"It's unheard of..."

[Tree]

Roadshow quote:

"It is unheard of, in this business, to be rewarded for undiscovered gas" - MH

Do you think rewarding IOC for undiscovered gas was TOT's idea or Hession's??

I've never heard of getting both the bird in hand and the 2 in the bush.....I'm gobsmacked.

Expect more roadshow reports.

use or flush

[Palm]

Absolutely unheard of.

[jft310]

That's why they have a clause for NG found above the top tranche , sweet payment $1.29
Per mcf

[CAC]

Roadshow quote:

"It is unheard of, in this business, to be rewarded for undiscovered gas" - MH

Do you think rewarding IOC for undiscovered gas was TOT's idea or Hession's??

I've never heard of getting both the bird in hand and the 2 in the bush.....I'm gobsmacked.

Expect more roadshow reports.

use or flush

***********

I did not understand Hession's comment on this.  What vested, tangible "reward" did they actually get right now for this undiscovered gas?  My understanding was that they would only be getting money for this undiscovered gas...if and when it is actually discovered.  So if there's no discovery...they get no reward.  And if there is a discovery...they have now pre-agreed to sell the newly "discovered" gas for $100M per tcf.  Isn't that an "unheard of" price (on the low end) for would be, at that time, fully discovered gas? 

[jft310]

Roadshow quote:

"It is unheard of, in this business, to be rewarded for undiscovered gas" - MH

Do you think rewarding IOC for undiscovered gas was TOT's idea or Hession's??

I've never heard of getting both the bird in hand and the 2 in the bush.....I'm gobsmacked.

Expect more roadshow reports.

use or flush

***********

I did not understand Hession's comment on this.  What vested, tangible "reward" did they actually get right now for this undiscovered gas?  My understanding was that they would only be getting money for this undiscovered gas...if and when it is actually discovered.  So if there's no discovery...they get no reward.  And if there is a discovery...they have now pre-agreed to sell the newly "discovered" gas for $100M per tcf.  Isn't that an "unheard of" price (on the low end) for would be, at that time, fully discovered gas? 

If the new discoveries communicate as all the other wells have IOC gets paid $1.29 per mcf. A new discovery that doesn't communicate is yes $100 m per T. Think Hession is stupid? They IOC must think all the new wells will communicate . This deal is only for E/A.

Did someone say Triceratops communicates with E/A or was that a dream . That's a PET ?

[AD123]

Clearly the market agrees that IOC should get no "reward" for undiscovered gas or LNG plants that come on line (maybe) in 2020. I agree with CAC. We got much worse than nothing for the undiscovered gas and an uncertain LNG plant - we got punished for the uncertainty of future payment. I don't think Hession is stupid - just very naïve (or badly advised or both) as to how he thought the public markets would view this deal. He totally backloaded the value of this deal and left very little on the front end - I would have much preferred $1/MCF NOW with only 25% of the LNG plant (down from 30%) regardless of how you value each piece. The current shareholders deserved more consideration in Hessions thinking while negotiating this deal - he needed to better balance the competing interests better.

[Movieguy]

I apologize for my ignorance, but what does "communicate" mean relative to natural gas discoveries? Thanks.

[Palm]

Per the SPA; if any other structures drilled in PRL 15 are shown to have the same GWC, pressures, etc, they are in "communication" with EA and they get the highest /mcf price. Others outside PRL 15 might also "communicate" with EA, or others.

[CAC]

Roadshow quote:

"It is unheard of, in this business, to be rewarded for undiscovered gas" - MH

Do you think rewarding IOC for undiscovered gas was TOT's idea or Hession's??

I've never heard of getting both the bird in hand and the 2 in the bush.....I'm gobsmacked.

Expect more roadshow reports.

use or flush

***********

I did not understand Hession's comment on this.  What vested, tangible "reward" did they actually get right now for this undiscovered gas?  My understanding was that they would only be getting money for this undiscovered gas...if and when it is actually discovered.  So if there's no discovery...they get no reward.  And if there is a discovery...they have now pre-agreed to sell the newly "discovered" gas for $100M per tcf.  Isn't that an "unheard of" price (on the low end) for would be, at that time, fully discovered gas? 

If the new discoveries communicate as all the other wells have IOC gets paid $1.29 per mcf. A new discovery that doesn't communicate is yes $100 m per T. Think Hession is stupid? They IOC must think all the new wells will communicate . This deal is only for E/A.

Did someone say Triceratops communicates with E/A or was that a dream . That's a PET ?

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

Okay, but how has IOC "been rewarded" as of today?  That is Hession's quote and that is what TREE is touting...but I don't see it. 

If additional gas is discovered, they either get a fair price of $1.29 (if it communicates) or they get a substandard price of $100M per Tcf (if they don't communicate).  Either way it is contingent on a new discovery occurring and the "reward" is a long way off.  So my question remains...what current tangible"reward" is Hession saying IOC received for this undiscovered gas? 

And maybe a better question is...how is this deal for the future discoveries (which provides no cash now and locks us in on those terms) better than just waiting for the discovery and negotiating a fair market price (which clearly wouldn't be $100M per tcf) at that time? 

[admin]

CAC, while I agree with you that there is a little bit of a Heisenberg cat in there (once discovered, the gas is no longer undiscovered), it really isn't custom to reward companies for undiscovered gas, and less so when the drilling of the first well are carried.

Tot buys a stake in PRL 15 as a whole, but as a potential bonus, it rewards IOC for an additional find and even pays for the first well.

It isn't that material when you compare it with InterOil's 30% stake in PRL 15 and the LNG plant, they're likely to make much more of any undiscovered gas (once discovered) in PRL 15, but it's a tacit acknowledgement from Total that there probably is a lot more in PRL 15 than just EA.