOC is approved.

2. Assume OSH puts up a tradable CVR shortly after the deal is approved.

3. Assume the drilling of Antelope-7 goes ahead prior to certification in September 2016 as they have told us it will.

What will the price of the CVR be when it is approved for trading? I would think it would be fairly low. Today’s implied value, at the moment,  is (41.63 -40.25) or $1.38/sh.

You have to decide for yourself what you think the certified resource number will be after drilling Antelope-7. If we find all of the high porosity rock like we had in Antelope-5 the resource number should be higher. If the Antelope-7 is too far to the west it could be a dry hole and the resource number would be back to where it is now... GLJ says 10.2 TCFe. If Antelope-7 is successful we should see the CVR increase in value. If Antelope-7 is a dry hole the CVR would probably decline in value.

Let’s say the CVR trades a little higher than it is now after the deal is approved. How about $6.05/sh or assuming 1 TCFe above the 6.2 TCFe cut off. Now you decide what you think the certified resource number will be after drilling Antelope-7. Will it be 7.2 TCFe or will it be something higher?

If you could buy it at $6.05/sh (7.2 TCFe) when it begins trading and we eventually find our the certified number is much higher than 7.2 TCFe you can see your profit margin depending on the certification out come.

I assume the CVR’s will be in your account when it begins trading. You will have to decide if you are a holder, a buyer or a seller.

I offer no advice!

Good luck

Pet - Good day to you,fine sir ! Your  last high-lighted statement sounds a little like Sgt. Schultz's "I know nothing"  !! However,in your case , we all know that you know a heck-of-a-lot !

For my part,I will strongly consider the purchase of the cvrs when we get a little more info. Regards , sageo   ...ps, thanks for your thoughts on the outcome .

[Libtardius Maximus]

From my perspective the CVR is nothing but a sucker bet. After all this time nobody wants to tell us what is in the hole. Botten is on record saying 5T's. Dr. Libor Plus 6 says there is enough for two trains, mid case is the low case, multi-Darcy, behaving like a beast. So which of these two can be trusted? It's like having to choose between Syphilis and Gonorrhea.

Make no mistake whoever does the certification will be in somebody's pocket and it won't be ours. This message board has been both a blessing and a curse. Botten knows the argument well and he knows many here claim 10T's plus. He is using it against us by trying to get shareholders to accept the CVR without knowing the tax ramifications as well. Unlimited upside and shareholders will get it!!! Where have I heard that before?

If Botten really wants to buy IOC then add to the offer. I don't care what it is as long as I get more upfront. And I could care less about OSH stock price appreciation since the only people that get paid for futures are stockbrokers. Besides, if I wanted to own OSH stock I would have bought it already.

Pass the sugar Peter.

Pay me now, not later.

[kommonsents]

I think we have to be realistic about the future value of the CVR, considering what we already know about the players.

The only number that is important to both Total and to OSH is that the certification certifies enough for two trains to support the project borrowing. Anything more is a waste of money for them.....AT THIS TIME!

I doubt very much any certification much above 7.2 Ts and I will make my decisions with regards to the the CVR based upon that scenario.

[jft310]

Botten in the latest presentation stated the CVR would be a debenture .
Wiki says
In corporate finance, a debenture is a medium to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest. The legal term "debenture" originally referred to a document that either creates a debt or acknowledges it, but in some countries the term is now used interchangeably with bond, loan stock or note. A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital.[1] Senior debentures get paid before subordinate debentures, and there are varying rates of risk and payoff for these categories.

Debentures are generally freely transferable by the debenture holder. Debenture holders have no rights to vote in the company's general meetings of shareholders, but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures. The interest paid to them is a charge against profit in the company's financial statements.

[katytrader]

Botten in the latest presentation stated the CVR would be a debenture . Wiki says In corporate finance, a debenture is a medium to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest. The legal term "debenture" originally referred to a document that either creates a debt or acknowledges it, but in some countries the term is now used interchangeably with bond, loan stock or note. A debenture is thus like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital.[1] Senior debentures get paid before subordinate debentures, and there are varying rates of risk and payoff for these categories. Debentures are generally freely transferable by the debenture holder. Debenture holders have no rights to vote in the company's general meetings of shareholders, but they may have separate meetings or votes e.g. on changes to the rights attached to the debentures. The interest paid to them is a charge against profit in the company's financial statements.

After reading the Australian Securities and Investment Commision's treatment of "debenture", I think we will just have to wait to see what the coming prospectus tells us.  I don't think Botten used the right term but, hey, why not a little more confusion to clear up while on his roadshow?

[ArtM72]

I think we have to be realistic about the future value of the CVR, considering what we already know about the players. The only number that is important to both Total and to OSH is that the certification certifies enough for two trains to support the project borrowing. Anything more is a waste of money for them.....AT THIS TIME! I doubt very much any certification much above 7.2 Ts and I will make my decisions with regards to the the CVR based upon that scenario.

Lib up above asked the question who do you trust with the certification number, Botten or Hession?  That is a trick question.  You trust the company that puts its professional reputation on the line. GLJ.  10.2 TCF is the C2.  What is the expected maximum deviation from that number?  +/- 10%?  There's your real range.  Hession has used his guarded language to say two trains...that would be two 5 MTPA plants...and there is your answer again.

There seems a scenario that should be considered goes like this.  GLJ believes there to be 10.2 TCF but another unidentified certifier insists that A7 first be drilled before credit can be given for the 3 TCF necessary to get from 7 to 10.  If that is the case, the PhD we hired as CEO would be expected to understand and communicate this unlikely confluence of estimates to his shareholders as a reason for going to this expense.

As it stands the more likely scenario is that A7 is hoped to take 10.2 to 13.2.  That will make E/A much more valuable to OSH and TOT, but put OSH in a cash crunch, a cash crunch that will be solved by this deal.  Assuming IOC will live to see next year, money to drill A7 can be obtained by trading the carry for Antelope South which was part of the SPA with Total.

[kommonsents]

I think we have to be realistic about the future value of the CVR, considering what we already know about the players. The only number that is important to both Total and to OSH is that the certification certifies enough for two trains to support the project borrowing. Anything more is a waste of money for them.....AT THIS TIME! I doubt very much any certification much above 7.2 Ts and I will make my decisions with regards to the the CVR based upon that scenario.

Lib up above asked the question who do you trust with the certification number, Botten or Hession?  That is a trick question.  You trust the company that puts its professional reputation on the line. GLJ.  10.2 TCF is the C2.  What is the expected maximum deviation from that number?  +/- 10%?  There's your real range.  Hession has used his guarded language to say two trains...that would be two 5 MTPA plants...and there is your answer again.

There seems a scenario that should be considered goes like this.  GLJ believes there to be 10.2 TCF but another unidentified certifier insists that A7 first be drilled before credit can be given for the 3 TCF necessary to get from 7 to 10.  If that is the case, the PhD we hired as CEO would be expected to understand and communicate this unlikely confluence of estimates to his shareholders as a reason for going to this expense.

As it stands the more likely scenario is that A7 is hoped to take 10.2 to 13.2.  That will make E/A much more valuable to OSH and TOT, but put OSH in a cash crunch, a cash crunch that will be solved by this deal.  Assuming IOC will live to see next year, money to drill A7 can be obtained by trading the carry for Antelope South which was part of the SPA with Total.

Are you saying that GLJ will be certifying for this deal?

I don't think so.  And if not, who?

And once who, what pressures will be upon them to be very conversative with their certification, as long as two trains are supported.  Heck, we can always recertify later with "new" information and understandings.  Just sayin'......

[2126]

If the CVRs are debentures [debt instruments], that could change their tax status from capital gains/losses to ordinary income. Lots of questions remain regarding tax consequences of the CVRs, none of which are being answered at present.

[ArtM72]

Are you saying that GLJ will be certifying for this deal?

I don't think so.  And if not, who?

And once who, what pressures will be upon them to be very conversative with their certification, as long as two trains are supported.  Heck, we can always recertify later with "new" information and understandings.  Just sayin'......

No, I'm saying that there are still professions where honesty reigns over advocacy and engineering remains one of them.  For good reasons.  I'm not saying GLJ will be certifying this deal, only that the extensiveness of the testing to date should leave a much narrower range of solutions possible than in 2012 when the last publicly known appraisal by other than GLC was performed.  More importantly, engineers have far more to lose by falsifying their results than to gain.  I see the strong likelihood that two engineers, provided full and open access to existing data, will end up closer to 10.2 than whatever Hession or Botten might say publicly.

I worry about certifying engineers will be given a limited data set and that the disqualification of certifying engineers due to their previous studies of the E/A reservoir is just another manifestation of malfeasance. Anyone else would look to take advantage of the savings in cost and time by not having to start the study from scratch. Not Hession.