A Visual Representation

[smeltman]

Being a visual guy, I created this from IOC's information on their site, and Hemi's breakdown in another thread.

Shuczar: Edited to embed the picture into the post

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Shuczar:  Edited post to embed the payment breakdown graph and comments below.  Smeltman, if this is a problem, let Hemi know and it will get it removed.

The payment numbers in the green bars above INCLUDE the fixed costs for every Tcfe level.  For a detailed understanding of the payment number breakdown see the below chart.

[ArtM72]

Being a visual guy, I created this from IOC's information on their site, and Hemi's breakdown in another thread.

Nice graphic but I believe there is a significant error.  Part 4 Schedule 6 of the Agreement states the first 3.5 TCFe is unpaid, and the various traunches are paid at the traunch rate, not the rate of the highest traunch reached.  Taking one example from the Part 4 Schedule shows 5.4 TCFe will result in a payment to IOC of only $698.71 million.  The payment for 7.1 Ts is $1,605.8 million.  These payments are of course in addition to the front end and milestone payments.

I hope Hession's confidence in finding more gas at E/A is warranted, especially given IOC's obligation to fund its part of the LNG plant.  Given the lack of any specific consideration for investments made to date at E/A I believe Total got a really good deal and IOC got a seat at the table with the big boys that will have significantly greater value in the years ahead if IOC continues to find hydrocarbons.

[efi426hemi]

Smeltman - first I have to say - a bloody brilliant job - simple and easy to understand.  Many thanx for taking the time.

Art, I believe Smeltman has it correct.  In Part 4 Schedule 6 of the SPA it is using a price per mcf PRE government buyin.

Recoverable hydrocarbon equivalent	Unit Price Pre-Gov’t Back-in	Unit Price Post Gov’t Back-in
>3.5 Tcfe and <5.4 Tcfe	US$0.60/mcfe	US$0.77/mcfe	Paid at FID
> 5.4 Tcfe and <6.5 Tcfe	US$0.80/mcfe	US$1.03/mcfe	Paid at Certification
> 6.5 Tcfe	US$1.00/mcfe	US$1.29/mcfe	Paid at Certification

If you use the number POST government buyin you get the $$ figures Smeltmen (and IOC) indicates in his visual representation

Pricing Table	Resource Level	Indicative Payment
US$0.00/mcfe	3.49 Tcfe	US $0
US$0.77/mcfe	5.4 Tcfe	US $1.5 Billion
US$1.03/mcfe	6.5 Tcfe	US $2.1 Billion
US$1.29/mcfe	9.9 Tcfe	US $4.1 Billion
US$1.29/mcfe	11.8 Tcfe	US $5.3 Billion

Health and Happiness,

Hemi

[efi426hemi]

Hey Smeltman,

Can you add a couple more items to your visual:

• The Carried Exploration Well - Discovery Bonus (which includes any gas found outside PRL 15)
  
  • >1 Tcf - 0 bucks
  • every Tcf after that - 100 million
  • This has to be Raptor/Duckbill imho
• Drilling Appraisal Program Costs - 25 million for 2 wells.  
  
  • There may be a 3rd (or more) well but it won't be until after the Carried Exploration Well

H&H,

Hemi

[jft310]

Or a picture is worth 10,000 words

[Thylacine-2]

Hey Smeltman,

Can you add a couple more items to your visual:

• The Carried Exploration Well - Discovery Bonus (which includes any gas found outside PRL 15)
  
  • >1 Tcf - 0 bucks
  • every Tcf after that - 100 million
  • This has to be Raptor/Duckbill imho
• Drilling Appraisal Program Costs - 25 million for 2 wells.
  
  • There may be a 3rd (or more) well but it won't be until after the Carried Exploration Well

H&H,

Hemi

Hemi, that should read in regards to the Discovery Bonus...(which includes any gas found in PRL 15 outside the Elk-Antelope fields)

[admin]

Question. I assumed that the variable payments come on top of the fixed ones, but thinking again, they are likely to be both included in the 'indicative' payments at different certification outcomes

[efi426hemi]

Nice graphic but I believe there is a significant error.  Part 4 Schedule 6 of the Agreement states the first 3.5 TCFe is unpaid, and the various traunches are paid at the traunch rate, not the rate of the highest traunch reached.  Taking one example from the Part 4 Schedule shows 5.4 TCFe will result in a payment to IOC of only $698.71 million.  The payment for 7.1 Ts is $1,605.8 million.  These payments are of course in addition to the front end and milestone payments.

Hey Art,

My apologies, you are of course, 100% correct.  The above visual from Smeltman is incorrect.  I will be working on putting together a new graphic.

H&H,

Hemi

[smeltman]

[/quote]

Hey Art,

My apologies, you are of course, 100% correct.  The above visual from Smeltman is incorrect.  I will be working on putting together a new graphic.

H&H,

Hemi

[/quote]

Hemi, I pulled my info from here:    http://www.interoil.com/investor-relations-news-and-press-releases/2013-2/interoil-announces-approval-of-prl39-by-the-png-government-and-clarification-on-the-transaction-with-total-sa/

Which section is wrong?

[Palm]

I think the graphic is correct; people have to understand that the amounts shown in billions at each level are cumulative. Hession explained that. If we prove up the 9.9Ts we get $2.6 billion once 2 certifications agree. The first $1.5 billion gets paid at FID of the LNG plant. If you realize this, the graphic is fine IMHO.