PetrEngr: A few thoughts from a new poster...

[Petro2458]

Hi All-

Long time reader..first time to post.  Appreciate the informative and constructive dialogue.  I'm a petroleum engineer and have been in IOC since May 2011.   A few thoughts/comments in no particular order:

-  curious if anyone has run a cash flow using the latest data from the png investor road show?  The $80b in gross revenues for the expected case...would be a good exercise to see range in net present values for the project.   I will do this...just haven't yet.  Could be wrong but my back of the envelope economics suggest stock in 90's was close to fair value ( just for E/A) when you factor in confidence (90%)  around Phase 1 (first train) development and resource estimates and Phase2 or second train of 50% confidence.   I Will work this in more detail and post results.

- I am certain the phasing is to de-risk the project..very common practice...i.e.  phase 1 ( 4 mtpa plant and X(?) wells) is a right sized development program (facility and wells) to get good dynamic data to assess reservoir pressure behavior and well performance..this will prove up the C2 ("expected") case resource, gas in place, and recovery factor...and presumably underpin Phase 2.

-  number of wells and recovery factor is very much an unknown until phase 1 commences production.  This is just a fact.  I have read some state that there isn't much uncertainty in the resource base.  This couldn't be further from the truth...there is considerable uncertainty and thus the range in the C1 to C3 assessments.  It's true that add'l drilling will / should narrow this range of uncertainty.

-  it's very positive that after many months of evaluation processes by multiple bidders that multiple majors are involved...this goes a long ways in my mind in confirming the resource range..especially the low (highest certainty estimate).

-  always a fine line messaging the points above to authorities...they prefer an 'all in'development approach, where as the majors (and IOC for that matter) will want to ensure that whatever the NEC approves gives the partnership the flexibility to develop the field over time as performance data and resource assessments dictate using an annual work program and budget process.

-  I'm concerned the fraud investigations are having implications on NEC approval...thoughts?  I do not know this...but time just keeps on ticking.  Lets hope this happens in next few weeks.

-  have been able to confirm, as of 2 days ago when I saw post on Yahoo that T Boone is in fact long IOC personally...don't know size and for how long.  But no question this is true.

All for now...just speaking technically...I really like the march 100 calls here.  Also like the stock action which seems to be bottoming here at $65 +/-.  Hope the pain is done for now.

Best.

Petro.

[Putncalls]

What fraud investigation are you referring to? Both RJ and MS have detailed a resource value calculation and their work is available on SHU.

[Petrovale]

Thank you.
Petro.

[bertl05]

What fraud investigation are you referring to? Both RJ and MS have detailed a resource value calculation and their work is available on SHU.

I think he is talking about the internal PNG fraud probe of politicians there.

[Petro2458]

What fraud investigation are you referring to? Both RJ and MS have detailed a resource value calculation and their work is available on SHU.

I think he is talking about the internal PNG fraud probe of politicians there.

Yes, that's what I was referring to..

I have not seen the RJ/MS economic runs ... Will look.

[admin]

Welcome aboard Petro. Actually we already have a Petro, so the numbering makes it easier. Sam Tibbs did an extensive spreadsheet on IOC valuation, you might wanna have a look at that one as well.

[TxPm]

Petro, I did a rough NPV analysis using the Cash Flows from the Sept 30th presentation a while back and depending upon the IRR that you use (which I figured most Private Equity firms use 15-20%) my NPV just for E/A was btw 115-135pps (depending upon the IRR). Once T-2 gets a resource value & PRE/IOC decide on early monotization efforts I think that that NPV will easily increase to 135-155pps....like I said though this was from a rough analysis that I did in an hour or so.

[Palm]

Thanks Tx, that seems much closer to what others have shown. WF has been onboard for a long time. They have approx $150 just on EA.

[jft310]

Morgan Stanley has $236 NAV without Triceratops.

[TxPm]

JFT,

Do you have a copy of that MS report? I'd be interested in taking a look at what figures they were using. I'm not saying MS is wrong and not trying to bash IOC by any means with my next statement but an NAV of $236 without Triceratops seems insanely high. MS would have to be 1) using an IRR that is near single digits which I can assure you Oil companies are not going to be using in their takeover offers (should that happen) or in their bid offers 2) MS would also have to be assuming commodity prices that are dramatically higher than the prices IOC is using in their forecast from the Sept 30th presentation. With that being said I will say is that in the presentation from Sept 30th I think IOC is being conservative on their Oil, Condensate, and Nat Gas prices but I am also quite bullish in my outlook on the energy market. Even with my bullish outlook though I don't see how you could get to an NAV of $236 om E/A alone.

I do think though that IOC's overall NAV is close to $200 b/c as I mentioned above I think within several months we will have a resource value on T2 and an indication from PRE/IOC on where we are going with T2. Once these things occur our NAV is boosted to the $150 range. I also personally have assigned NAV's to some of IOC's other fields b/c from a long term investors aspect I believe many of these field will have resource values assigned within the next 2 years which is how I get to the $200 range.