Bloomberg Article today

[ebster123]

InterOil Corp. (IOC) expects approval for a liquefied natural gas project from the Papua New Guinea government will help attract a partner to develop the venture.
“There are a number of international oil companies, a number of national oil companies and a number of utilities” that have spoken to InterOil about joining the planned project, Chief Executive Officer Phil Mulacek said today in an interview in Sydney. “We’ve funneled that down to a shorter list.”
InterOil last month received approval from Papua New Guinea’s National Executive Council, clearing the way for the proposed LNG plant with an initial production capacity of 3.8 million metric tons annually. The company said last year it hired Morgan Stanley, UBS AG and Macquarie Group Ltd. to evaluate partnership proposals.
InterOil shares in New York have risen 8.9 percent this year, compared with a 10 percent increase in the New York Stock Exchange Composite Index.
To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net
To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

[ebster123]

Unfortunate the Bloomberg article did ot mention what was stated in another article "He also expressed confidence that Papua New Guinea would be able to finance a higher share of InterOil Corp.’s natural gas assets following an agreement reached in November." Regardless of what the train mixes, regardless of who the Partner is, regardless of anything this should reinforce the shorts bogus claims. Read "would be able to finance a higher share of InterOil Corp.’s natural gas assets", the assets are there and PNG is doing their best to get them. Looks to me like the PNG GOV'T wants and needs IOC as much as IOC needs them. Symbiotic relationship will work well for both entities!!

[Tree]

Unfortunate the Bloomberg article did ot mention what was stated in another article "He also expressed confidence that Papua New Guinea would be able to finance a higher share of InterOil Corp.’s natural gas assets following an agreement reached in November." Regardless of what the train mixes, regardless of who the Partner is, regardless of anything this should reinforce the shorts bogus claims. Read "would be able to finance a higher share of InterOil Corp.’s natural gas assets", the assets are there and PNG is doing their best to get them. Looks to me like the PNG GOV'T wants and needs IOC as much as IOC needs them. Symbiotic relationship will work well for both entities!!

Yes they want it and yes they will pay matching commercial rates.

The irony is PNG is motivated to have a higher buy-in $/M than a lower $/M as that places a higher value on the asset.  

Many are freaking  that this does not hold true as they fall for short rubbish.

[ArtM72]

I don't see how PNG can be motivated to have a higher $/M buy-in. That simply makes no sense when they look to control their own costs and maximizing the margins when gas is sold to others. The big question is whether PNG is taking a laissez faire position with respect to IOC negotiations in the selldown. Human nature tells me the chances of that are pretty slim.

IOC's best deal would be to give/sell PNG a total of 4 TCF from E/A, with any remaining in the formation above 8 TCF the 77.5% property of IOC. That gives PNG all the gas they will need for a long time but leaves IOC with an upside.

Triceratops seems to be a clean agreement with PNG at this time although there was already some suggestion new licenses will be negotiated on terms more favorable to PNG. More favorable than what? So many questions.

[Tree]

I don't see how PNG can be motivated to have a higher $/M buy-in. That simply makes no sense when they look to control their own costs and maximizing the margins when gas is sold to others. The big question is whether PNG is taking a laissez faire position with respect to IOC negotiations in the selldown. Human nature tells me the chances of that are pretty slim. IOC's best deal would be to give/sell PNG a total of 4 TCF from E/A, with any remaining in the formation above 8 TCF the 77.5% property of IOC. That gives PNG all the gas they will need for a long time but leaves IOC with an upside. Triceratops seems to be a clean agreement with PNG at this time although there was already some suggestion new licenses will be negotiated on terms more favorable to PNG. More favorable than what? So many questions.

Hey Art,

Consider this:  In round #s, Mitsui CSP deal valued E/A at about $20 Billion.  Mitsui to receive 5% E/A for a Billion dollar CSP swap.  Roughly $2.4/M from memory.  PNG had rights to 22.5% E/A for sunk costs and those are in the hundreds of millions, or $.70/M tops.  That 22.5% chunk is worth about 4.5 $Billion.  Not bad equity position.  Spend less than a billion, receive $4.5 Billion assett.  Tremendous borrowing power for PNG and that is the benefit for a high buy in price.

If PNG opts in an additional 27.5% at any price above $.7 it increases their collateral position.  Even if PNG pays $2.5/M for that 27.5% their blended cost is  still miniscule and their borrowing power remains.  PNG likely will flip that 27.5%, or a large chunk of it, to a third entity and that will place an even higher value on their E/A ownership %.

A high $Mcf today also sets precedent for future in country sales and that is more reason for PNG to help settle IOC's stake sale at a high $Mcf.  The more it sells for, the more they can borrow and loans are re-paid by flipping chunks or from future LNG revenues.  Basically not much out of pocket needed for PNG in these transactions.  Make sense now?

[ebster123]

That plus if PNG sets a higher price now as "market value" and then takes a piece of all the new licenses (which it seems they will). Their net loss now is a net gain fir the multiple higher mcfs they reel profit from in the future.

[ArtM72]

Tree - You won't find me arguing that $3.25/mcf is a bad price and not good investment for PNG. I'm only saying $2.25 for the 27.5% is a better price. If I were a young guy working on behalf of PNG trying to make my mark in the world I'd look a lot more attractive to future employers by getting the $2.25 (or $1.25) for my employer.

On a different scale, if you've got 20,000 shares of this puppy would you rather see it go to $150 or $250? Just human nature getting in the way.