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Like most of us here, I am quite shellshocked, yet many of us may need to explain the IOC situation to those who are not nearly as knowledgeable on the subject. The nuances of "resources versus reserves" and "$/mcf," etc., may not be at all understood by them, so I am looking for a way to make the situation clear to the uneducated, and perhaps it will even make it a little clearer to those vastly more knowledgeable on the subject. I appreciate and thank those on SHU who have given detailed analysis of the deal, as that has helped me and probably many others better understand the situation. The purpose of my analogy following is merely conceptual accuracy. The math is certainly inaccurate, but I think in the general vicinity, which allows for the concepts to be understood..
So say we value IOC only by the Elk/Antelope gas fields (ignoring the refinery, all other prospects, etc.), then prior to the Total announcement say it owned 8 widgets. The value of the entire company was $800, so that means the implied value was $100 per widget.. It then sold 5 widgets to Total and kept 3 widgets for itself (again, math not that accurate but conceptually in the ballpark). Total paid $150 per widget, valuing that at $750. Since IOC kept 3 widgets, and since we now know widgets are worth $150 each, IOC tetains an asset worth $450. When one adds $750 to $450 one gets $1200, so the company is now worth $1200. But for whatever reasons, the stock market now values the company at about $500, not only way less than the current implied value, but way less than before the deal.
Is this simplistically accurate? If so, I hope some find it useful.
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'Movieguy' pid='33391' datel Wrote:
Like most of us here, I am quite shellshocked, yet many of us may need to explain the IOC situation to those who are not nearly as knowledgeable on the subject. The nuances of "resources versus reserves" and "$/mcf," etc., may not be at all understood by them, so I am looking for a way to make the situation clear to the uneducated, and perhaps it will even make it a little clearer to those vastly more knowledgeable on the subject. I appreciate and thank those on SHU who have given detailed analysis of the deal, as that has helped me and probably many others better understand the situation. The purpose of my analogy following is merely conceptual accuracy. The math is certainly inaccurate, but I think in the general vicinity, which allows for the concepts to be understood..
So say we value IOC only by the Elk/Antelope gas fields (ignoring the refinery, all other prospects, etc.), then prior to the Total announcement say it owned 8 widgets. The value of the entire company was $800, so that means the implied value was $100 per widget.. It then sold 5 widgets to Total and kept 3 widgets for itself (again, math not that accurate but conceptually in the ballpark). Total paid $150 per widget, valuing that at $750. Since IOC kept 3 widgets, and since we now know widgets are worth $150 each, IOC tetains an asset worth $450. When one adds $750 to $450 one gets $1200, so the company is now worth $1200. But for whatever reasons, the stock market now values the company at about $500, not only way less than the current implied value, but way less than before the deal.
Is this simplistically accurate? If so, I hope some find it useful.
Yes IMO a good analogy . Markets are all perception and yesterday is a good example. This is a good deal for IOC. Very frustrating when the market poo poo's it. I think the market did not like the idea of contigencies. TOT says we will buy x number of Ts at this price as the Ts are confirmed. Even though the Ts have been confirmed by 3rd parties TOT only agree's to pay when delivered. < Something like that> $33 down, ridiculous! I smell another serious deal soon anyway. Hopefully that brings us back to numbers that reflect reality
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'iluvioc' pid='33393' dateline='<a href="tel:1386430 Wrote:
'Movieguy' pid='33391' dateline='<a href="tel:1386427 Wrote:
Like most of us here, I am quite shellshocked, yet many of us may need to explain the IOC situation to those who are not nearly as knowledgeable on the subject. The nuances of "resources versus reserves" and "$/mcf," etc., may not be at all understood by them, so I am looking for a way to make the situation clear to the uneducated, and perhaps it will even make it a little clearer to those vastly more knowledgeable on the subject. I appreciate and thank those on SHU who have given detailed analysis of the deal, as that has helped me and probably many others better understand the situation. The purpose of my analogy following is merely conceptual accuracy. The math is certainly inaccurate, but I think in the general vicinity, which allows for the concepts to be understood..
So say we value IOC only by the Elk/Antelope gas fields (ignoring the refinery, all other prospects, etc.), then prior to the Total announcement say it owned 8 widgets. The value of the entire company was $800, so that means the implied value was $100 per widget.. It then sold 5 widgets to Total and kept 3 widgets for itself (again, math not that accurate but conceptually in the ballpark). Total paid $150 per widget, valuing that at $750. Since IOC kept 3 widgets, and since we now know widgets are worth $150 each, IOC tetains an asset worth $450. When one adds $750 to $450 one gets $1200, so the company is now worth $1200. But for whatever reasons, the stock market now values the company at about $500, not only way less than the current implied value, but way less than before the deal.
Is this simplistically accurate? If so, I hope some find it useful.
Yes IMO a good analogy . Markets are all perception and yesterday is a good example. This is a good deal for IOC. Very frustrating when the market poo poo's it. I think the market did not like the idea of contigencies. TOT says we will buy x number of Ts at this price as the Ts are confirmed. Even though the Ts have been confirmed by 3rd parties TOT only agree's to pay when delivered. < Something like that> $33 down, ridiculous! I smell another serious deal soon anyway. Hopefully that brings us back to numbers that reflect reality
listen to Iluvioc the Fat Lady Had NOT Sung yet
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I suspect the next deal announcement will be the farm in for other properties, but I don't believe that deal can be done until the drill bit gets to the bottom of Wahoo.
The widgets thing is fine, but seems to forget payments for future PRL15 finds and the value, based on GLJ best case estimate, of the gas payment at certification.
However it gets explained, I figure the deal is worth $4.1 billion for GLJ best case gas estimate plus another $900 million fixed payments, or a most likely total of $5 billion, greater or lesser based upon final certification (or certifications). That is what Total was willing to pay. Ignoring all other properties and PRL 15 finds, that puts IOC value around $8 billion.
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How many saw this
Based on the first sentence of the second paragraph from IOC's original press release on Thursday evening (12/5), there were 3 agreements that were executed between IOC & Total. (1) SPA for the sale of PRL 15, (2) Proposed LNG project & (3) The exploration farm-in rights given to Total from IOC. The only agreement I have seen is the SPA for PRL 15.
Why IOC elected not to emphasize the potential profits from IOC's participation in the LNG plant at a 30% level is beyond my comprehension.
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Good eyeball JFT. Might be that they are waiting for the strategic partner to arrive. An integrated project means this partner would be in the LNG plant also. Doesn't have to happen immediately, but seems that initial payment upon closing being stated as net by Total and Hession's expectation of a CC "soon" point a bit to that.
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