Interoil Corp Earnings Q4 2012 Earnings Call Teleconference IOC
2013-02-28 14:39:24.16 GMT
Event Date: 02/28/2013
Company Name: Interoil Corp
Event Description:Q4 2012 Earnings Call
Source: Interoil Corp
For more event information and transcripts,
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Q4 2012 Earnings Call
MANAGEMENT DISCUSSION SECTION
Operator:
Ladies and gentlemen, thank you for standing by, and welcome to the
InterOil's Fourth Quarter Financial and Operating Results Conference Call. At
this time, all participants are in a listen-only mode. Later we will conduct,
the question-and-answer session. Instructions will be given at that time.
[Operator Instructions] As a reminder, today's conference is being recorded.
I would now like to turn the conference over to our host Wayne Andrews.
Please go ahead.
Wayne W. Andrews:
Thank you, Judy [ph], and hello, everyone. This is Wayne Andrews, VP of
Capital Markets for InterOil Corporation.
Before we start, I want to briefly remind everyone that some of the
statements made during this conference call constitute forward-looking
statements within the meanings of the U.S. Securities laws, including such
statements as those regarding expectations of future results, general
financial performance, future business prospects and strategies.
These statements are based on management's current expectations and are
subject to a number of risks and uncertainties, which could cause actual
results to differ materially from those described in the forward-looking
statements. Investors are cautioned not to place undue reliance on these
statements.
Additional information about factors that could cause our results to differ
materially from those in the forward-looking statements can be found in the
company's filings with the U.S. Securities and Exchange Commission and SEDAR.
The speakers from management on the call today are Phil Mulacek, our CEO;
Bill Jasper, President; Collin Visaggio, CFO; and Dave Holland, our Upstream
Manager. Also Gaylen Byker, our Chairman is with us today. We have a
presentation to accompany our comments today. The presentation can be
accessed on our website at www.interoil.com. You can find the link under the
Investor Relations section on the homepage.
At this time I'd like to turn the call over to Mr. Phil Mulacek, our CEO. Go
ahead, Phil.
Phil E. Mulacek:
Thank you, Wayne. I'd like to thank everyone for joining us today, and
participating in today's conference call and summary of our fourth quarter
2012 and 2012 annual results.
Fourth quarter, we saw a stable upgradation of accrual phases resulted in
improved refinery crack spreads and the solid combination of volume growth in
the Downstream sector. These provided a consolidated group net profit of
about 18.5 million and approximately 26 million EBITDA from the fourth
quarter with an overall year end 1.9 net profit with a rough EBITDA of around
36 million per year in 2012.
Growth in the PNG accounting has been the strong contributor in the earnings
space for our Mid and Downstream business. The free cash flow from these
operations were targeted and spend on a Upstream technology [ph] activities
to improve the overall value of the company and our shareholders.
On the LNG front, we are very excited at these times. During the fourth
quarter of 2012 we were the first LNG developer to proactively have the PNG
government to clear it's 25% equity in kind from the Elk and Antelope field.
This is dedicated for local power and natural gas related industries. This is
a key and transforming event for the country at PNG and the standard
delivered of those in the Gulf area. The PNG government has reiterated its
desire to control cost, accelerate our production, create jobs and under
pending revenues sources from our LNG development activities, and support of
InterOil to demonstrate the importance of this key industry for PNG, today
the Prime Minister of PNG, the Ministry of Finance, Ministry of Labor, Chief
Secretary and the Governor visited our upstream operations including our
logistics centers the Elk and Antelope fields, related infrastructure.
The delegation was impressed with our overall upstream activity, overall
operations of building roads, bridges, camps, the assistance in eight pros
and Wabo community centers for new teachers and local police. The LNG
capacity sizing 3.8 million tons, supported by the PNG government has created
enhanced interest by several new parties, which engaged in the process as we
reached and we are in the final stages of our partner selection.
IOCs, NOCs and utilities have all moved forward and we look forward to this
partner selection for us all at InterOil and all related stakeholders. The
Management and Board are ready to take the company into a stronger dimension
through a transpiration of exploration and appraisal to long-term LNG
revenue.
On the upstream side, we've just completed operations in Antelope-3. This
well provided greater understanding of the central core of the Antelope
structure, adding knowledge to the LNG partners for the sell-down process.
Our new drilling rig, Rig 3, has now rigged up, and on location at Elk-3,
which is one of two commitment wells we have scheduled at Elk and Antelope
over the next 12 months.
Triceratops-2, proved to a successful discovery just west of Elk and Antelope
with our new partner Pacific Rubiales. Similar to the process we executed in
moving from Elk-1 to Antelope-1 and Antelope-4, that meant we went from
drilling the front well to targeting the top of the reef that we saw in
seismic. The next well Antelope-3 is also planning to move up deep [ph] from
Triceratops-2 and drill the top of the reef location on the Triceratops
structure.
Overall, the two wells Antelope-3 and Triceratops-2 provided solid results to
increase the overall 2C [ph] gas resource reported by GLJ by about 10%,
around 358 Bcf and now about 10 million or 10 Tcf total.
On to other business at hand, I would like to turn the call over to our CFO,
Collin Visaggio, to cover the financial in more detail.
Collin F. Visaggio:
Thanks Phil and welcome to everyone listening to today's presentation. You
can see from our filed financials, we continue to progress and expand on the
Gulf LNG project to monetize existing resources, and we also continue to
invest in our exploration portfolio, which David Holland will cover in more
detail.
I know that you are all eagerly awaiting the announcement from the assets
sell down process and I can assure you that we're all excited about our
future, especially given the certified resources that we've.
As publically disclosed and highlighted by Phil, the final bid solicitation
period for the partnering process will close today and our boarding teams to
meet our advisors during March for the purpose of evaluating the proposals
received and selecting our partner for the development of the LNG Project.
The assets sell down once completed, we will fund the Gulf LNG project and
our longer term exploration program. The timing and execution of the
agreements will be advised in accordance with our continues disclosure
requirement. Also we may not extend existing agreements as we move forward
towards an integrated LNG project and conclude documentation with the
selected strategic partner.
Net profit for the quarter ended December the 31, 2012 was 18.5 million which
is contributed to us achieving an annually net profit for the year ended
December the 31, 2012 of 1.6 million. The operating segments Corporate,
Midstream, Refinery and Downstream collectively drive a net profit for the
year of 61.2 million, mainly due to an increase in gross margins attributable
to the positive crude and product price movements and higher margins from
export cargos.
Our balance sheet remains robust, with our debt-to-capital ratio at 19%. As
of the 31 December 2012, our total book assets amounted to 1.3 billion and
our total liabilities amounted to 524 million. Our current ratio and quick
ratio were 1.3 times and 0.7 times respectively. These ratios were below our
internal target of above 1.5 times for the current ratio and one time for the
quick ratio.
The completion of the Pacific Rubiales Energy Farm-In transaction in the
coming days and the closing of the sell down interest in the Elk and Antelope
fields and the LNG project will bring these ratios well within our internal
targets.
On the 16 October, 2012, the company entered into a five-year amortizing 100
million secured term loan facility with BNP Paribas Singapore, the Bank of
South Pacific Limited, and the Australian and New Zealand Banking Group.
Borrowings under the facility had been used to repay all outstanding amounts
under the term loan granted by the overseas private investment corporation. I
would like to thank the overseas private investment corporation for their
long-term support, which has resulted in PNG for its secondary production
facility providing strategy fuel supply and field employment in the refining
business to the country. It is very pleasing that we recently achieved our
100th cargo and Bill Jasper will elaborate on this.
Firstly, summarizing our results of the group. As mentioned, our operating
business segments had a combined net profit of 61.2 million and the
investments in our developing business segment resulted in a net loss of 59.6
million.
Our EBITDA for the year was 35.9 million. The decreasing impact for the year
compared to 2011 of 16.1 million was mainly due to 25.1 million decrease in
foreign exchange gain due to the Kina being relatively flat through the year
ended December 31st 2012 compared to the same period in 2011 when it
strengthened significantly.
A 9.8 million increase in interest expense resulting from the 9.7 million
interest reporting tax paid in November 2012 to certain inter company loan
interest accrued from January 2007 to October 2012 and settled in that period
and a 6.3 million decrease in derivate gains primary from the losses incurred
for the commodity contract.
These decreases were partly offset by 10 million increase in income tax
benefits resulting mainly from the current years result and interest
deductibility recognized subsequent to the payment from the interest
withholding tax. A 4.5 million reduction in exploration cost incurred through
seismic activity for PPL 236, a 4.4 million increase in gain on conveyance of
oil and gas properties which was recognized from the sale of the interest in
PPL 237 to Pacific Rubiales Energy and the waiver or forfeiture of the 1.5%
IPI interest conversion rate into common share.
In addition, an improvement of 3.3 million in gross margin and increasing
downstream domestic sales volumes resulting from the supply to various
development projects. The total volume of oil products sold by us was 8.5
million barrels for 2012, compared to 7.4 million barrels in 2011. I see
brilliant increase. A full detailed analysis for your review is available in
the press release and in the filed financials and MD&A.
Analyzing the cash position of the group, as of the 31st December, 2012, we
had cash, cash equivalents and cash restricted of 99 million. Since the start
of 2012, we've spent 38 million on Triceratops-2 drilling and testing works.
25 million on Antelope-3 site preparation, pre-spud and drilling works, 9
million on Antelope-3 site preparation and pre-spud, 14 million on seismic
activity, and 112 million on the Gulf LNG project and 37 million on operating
business maintenance upgrades.
As of 31st December, 2012, the company has capacity to increase debt levels.
Based on existing book values, gearing 50% allows open debt of some 600
million more than sufficiently available cash as we continue progress towards
achieving our near-term strategic objectives.
Our previous shelf expand in September 2012 and like all prudent company, we
will be looking at replacing it given the open debt levels as this will add
to our financial flexibility. On July, the 27th 2012, we executed the farm-in
agreement with Pacific Rubiales energy relating to the Triceratops structure
and the participating interest in PPL 237 license. As December, the 31, 2012,
Pacific Rubiales has paid us 40 million of the stage cash payments. The first
20 million was paid on May the 3rd 2012 in accordance with the Heads of
Agreement and became non-refundable on execution of the farm-in agreement.
The first new cash payment of 12 million was paid on September the 26th 2012
in accordance with the farm-in agreement under the advance payment facility.
Subsequent to year-end on January the 9th 2012 Pacific Rubiales Energy paid a
third cash payment of 20 million under the advance payment facility.
or the next 56 million is expected in the coming days along completion of all
conditions placements. As advised previously Pacific LNG operations limited
their partner is participating on the processing in equity vices as
accredited against joint venture cash cost and billings.
In terms of investment so far as of December 31st 2012, 371 million has been
spent on the Elk and Antelope fields of which InterOil has contributed 255
million and Upstream JV partners with 116 million. In addition, 75 million is
being spent on the Triceratops-2 field of which Ero [ph] has contributed 61
million and Upstream JV partners 14 million. The LNG joint venture has spend
approximately 50 million, 140 million has been spend on the construction
equipment, road construction, logistics and site work associated with the
upstream development sites and 53 million has been spent on the condensate
shipping, front-end engineering and design.
We are focused on our strategic plan to monetize the Elk and Antelope fields
through an integrated development project. We are also working very closely
with the Government of PNG to keep them updated on all key developments in
relation to the project's early works, strategic partnering process, and the
PDL application.
We have successfully negotiated the transaction with Pacific Rubiales Energy
bringing a new strong and respected player at PNG.
We have delivered our very successful well in Triceratops which all goes well
for the future exploration portfolio. We have secured new long term debt
financing arrangements and we are very excited about the opportunity ahead of
us and looking forward to maintaining the maintenance and selecting a
strategic partner and completing the requirements with the government and
stakeholders to proceed to FID on the Gulf Energy project.
With that I will hand back to Phil.
Phil E. Mulacek:
Thank you, Collin. Moving to Refinery and Downstream Operations, I would like
to pass the call over to our President, Bill Jasper.
William J. Jasper:
Thanks, Phil, and good morning, everyone. I'm pleased to report that the
fourth quarter was another consecutive quarter of good gross refining margin
for the refinery and the 17.5 million gross refining margins translates to
about $9 a barrel. This result is a combination of the more stable crude
price environment together with the modest improvement in ITT margins.
Naptha cracks have also shown a significant improvement in the fourth quarter
with almost a $6 a barrel increase compared to the same period in 2011 which
together with the much improved premiums associated with our current term
naptha buyer gives us of vastly improved position for sales. In fact this has
changed our evaluation of crudes and is partly why we are running more naptha
rich crudes as of late it's in our carrier GRM debt versus the higher middle
distilled crudes.
It is also pleasing to see that domestic sales for this quarter continue to
exceed the level for the same period in 2011 being 14% higher for the quarter
or 9% higher for the year. This reflects that growth in PNG mining and other
construction activities.
During the fourth quarter 2012, we purchased our 100th crude cargo which
interestingly enough was a shipment of Kutubu, PNG's only [ph] indigenous
crude. This marks the major milestone for the refinery of more 56 million
barrels of crude with a value over $4.9 billion processed since our first
cargo discharge in June of 2004. All this took place without a single
loss-time injury and I personally don't know a single plant anywhere in the
world that can make such a bold statement.
Our downstream total sales volume for the fourth quarter of 2012 were 220
million liters, which is a 5% increase on the volume sold in the same quarter
of 2011. The volume for 12 months at 863 million liters is also up 16%
compared with the same 12 months in 2011.
Our downstream team has done a great job managing this very diverse business
and we continue to be the PNG leader of quality product sales and service. We
strive to look for opportunities to grow this business and serve the country
better. As mentioned in last quarter this growth is largely due to various
oil, natural gas and mining project that we being pursued in various parts of
the country, together with a general increase in retail business activities.
Our safety record at the end of 2012 as the refinery achieving a total of 5
million man hours without a loss-time injury, this fantastic milestone was a
result of a lot of dedication and focus from every one of the 126 employees
at the refinery. With a total 8.1 million man hours for the corporation,
safety remains as our top focus for all of our operations.
And with that I'll turn it back to Phil.
Phil E. Mulacek:
Thank you, Bill. I'd like to take a special margin to thank all the refinery
group and everybody in the downstream as well. They've done great job to
underpin our feature and really supply the cash flow for the company.
And I'd like to move to exploration production and hand the call over to our
General Manager of Exploration, Mr. Dave Holland.
David Holland:
Yeah, thanks, Phil, and good morning everyone. As we present the financials
for 2012, it is time to reflect on a busy year for InterOil's exploration
group. 2012 saw the resumption of drilling after 15 months in which we
concentrated on construction and development of key in-field infrastructure
and the acquisition and interpretation of airborne potential field and
seismic data.
In January, we spotted the Triceratops-2 well, which was declared a new
discovery by the Department of Petroleum and Energy in June 2012. This was a
great result. The Triceratops-2 discovery is a third successive discovery for
InterOil after the discovery of Elk in with the Elk-1 well in 2006 and the
Antelope discovery in 2008 Elk-4 well.
As many follow the InterOil story will remember a true magnitude of the
Antelope resource was not fully understood until later in 2008 and early in
2009 when we drilled well then tested the Antelope-1 well.
The appraisal and the delineation operations at seismic and drilling take
time effort and resources. Results are not instantaneous nor easily won. And
as we review 2012 we are in a position where we have begun a new journey with
the Triceratops-2 discovery and taken a new big step forward with Antelope-3,
for Elk and Antelope.
At year-end 2012, with the completion of the independent third-party resource
assessment by GLJ Petroleum Consultants, the use result -- the results of our
used work are on the table. In this assessment we have seen an increase in
the contingent gas resource on a P50 or C2 bases of 858.3 billion cubic feet
of gas and 16.7 million barrels of condensate.
This equates to a 157.7 barrels of oil equivalent which is an increase of
10.1% over our 2011. In anyone's language this is a great result from only
two wells and brings the contingent resource net through each well to over 1
billion barrels of oil equivalent.
As shown on slide 18, 858 million barrels of oil equivalent of this increase
or approximately 54% came from the Antelope field and 71.9 barrels oil
equivalent or 46% from the Triceratops field.
As summarized and shown on slide 16 and 17, the Antelope-3 well came in high
to the predrill prognosis made by InterOil and [indiscernible] reservoir and
also high to the previous making by GLJ in 2011. This has resulted in an
increase in gross volume of the reservoir within the gas pay and this is a
key factor in driving the improved contingent resource investment by GLJ
Petroleum Resources.
The 2012 results brings the total contingent resource for the Elk and
Antelope fields on a C2 basis to 1,646 million barrels of oil equivalent of
this 964.7 million barrels is net to InterOil.
As said above, GLJ Petroleum Consultants as for the first time completed the
resources for Triceratops gas field. And the aim in 2013 and 2014 with the
PPL joint venture and their main Pacific Rubiales Energy will be to build on
this great start.
The seismic acquisition and additional wells, we hope to gradually convert
perspective resource potential into contingent resources. By way of a
comparison, I think it's helpful to compare Elk and Antelope that are at a
similar stage of appraisal.
In 2007 in one of the first independent assessment completed on Elk and
Antelope fields, the P50 or P2 contingent resource assessment was 187 Bcf for
Elk and on a prospective resource assessment 841 Bcf recoverable from
Antelope.
Triceratops in the first resource assessment has shown on slide 19 of the
presentation. We've a P50 or P2 contingent resource for Triceratops of 382.6
billion cubic feet and 8.2 million barrels of common space. This contingent
resource is shown on slide 20 and is calculated from a restricted reservoir
volume in the each of those portion of the field around the Bwata-1 by
Triceratops-1 and Triceratops-2 well.
Our original PRE drilling assessment of Triceratops resource potential of
approximately 4 Tcf of gas in place has not changed. Clearly, there is a
similar result and at a similar stage of development at 4 Triceratops
compared to Elk and Antelope. The clear objectives of our forward appraisal
program for Triceratops, which complete additional seismic to extend seismic
coverage to the west and define the western units of the field and into a
seismic within the current seismic footprint to help identify and locate the
source of the repo material identified in Triceratops too.
And also to identify further a shallow marine that is in accumulations claim
to release north and west of Triceratops. With the similar philosophy, our
next appraisals roles will be to drill a well in the Triceratops. Update [ph]
from Triceratops to targeting more proximal repo basis, where we have the
seismic control. In efficient, after we have completed the next phase of
seismic.
As a joint venture, we will select a location for a second and a more
significance did that well. This well will target respective reservoir volume
to confirm harder problems and reservoir quality. In the step wise session,
we will intuitively increase - attempt to intuitively increase our continued
resource base for Triceratops as we linked our next commercial threshold. We
are confident and believe we see the potential as well conclude this approval
to build a resource based to meet or exceed the appraisal estimates.
At the end for 2012, my first year - my first full year and my current job is
the General Manager, Rig [ph] Supply Exploration. I would like to take this
opportunity and at this time of the year to stop and reflect on 2012. I would
like to take this opportunity to congratulate our exploration GLJ drilling
and engineering teams and deliver all operations finance teams to support us
on our job well done.
With a special mention to those who toil away at the call sites in the jungle
right from families and in optimum yet difficult conditions. Collectively
they've both reached an important and psychological milestone this year. In
2012 each world has at least one billion barrels of oil equivalent on a
contingent basis net to the company.
That said we still have a lot to do and a busy 2013 ahead of us. I am
reminded of this when I look at slide 22 on the map. I look forward to
talking to you in a short time when we end up this quarter results and then
we will have the opportunity to present our forward plans for new exploration
of prices and further exploration in the appraisal wells. And we work to
unlock the perspective potential of their licenses. Thank you.
Phil E. Mulacek:
Thank you, Dave. I'd like to add some closing statements. As stated earlier
everyone is excited to be at the final stage in our LNG Partners selection.
The components to be understood are risk LTV value for the company including
clarifications and the evaluation of any conditions, price very basic.
Size of participation LNG cost approach, timing to first LNG cash flow and
the risk of completion. With the Prime Minister's statement of support and
approval for 3.8 million ton capacity project and the need to balance PNG
domestic demand and gas supply the sell-down process of Elk and Antelope is
now competitive and moving ahead and we are sticking towards our own
timelines to go forward.
Antelope management and the Board is firmly committed to our shareholders
where we transform discovered gas to a gas monetization stream. We're all
focused on the commercial drivers to close a sale for part of Elk and
Antelope assets and retain the partial state.
In the Elk and Antelope LNG revenues, we understand the balance expected
between price sale and forward revenue as being the helpful drivers for our
shareholders. Recapping Triceratops two for day, as we entered that early
stages Triceratops, I know the comparison when we discovered Elk in 2006 I
was asked in the call what are the possible estimates in gas volume? I stated
Elk and Antelope could be between one and 4 Tcf.
The numbers as Dave stated were around 200 Bcf and 800 perspective by
conservative third parties. Yet today we are almost 10 Tcf, TC gas
incumbency, again a remarkable feet for any company. I'd like to thank our
shareholders, all the staff and coworkers and the PNG government and the
continued support and we have a great year ahead of us.
Before I begun the Q&A session, I'd like to state that we all miss
[indiscernible] who had vast experience in energy sectors and analyst and we
wish his family our deep sincere apology and condolences.
And after that I think we're ready for to open the call for questions. Thank
you.
Q&A
Operator:
Thank you. [Operator Instructions] We'll go to the line of Evan Calio with
Morgan Stanley. Please go ahead.
<Q - Evan Calio>: Good morning guys. I love the core-tuning exciting month of
March. My first question relates to -- it's a question for Dave, I didn't
know if you could -- give us more color on which wells will be next in
exploration front. If there had been any shift to drilling more development
[indiscernible] versus exploration balance--?
<A - David Holland>: Yeah, sure. I think it's still said -- have value on
Elk-3 and that will obviously the first thing that we approach. And we will
move on in 2013 to meet the world obligations that we have with the
government. At this stage, the final timing of those will depend on progress
at Elk-3 and as we decide to move forward.
<Q - Evan Calio>: Are you moving the affordable rig from Antelope-3 to
[indiscernible] or is sustained field in bigger terms?
<A>: Yeah, we're currently in some discussions with the government on the
balancing of our portfolio. Cleary, while we're in this process, it's a --
everybody is really keen to make some progress the appraisal of Elk and
Antelope. But currently that's been fluxed, but we're having ongoing
conversations with the government about that.
<Q - Evan Calio>: Great. And my last question that's more fulfill and maybe
it's a premature question, but my question relates to the comment by PNG
government lets you take incremental amount potentially they'll be able to
deal above the [indiscernible] involve. I'm just curious if there is any
update or outlook for that potential or that should bring the choice at this
juncture?
<A>: It's a little premature. They are really - I mean, they are basically
more interested in making sure that they get the activity going for the
economy, and workings at the project will generate it. And the Prime
Minister, it's important enough as I said, they just - they're physically
their today. And I think they are actually they were thinking of sleeping out
into the field, and I don't know if they hold negotiation. But I had a call
just before this call, and that's why we added that update. I mean, they are
extremely excited after they seen the benefits of the ExxonMobil project to
the economy. So, they really want to ramp this up.
<Q - Evan Calio>: Great. Look forward to your next call on March, guys.
<A>: Thanks.
Operator:
Thank you. We'll go to the line of Pavel Molchanov with Raymond James. Please
go ahead.
<Q - Pavel Molchanov>: Hi, guys. Phil, a question for you. How long do you
anticipate the board deliberations on selecting a partner?
<A - Phil E. Mulacek>: It's a little - yeah, somebody is saying that how long
is the piece of string. We haven't got that coming in today, so we'll know a
lot more, and then the advisors need time to review everything, do their
analysis, qualify Q&A. I mean, I'm sure we're going to have a number of
meeting with them, while we're in this final evaluation, I mean, it's a
one-time event and we - until we know what, as I stated in my clarification,
any conditions that is have is just way too premature.
<Q - Pavel Molchanov>: Okay. And then, you know, assuming the process move
forward as you are anticipating, what do you think is the realistic timeframe
to physically begin construction of the LNG facility?
<A>: You know probably we have to get with them and sit down and map it out,
but one of the key is, what process are they going to use, from the stick
belt, and we have discussions from 36 months to 60 plus. So, I mean, everyone
has different project, that's to build it. So everybody has different
concept, some maybe portfolio issues that maybe that they are really in need
of a strategic supply of near-term fuel. So, as I said, I mean, we -- that
process is going to kick-off in earnest in the next 24 hours. We are going to
know a lot more over the next 30 and 60 days. So that's what we would like to
- that's all I can say.
<Q - Pavel Molchanov>: Okay. Last question from me on a different topic. Did
all of the increase in the resource estimate from a year ago to this latest
one comes from Triceratops, or was there some change in Elk and Antelope as
well?
<A>: Yes, the right share was to discuss that -- that the increase -- 54% of
the increase came from the Antelope field. And 46% of the increase came from
Triceratops.
<Q - Pavel Molchanov>: Okay, understood. Appreciate it guys.
<A>: Thank you./
Operator:
Thank you. [Operator Instructions] We'll go to the line of Chris McDougall
with Westlake Securities. Please go ahead.
<Q - Chris McDougall>: Thank you for taking the question and look forward to
hearing the results from a bidding process. I want to understand a little bit
of the process when communicating with the market over the next few months,
will it be kind of one, updated to in when you accept to bid or will there be
some interim uptick?
<A>: I mean, as we need to disclose under a law we will complete and comply
with the proper disclosure, but we really hit this. I don't want say its too
premature but we don't want talk and be predaditial [ph] or any comments
effect of final outcome. I mean, we have waited this long. We have never had
better interest. LNG prices has - winner have been some of the highest. We
saw over $20, we saw 19 earlier this month 1950 and when everyone was
claiming six months ago are we're going to see some new parity and that was
an absolute fall suite. So I mean, we're coming together at a timing that
nobody - we don't want to jeopardize there. So as we have requirements we'll
complete and will announce to the market.
<Q - Chris McDougall>: Okay. Great. Thanks. So then on a separate topic, the
Rubiales payments are certainly a welcome news. I want to understand if there
will be a cash tax burden on this payments or if you have enough deferred tax
losses and such to offset those?
<A>: The reason on a capital gains tax...
<Q - Chris McDougall>: Okay.
<A>: And this a sale of an interest in an asset
<Q - Chris McDougall>: Okay. Great. So there will be no tax for the year. And
then on the Refinery, a question there, what do you see as kind of the
current market for crude, you had talked in previous quarters about as the
LNG - PNG LNG project rolls off the construction there then on - then you
might see a little low in demand for some of the products, are you seeing
that in the first part of the year or is it kind of continuing to grow?
<A>: We're seeing just kind of continuous demand. We have seen spikes and fix
and valleys is different parts of their project is ramped up and completed.
But there is still quite a bit of other projects going on in the country with
the mining activity. So it's a fairly cost of growth right now.
<Q - Chris McDougall>: Okay, great. And what do you see as kind of the
operating leverage in that asset. I mean typically is there half fixed assets
and as the volume grows you can see some good cash gains.
<A>: We're currently only operating at about 60% of capacity and - so we've
got plenty of room for growth. And with that increased capacity utilization
comes better economies that we see in our operations.
<Q - Chris McDougall>: Great, thanks. And on the E&P side, with the
Triceratops estimate that came in at the end of the year. Could you just
remind us kind of what results from well or seismic of other sources were
incorporated into that re-choice [ph] estimate? I feel like it was very early
in the kind of space of your result for that assessment.
<A>: Yeah. I guess, we've completed about 140 kilometers of seismic coverage
and that's really helped define kind of the [indiscernible] and southern and
northern closure and we still have to close out the western ends of the
structure with seismic. There was one legacy well that we had which was
quarter one which was filled in 959 which was a gas condensate discovery. We
drilled the Triceratops-1 well in 2005 in which we penetrated just into the
transition line below the gas. And then obviously we felt Triceratops-2, so
the results of three wells and 140 square kilometers of seismic is what we've
incorporated into the review.
<Q - Chris McDougall>: Okay. Great, thanks a lot guys. Look forward to
hearing the update.
Operator:
And due to time constraints I'll turn the conference back over to the
speakers for any final closing remark.
Phil E. Mulacek:
We like to thank everybody, really want to thank again the refinery downturn
for just phenomenal steady pace for the company and congratulations to their
group for a hundred cargo crude oil that cash flow is really underpinned all
of our activities and helped to build the company to what it is today. And
special thanks for the exploration really transforming. We are all totally
excited on the upcoming event. We're almost unkindled the needle so if there
are lot of people we can get or lets say we're chopping off the bid to get
going. And with that, thank everybody for participating today and look
forward to communicating in the near future.
Operator:
Thank you. And ladies and gentlemen, that does conclude your conference for
today. Thank you for your participation and for using the AT&T executive
teleconference. You may now disconnect.
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