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Hello folks. I just wanted to share some of my thinking here. Of course we know that multiple offers were received and thus IOC will be negotiating with the best party (XOM). But one thing I haven't read that I happen to believe is that it is not in Exxon's best interest to pay a lowball price:
A) If Exxon pays a lowball price, it sends a message that the asset is not that valuable. The less they pay, the harder it will be to tell their investors that they got a great asset. It's like telling someone you bought a Rolex on the streets of Hong Kong for $20 if you follow.
B) If they pay a fair price of say $2 per mcf equivalent, then it will be easier to convince other investors and bankers down the road that they should pay a good price too. This will also reflect the value of PNG LNG.
C) If they want banks to finance things it would be hard to tell a bank someting is worth $2 that you just spent $1 on.
In other words, I think it is in Exxon's best interests to pay a good (but not silly price) as it verifies the value of the asset, makes it easier to finance, but also validates the PNG LNG project that they spent almost 20 Billion on.
Am I wrong on this thinking?
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Exxon paid the highest price amongst all the bidders. Reports saying differently are well just wrong .
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Exxon's job is to pay as little as possible to acquire the assets. InterOil's job is to make sure that they get the highest price possible. Where they meet in the middle and make the deal is the "real" or "fair" price - ie, the market price.
I would hope that since the term sheet (apparently) was signed off on by Exxon, they are not still quibbling over price. I would hope that the issues have to do with ownership percentages, involvement of other parties (like OSH), and the details of how the lawyers paper the deal.
That being said: Hurry up already !!! I am tired of seeing the big money guys play games with the IOC stock price !!!
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John-"Good job" ! Your words echo my thoughts. Stay strong ...(and long !!)
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06-16-2013, 09:44 AM
(This post was last modified: 06-16-2013, 09:46 AM by ArtM72.)
I suspect but certainly do not know it is the approval of tangential players that is delaying the selldown announcement. What immediately comes to mind is the need to get others such as OSH on board if IOC is to take a stake in PNG LNG's facilities. It also seems A matter of faith in this board that anything IOC does in their negotiations is fine with Henry Aldorf and his group. Might not be the case.
What also appears apparent at this hour is the best we can expect from this AGM is great conversation and maybe a couple of new hats. Hope though springs eternal.
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["A matter of faith in this board that anything IOC does in their negotiations is fine with Henry Aldorf and his group. Might not be the case."]
No faith here, but no reason to be concerned either, at least I can't think of one, although that is by no means a guarantee that there aren't any. Do you have reasons to be concerned, Art? I can imagine why OilSearch isn't too happy, but Aldorf?
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'admin' pid='24380' datel Wrote:["A matter of faith in this board that anything IOC does in their negotiations is fine with Henry Aldorf and his group. Might not be the case."] No faith here, but no reason to be concerned either, at least I can't think of one, although that is by no means a guarantee that there aren't any. Do you have reasons to be concerned, Art? I can imagine why OilSearch isn't too happy, but Aldorf?
No reason to be concerned, just trying to guess why the delay in getting the deal done. Lots of players, and as has often been said, this is a very important deal for IOC to get right. Assuming they as I suspect have incentive to getting something done so they can move forward with exploration, even a giveaway deal is likely to take a lot of time. Don't misunderstand me. I don't believe there is a giveaway deal coming. One thing I do believe is Duma provides no solutions, no assistance, no support. He reminds me of a couple of highway road commissioners I knew who carried a lot of weight whle obstructing progress until people, including others in power, said, "enough".
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Well, the noises coming out of it argue it's a great deal, which is certainly possible considering the fact that building a third train costs 1/4 of building a new LNG plant. Plenty to go around for all parties, I would say. I'm not even sure whether there is a delay as we don't have a useful yardstick. A delay can only be measured against an existing plan with marks to achieve.
Elsewhere here there are people already discussing the content of the deal, which suggests (provided they're right and their sources reliable, I've no way of knowing) that much of it has been done already and it could be up to the lawyers now.
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Art:
Carlo Civelli is the guy running Pacific LNG not Henry Aldorf, who is merely an employee.
It's been said that Mr. Civelli went to PNG two weeks ago and signed the Term Sheet giving Pac LNG's approval to the deal structure.
To my opinion, the issues that are being negotiated include:
+ IOC's Percentage ownerships in the CSP, Pipeline, LNG Plant, the Gulf Port, etc
+ IOC's revenue from LNG sales
+ Split/ percentage ownership of the condensate and who will market it - this is a key issue
+ Final $$$'s in terms of total deal value, how much up front money, how much XOM funding of IOC's project costs (ie carry)
+ Whether any of the Offtake HOA's (Gunvor, ENN, Noble) are acceptable to XOM
+ Percentage that the PNG Government will take above the 22.5%
+ Minor modifications to the JVOA
+ Finalization of the new Gas Agreement that will replace the 2009 Project Agreement
+ etc
How long should all this take ... Ithey ought to be finished and in the process of getting requisite government approvals.
Mr. Duma must approve ultimately; right now competition is his major concern.
I think Tree and Palm have opined correctly that he wants to be seen as the hero.
Binc is happy
EOM
Drivel Maven with Personality
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["They ought to be finished"]
I like that one, Stavros 
I somehow can't imagine that PNG govt. hasn't pre-approved InterOil's exclusive talks with Exxon as the winning bid, only to raise competition issues when they're reaching an agreement.
Especially when the Exxon/IOC train is so much cheaper than other solutions (bar a modular Gulf plant, perhaps), although that might not be an overriding concern for the politicians (but the speed to market is likely to offer them faster tax revenues).
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