Meet the new CEO: Michael Hession.
InterOil’s leadership picture has been murky since
former CEO Phil Mulacek retired in April, but this morning the company announced that
Michael Hession will be the new CEO. Dr. Hession’s professional background is in
geophysics, earning a Ph.D from the University College Wales before obtaining his MBA
from the London School of Economics. He began his career with BP, where he was involved
with exploration projects in geographies including Norway and Indonesia. His last twelve
years have been spent with Woodside Energy, Australia’s largest oil and gas company.
Most recently, Hession was senior vice president in the Browse LNG Development division,
and the resulting LNG project experience makes him an excellent fit for InterOil’s top
position. He brings both the geographical experience and the industry background to
understand and leverage the company’s position in Papua New Guinea. (On a side note: In
response to questions from a few investors, we note that Hession left Woodside only a
month ago, following his decision to move to InterOil.)
♦
Strategic vision. We had an opportunity to speak with Hession this morning, on what is
essentially his first day on the job. He is wasting no time making his mark. In our
conversation – and in public comments to the press – he confirmed that the company is
committed to pursuing a stand-alone liquefied natural gas (LNG) project, following the
completion of ongoing resource selldown negotiations with Exxon. In other words,
Hession’s immediate priority is to finalize the Exxon transaction, and then he can turn his
attention to long-term strategy.
We believe Exxon deal within sight. While Hession’s hiring was not necessary for the
Exxon transaction to be finalized, we think it can help speed things along. While Hession
and the rest of the management team are – wisely – not making specific promises about
timing for the deal announcement, we believe that essentially all of the key terms have
already been agreed by the two sides, leaving the proverbial “paperwork” and other minor
provisions left to be finalized. Our assumptions about the deal terms are based on our
conversations with InterOil's management over the past six weeks, along with public
comments made at an Australian conference in late May by Mark Nolan, an Exxon vice
president. It goes without saying that the Exxon transaction is the most important
upcoming catalyst for the stock. What we would underscore in this context is that IOC
shares are trading at approximately $0.70/Mcf on a proved basis, with the five-year
average transaction multiple in the region near $1.25/Mcf. In our view, there remains
significant upside in the stock based on the fundamentals of the resource base, and a
quality hire at the top only strengthens our conviction.