Shell’s unsolicited bid for InterOil’s project

[Resourcearb]

As I have indicated in the past several weeks, based on multiple pieces of evidence that I have gathered I strongly believed that Shell very recently submitted an unsolicited bid for InterOil’s project.  Though InterOil refused to confirm or deny such speculation, I just received an e-mail from one of the most connected oil & gas reporters in PNG indicating that “…there is indeed word on the street that Shell has submitted a bid.”

Here is my perspective on the implications of this development:

1)    It will accelerate InterOil’s SPA closure with Exxon.

2)    If the “word” is circulating in PNG that Shell has bid, Exxon almost certainly is aware of this.

3)  It implies that Shell has done a significant amount of due diligence on InterOil and may bid for the entire company when the SPA is consummated with Exxon.

4)  InterOil is in a very strong position to close a good deal, and it has options that protect it against a negative outcome.

I would caution readers that since neither Shell nor InterOil have confirmed that an unsolicited bid was submitted, it is possible that the speculation is wrong.  However, this latest confirmation from such a connected source is very encouraging.

[Petrovale]

Thanks for the color, Resource

Sun may shine on a dog's arse...

[cybersssss]

If Shell did indeed Bid for the resource, their goal is not to accelerate closure with Exxon, rather their goal is to win the bid. IF Shell did submit a bid I would presume that it would be quite competitive with Exxon's bid in order to be taken seriously. I do not think Shell would bid just for the sake of bidding.

That being said, for a Shell bid to be formidable, it would have to be at a higher price point and benefit to IOC in order to adequately make up for the delay in getting the gas to market. Exxon's biggest strength to IOC is that if IOC own a % of train3, cash flow can be as soon as 2-2.5 years. Any other company is at least 4 years away.

I hope you are correct, but I have heard these rumors too many times before.

[Investor1979]

If Shell did indeed Bid for the resource, their goal is not to accelerate closure with Exxon, rather their goal is to win the bid. IF Shell did submit a bid I would presume that it would be quite competitive with Exxon's bid in order to be taken seriously. I do not think Shell would bid just for the sake of bidding. That being said, for a Shell bid to be formidable, it would have to be at a higher price point and benefit to IOC in order to adequately make up for the delay in getting the gas to market. Exxon's biggest strength to IOC is that if IOC own a % of train3, cash flow can be as soon as 2-2.5 years. Any other company is at least 4 years away. I hope you are correct, but I have heard these rumors too many times before.

A Shell bid alone would be good enough  reason , to let the exclusivity restriction lapse.

[ltinvest]

2 things:

1) Shell already submitted a bid earlier this year. It may be revised but extensive talks have already occured.

2) Shell owns 23% of Woodside.

[Stavros]

If Shell submitted a meaningful bid "recently" it seems to me that it would be incumbent upon the IOC Board of Directors to have a face-to-face meeting of at least 2 days to hear all the details and decide how to proceed.

Are they meeting any time soon R-arb?

Thanks as always for your keen insights and

[Resourcearb]

If Shell submitted a meaningful bid "recently" it seems to me that it would be incumbent upon the IOC Board of Directors to have a face-to-face meeting of at least 2 days to hear all the details and decide how to proceed. Are they meeting any time soon R-arb? Thanks as always for your keen insights and

I don't have any more details, but I believe the Shell bid was submitted several weeks ago, and I also believe that this development along with exclusivity lapsing will result in the Exxon deal closing much sooner than the market is contemplating.  There is no way that Exxon is going to allow its highest NPV project that it has been touting in private meetings with investors and on its latest quarterly conference call slip into Shell's hands.  This exclusivity lapse is the most positive development that InterOil shareholders could have hoped for.  

[Movieguy]

If Shell submitted a meaningful bid "recently" it seems to me that it would be incumbent upon the IOC Board of Directors to have a face-to-face meeting of at least 2 days to hear all the details and decide how to proceed. Are they meeting any time soon R-arb? Thanks as always for your keen insights and

As Resource says, the Shell bid was weeks ago.  I have heard the board has met since then.

[tarulestheday]

As Resource says, the Shell bid was weeks ago.  I have heard the board has met since then.

Not to pile on and create a circular rumor, but I have also heard that the BOD met recently. I would assume that removing the exclusivity would have to be a BOD decision and not just at Dr. Mike's whim. The question then would be what event forced the BOD to remove XOM's exclusivity? A new (higher) Shell bid is a very plausible explanation.

This is not a big stretch, we know that Shell bid against XOM originally.

[CAC]

As Resource says, the Shell bid was weeks ago.  I have heard the board has met since then.

Not to pile on and create a circular rumor, but I have also heard that the BOD met recently. I would assume that removing the exclusivity would have to be a BOD decision and not just at Dr. Mike's whim. The question then would be what event forced the BOD to remove XOM's exclusivity? A new (higher) Shell bid is a very plausible explanation.

This is not a big stretch, we know that Shell bid against XOM originally.

*************

I know I'm now getting into speculative territory here but my guess is that something unexpected happened (maybe a bid by someone or maybe a bad turn in the negotiations) between the date of the CC and the subsequent announcement...as opposed to it being a simple expiration of a predetermined length of time for the exclusivity. 

My basis for this is Hession's response when asked, during the CC, why the press release didn't include the word "exclusive".  He almost seemed annoyed at the question and responded curtly that they were still exclusive...with no elaboration.  I took that to mean the status quo was still in effect and maybe even that he expected it to remains so.  If he knew, at the time, that the contractual exclusivity period was going to naturally expire in two days, it is possible he might have mentioned that...or at least answered it in a less robust fashion...to avoid giving the public information he knew would only be accurate for two more days.  I could be reaching on this.