10Ts Highly Unlikely at Certification

[efi426hemi]

Starting with a few assumptions:

1. Let's assume A7 actually hits and it does hit higher than was estimated by OSH/Pac.
2. Cert numbers will be influenced by the company's certifiers as per Kaliboo's post here
3. TOT wants the smallest cert number available.
4. XOM wants the largest cert number available.

Playing with the numbers:

• TOT at 7 which means XOM would have to come in at 13 just to make a 10T certification
• TOT at 7, XOM at 11 would mean a 9T cert
• TOT at 7, XOM at 9 and we get 8T cert.

So after everything that has happened, imho, there is no way the 10T XOM bid cap comes into play and I would be surprised if we ended up with a cert number north of 8.5.

H&H,

Hemi

p.s. Another reason why I don't see TOT counter bidding as they won't be afraid of making a big initial payout at certification.

[Putncalls]

Pretty much agree.

[ioc.aussie]

Starting with a few assumptions:

1. Let's assume A7 actually hits and it does hit higher than was estimated by OSH/Pac.
2. Cert numbers will be influenced by the company's certifiers as per Kaliboo's post here
3. TOT wants the smallest cert number available.
4. XOM wants the largest cert number available.

Playing with the numbers:

• TOT at 7 which means XOM would have to come in at 13 just to make a 10T certification
• TOT at 7, XOM at 11 would mean a 9T cert
• TOT at 7, XOM at 9 and we get 8T cert.

So after everything that has happened, imho, there is no way the 10T XOM bid cap comes into play and I would be surprised if we ended up with a cert number north of 8.5.

H&H,

Hemi

p.s. Another reason why I don't see TOT counter bidding as they won't be afraid of making a big initial payout at certification.

Disagree..  certifiers will receive same information and data ...  they will be scutinised this time.. unlike OSH..

I believe they will cerify much closer  , less spread.

[Indoreservoir]

Starting with a few assumptions:

1. Let's assume A7 actually hits and it does hit higher than was estimated by OSH/Pac.
2. Cert numbers will be influenced by the company's certifiers as per Kaliboo's post here
3. TOT wants the smallest cert number available.
4. XOM wants the largest cert number available.

Playing with the numbers:

• TOT at 7 which means XOM would have to come in at 13 just to make a 10T certification
• TOT at 7, XOM at 11 would mean a 9T cert
• TOT at 7, XOM at 9 and we get 8T cert.

So after everything that has happened, imho, there is no way the 10T XOM bid cap comes into play and I would be surprised if we ended up with a cert number north of 8.5.

H&H,

Hemi

p.s. Another reason why I don't see TOT counter bidding as they won't be afraid of making a big initial payout at certification.

Disagree..  certifiers will receive same information and data ...  they will be scutinised this time.. unlike OSH..

I believe they will cerify much closer  , less spread.

There was not much spread between NSAI and GCA, but a large difference with GLJ.

I assume GLJ used the same Rec Factor (RF) as in 2009, where their most likely number was about 87% RF, which is quite high.  My guess (and it is a guess) is that NSAI and GCA used a much more conservative RF, maybe 55-70%, which would be common in an undeveloped, low porosity (10-15%) carbonate with no history.

So, the OGIP numbers for all may have been similar, but the difference could have been largely RF.  Plus a few other areas of difference.

I'm told that the internal numbers certainly are higher than GCA and NSAI, but those include A7 area. FWIW.


So, trying to determine if IOC is fair valued at present or whether to buy more, I looked at the IOC Total SPA and found that both parties

1. Have a lot of input into the certification,

2. Have an opportunity to comment on the final draft

3. Have no rights of appeal - the certifiers results are final after they review the comments

Certifiers have only 90 days to do their work, which is not a lot of time and that may push them to rely on company materials (maps) more than with a 5-6 month certifying period.  Also, they are to use the deterministic approach.

So enough on that. IOC could be fair value, but maybe not.

Now, the discouraging part:

The Wildcard certification is NOT in our favor, as XOM could easily accept a low number for the CRP payment, then after up to 25% of the field's gas is produced (as per the TOT SPA), call for a Wildcard certification and capture the rest of monies owing from TOT at that time.  They also get the FID and first cargo payments, as others have noted.

Bottom line is I see no reason to expect a large payment from the CRP, as XOM can just wait and get the full TOT payment (less time value of money, of course).

In sum, I don't think XOM is aligned with IOC shareholders at all.  I would be surprised, as others have said, to see much above 7-7.5 TCF unfortunately.

GLTAL

PS - reading the Alignment of Interests thread I see others have reached the same conclusion as I. Seems the only question is whether to sell now or await A7 and the CRP.

Anyone know when the CRPs will 'vest' - after the shareholder vote or ? TIA

[Stavros]

This CRAP Deal with XOM is only slightly better than the ROTTEN Deal proposed by OSH.
It seems to me that almost all Retail Investor Schmucks who post on SHU were lining up to vote NO to the OSH Deal.

These are yet more reasons why we should all vote NO to this CRAP deal with XOM.

[Li'loilady]

What are the implications of using a deterministic approach vs. a probablistic approach for E/A in particular?  GCA report published January, 2012, used probabilistic methodology.  (I double checked.)

Art previously informed us:

"In the Notes section of the July 16th OSH ASX release "GCA and NSAI certification of Elk-Antelope fields completed"  "As agreed in the SPA, NSAI employed a deterministic methodology while GCA employed a probabilistic methodology. Otherwise the Certifiers were provided with the same instructions."

[Indoreservoir]

What are the implications of using a "deterministic approach" vs. a "probablistic approach" for E/A in particular?

See attached for a good write up.

I think the 2C (or P50 numbers) are not too heavily affected by the choice.  Capturing the P10 and P90 numbers is probably affected more by which method is used.  And of course these don't matter much to us - we're paid on P50.

Look at the GCA and NSAI numbers from OSH for the spread - 6.06 vs 6.80, a range of 0.74 TCF or about 10-12% depending on how you calculate it.  This is not much.  Using the 10 TCF or thereabouts from GLJ, that IS a big range but I think that is heavily affected by the recovery factor.  If GLJ used 87% with no production history, that is a stretch by any criteria.  In this type of rock one would likely use 50-70% (my guess) unless you had strong nearby analogues.

On the surface I do not believe Arun is a good analogue - Nam Phong/Thailand, Lacq/France, and some in the Middle East might be similar - would need to do some work on this which I'm sure all the evaluators have (as have Total and XOM).  IMHO GLJ did not to their homework here and hence the P50 is likely too high (of course I'm guessing based on the 2009 report, as no one has released their RFs).  I'm surprised about this as I thought GLJ would be very thorough now that their work was being checked by the big boys in certification.  Oh well - looks like I was wrong.

Would like to know what the wild card certification says in a few years - will be interesting.

Not sure if my attachment made it. Will try a new post with it

[Indoreservoir]

Here's the Rose paper

[jft310]

Total can save making the promised payments in the SPA to IOC by making a bid. Those payments are substantial and if all those payment requirements transfer to the buyer of IOC as I believe then Total is compelled to bid.My opinion is based on conversations 2 former IOC execs who own substantial positions in IOC stock.They both think Total will bid at some time.
Phil addressed in his presentation the possibility of the lack of a large difference in asset size between Ant 6 and 7. GLJ has included much of what Ant 7 can provide. How much with one well will the asset jump ???

[Indoreservoir]

Total can save making the promised payments in the SPA to IOC by making a bid. Those payments are substantial and if all those payment requirements transfer to the buyer of IOC as I believe then Total is compelled to bid.My opinion is based on conversations 2 former IOC execs who own substantial positions in IOC stock.They both think Total will bid at some time. Phil addressed in his presentation the possibility of the lack of a large difference in asset size between Ant 6 and 7. GLJ has included much of what Ant 7 can provide. How much with one well will the asset jump ???

TOT may bid to protect themselves from the unlimited upside exposure they now have.  Am not sure why XOM put a cap on it given the OSH certifications, but maybe Rex said no cap, no way.  Dunno.

We've been told A7 may get 1-2 TCF, but part of that is probably baked-in to the current 2C numbers.  The 3C numbers of NSAI and GCA from OSH were 8.11 and 7.57, respectively, which seem very tight/close to the 2C numbers.  Remember these numbers are designed to account for 90% of all possible sizes.  Take about 5% or so off of those numbers to account for CO2 and fuel and flare (which I had a better estimate of that reduction GLJ 2009 says up to 10% but then you have to add-in the condensate volumes, I think, on a quick read) and that is your hydrocarbon gas.

So how to get above 95% of 8.11 or 7.7 TCF is difficult for me to envision. Assuming Beicip (my bet for TOT certifier) comes in at 6 or 7 after all that red wine, foie gras and croissant, that would mean XOM needs to go to 10-11 just to get an average of 8. No way. Nothing in it for XOM unless it's already over 10.

Post A7 2C number will likely be 7TCF and change, as others have said. Wild card certification could be a lot more, and I mean a lot (12?) as they have no idea of the contribution of low k material and other connected reserves. XOM is aware of this from their NE Thailand experience and am sure many other examples.

All IMHO.