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Meets threshold but is much less than the expected floor which was closer to Pre...time will tell
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I don't think the market is factoring anything unless it expects a 0.60/mcf deal.
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$1.20 is the average of deals in the region over the last 5 years. Pavel references it often. He also maintains his $100 price target based on $1/mcf and readily admits he's waiting on the deal to reset that number to whatever it actually is. Calio used a muvh higher mcf # and thus his price target is higher.
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pickboone•4 minutes 22 seconds agoFlag
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Ken,
I agree with Tree's analysis, and WA apparently listed the superior traits of the Gulf deal relative to the Cove transaction (offshore deepwater F&D costs much higher, Rovuma at least 3-5 years further out than the Gulf project, no gas act in Mozambique, no project agreement to produce at Rovuma, Rovuma has much higher infrastructure costs than the Gulf project and there's no readily available labor and equipment as there is in PNG from XOM's project), which some think means that he expects a much higher value than the $1 or so that Cove got. The purpose of writing this wasn't to engage in an argument about the relative merits of each project but rather to make the point that it confirms Wayne' belief that $1 an mcf, which is ~70% above the stock's current valuation, is too low. I'm guessing that, by now, he knows exactly what the bids for Elk/Antelope look like.
Tree makes some very compelling points, and although the rumors he cites are logical, they're still so far away from consensus and the stock's $.60/mcf valuation that the upside is stunning. I calculate the PRE deal to have been above $1.50/mcf on 2C (on an apples to apples basis with Elk/Antelope, meaning post certified resources) and that deal was done without any competition and the resource flow is further out unless it goes to XOM's project. The competition for Elk/Antelope has been much more fierce, the project is coming on stream much sooner, the resource is much less speculative, and majors are involved, so I think the valuation of this sell-down could imply a value of at least 2-3X InterOil's current valuation. And based on Wayne's comments, it seems to be coming very soon!
Last point - why is InterOil so focused on drilling Elk-4 and another Antelope well (yesterday was the first time we've heard this...) unless the project is going to be much bigger than investors think? I wouldn't be surprised if the Gulf project were 8-12mtpa.
