Flex Q4 Blurb

[Tree]

FLEX LNG said that, during the fourth quarter of 2011, work continued on a potential LNG Producer unit as the front-end engineering and design (FEED) work on the Gulf LNG project in Papua New Guinea was substantially completed.

The cash balances at 31 December were $14.8m ($9.9m) with $2.1m net outflow ($3.3m net outflow) in the quarter and $4.9m net inflow ($15.8m net outflow) year to date. In the twelve months in 2011 the operating cash inflow was $0.5m (principally the operating loss, working capital movements and a short term loan of $10.0m, repayable in Q1 2012); investing activities outflow $23.5m (FEED costs); and financing activities inflow $27.9m (proceeds from a share purchase by InterOil Corporation (IOC) and Pacific LNG Operations (PACLNG), and deferred payments on the FEED costs).
The loss before tax was $4.6m ($100.2m) in the quarter and $23.6m ($108.7m) year to date, with a year to date retained net loss of $23.7m ($108.9m). In the year and quarter there have also been additional Gulf LNG Project related costs and the quarter includes a write off of the value of the Minza investment, equal to $2.4m ($0.9m). 2011 has also been impacted by the reduction in the strike price and the amended vesting dates for the staff option awards from 2008, following the amendment approved at the 2011 annual shareholders meeting (ASM).
The additional option and warrant costs were $1.9m in 2011 when compared to 2010. Additionally Q2 2011 includes a financing charge of $7.8m from the valuation of the share purchase option provided to IOC and PACLNG. Under the option the two parties were able to subscribe for 11,315,080 shares at an average price of NOK 4.59, against a share price of NOK 8.22 at the time of grant.

[Palm]

A lot of interesting info in that Q4 report. In a nutshell:
1. Since Jan 31 is now passed all agreements with IOC/Pac LNG have lapsed. The remaining stock purchase options have expired as well as the need for IOC/Pac LNG to provide the conditional financing needed to assure final payment to Samsung. In effect IOC is now a large shareholder of Flex; that's it.

2. Should things get approved and Flex still be in, things start all over. If FID is declared to include Flex, new agreements would need to be struck with Samsung and IOC/Pac LNG.

3. The old terms between Flex and Samsung are now back in place, but Samsung has yet to make any payment demands.

4. Talks are still ongoing with IOC and Flex is providing information as needed.

This all reflects the SD process and at this point Flex is in the back seat.

[Petrovale]

Methinks this news failed to get the attention it deserved today...

Petrobump

[Palm]

But it really isn't a surprise. Flex is the unfortunate sacrificial lamb in this thing. Petromin wants its FLNG as part of the project; very embarrasing for them to announce, specifically mention E/A as a source for their FLNG, go through the approval of FLNG, then have IOC say, "sorry, we're going with Flex/Samsung." The question will be unanswered for a bit until the SD is complete. If KJM is the victor, the SK government will step in. With both Daewoo and Samsung as SK, they will make desires known. Could be that the Flex hulls are switched to tankers to haul LNG to SK/Japan, or they push for 2 FLNGs. Lots of scenarios. Again is important that T2 results are in so that it is known how much NG we are talking about.

Good reason for hedge funds to push it down some, but like Trans has said, the overbought status has been cleaned up. Question is what might now push it higher? My guess is they will announce earnings release within the next week, and we will get a T2 drilling update as part of that.

[Petrovale]

It simply didn't sink into my Petrobrain that this might be the cause / context of today's price action. Time for a break, I guess.

[Tree]

Petromin/Shell are co-conspirators, each has a FLNG in the hopper, but do not forget KOGAS and their preferred HHI FLNG vessel.
Re Flex, IOC had a sweetheart deal with Flex, was guaranteed to perform by SHI and was viewed as 'icing on the cake' and was never critical to their Gulf Operations scheme. Flex had spent $23 mill on FEED, if they do wash out, or are pushed out, there may be a compensation clause in their IOC agreements similar to IOC/Mitsui where IOC is obligated to re-pay FEED costs and that FEED engineering work becomes property of IOC. I would imagine that work could generically streamline the FEED process for a Shell, Petromin or KOGAS FLNG vessel, if there is to be one in the Gulf.
If there proves to be a problem with Flex, it could be a clear sign of project definition, not project delay or political hanky panky, as there are 3 other FLNG schemes of interested PNG players jockeying for Gulf LNG stakes.

[ellerslick]

Todays price action is lack of announcements by IOC. Phil gushed optimism back in Nov about getting everything done by year end. Now we are two months into the new year and one month from a 4th move of fid deadlines. Yes there is complexity and the government to deal with but it has been four months. Time to deliver, it is a about credibility, you say it you do it. No excuses.

[Libtardius Maximus]

Ellerslick is correct. I won't make excuses for management, they should execute post haste, or, at a minimum update.

On the other hand, this is/was a coordinated bear raid that started at 72 a share. Take a glance back at the number of negative articles written by people you have never heard of since the Kogas article on 2-6 by the Wall Street Journal. Factor in IOC is most likely in a quiet period pre-earnings and you've got another bear raid while short interest is in decline.

And this latest Soros scare, why isn't anyone asking when Soros is still in the stock? Is booking a profit against the rules somewhere? Like most, he's probably still stinging from 2011.