Comparing the deals

[efi426hemi]

My friends,

Information is now starting to come out from the roadshow about the other offers that were in the pipeline.  Apparently:

• The XOM deal failed because XOM does not own the PNG LNG plant and for IOC to get any ownership would have been extremely improbable with all the owners at the table
• XOM's price per Mcf was slightly superior to Totals price
• XOM had a bigger appraisal program for the E/A field - however they didn't have the bonus discovery well.

I have less details about Shell however

• I believe they had the highest price per Mcf - don't get any visions of 1.50/M as this was never a possibility.
• They had a very limited program for appraisal work.

Now compare that with the Total deal from an appraisal perspective:

• we get upside potential with 3 appraisal wells in E/A
• we get to pick a bonus discovery location to drill, which sounds like Bighorn that:
  
  • may be as large as Antelope
  • and based upon whispers from the roadshow it may also be connected to E/A
• and if any future drilling shows connectivity to E/A then it becomes part of our 1.29 (net) payment structure

Where I was ignorant or naive was assuming a high price per Mcf (aka the PRE deal) but not taking into account ownership in an LNG plant.  When you bring in a 30% ownership interest, the industry average for the gas is between 0.60 and 0.80 per Mcf (another tidbit from the roadshow).

All this information is water under the bridge at this point - but people should be very careful assuming that there were other options that were vastly superior and would have shot the PPS to stratospheric levels.

Use or flush and Health and Happiness,

Hemi

[ebster123]

Hemi, thanks

[Palm]

Thanks for that Hefi. No doubt those on the road show got some great details, now let's hope that CC that is "sure" to come in the very near future per Hession materializes. The more I read about that Antelope Deep prospect (per our good Dr Wu; Bighorn) the more interesting it gets. Will have to look again but it looks like they get the one "bonus" well to make their case for it bring "in communication" with the Antelope Field. Now we know that one well will not likely get a resource estimate of 10Ts, so it's a very safe "bet" for Total. They may have to cough up a good wad of cash, but if it is in communication, that instantly helps add size to any LNG plant. And IOC gets more $$$$ quickly; maybe a good "hit" gets us an additional 4-5Ts.

More to come later, but Hession's excitement over Bighorn in the CC brings a bit of good expectations.

[Tree]

Thanks Hemi, from Boston today that info flow may continue.

'4 rigs and looking at 2 more'

Hession landed a 2nd SM for PNG.  That alone will benefit IOC and PNG for decades.

Uncapped upside, 30% LNG ownership, a SM partner that 'knows it hit a homerun' and PNG Government satisfied on all levels are this deal's legacies.

[Libtardius Maximus]

[quote='Tree' pid='34266' dateline='1386940465']

Thanks Hemi, from Boston today that info flow may continue.

'4 rigs and looking at 2 more'

Hession landed a 2nd SM for PNG.  That alone will benefit IOC and PNG for decades.

Uncapped upside, 30% LNG ownership, a SM partner that 'knows it hit a homerun' and PNG Government satisfied on all levels are this deal's legacies.

Great summary Tree but you left the uncapped number out at 1.29, a 7.5% increase over region average. And that is just P-15, never mind 236, 237, 238 licenses approved which is really a big deal. Drill baby drill.

What we have here is a botched rollout that will get corrected ever so slowly and after completely overshooting to the downside. The narrative now is 60 cents while pricing us at apprx 46 cents, stranded gas levels which is a complete fallacy.

[ebster123]

Lib, I agree on the role out, I agree on the great news and deal with a second SM, I agree this is the makings of a great future. However, while the happiness at being above the region average is a good thing part of what hurt many viscerally was the repeated touting by many "in the know" of a much higher price did not happen. Maybe some of us should learn from MH and "under promise and over deliver".

[admin]

Relker provided an interesting perspective in another thread: Here it is:

According to the Project Agreement with PNG IOC committed itself to set up a new LNG plant with a major. PNG was not happy with the XOM-deal and O' Neill and Duma played good guy/bad. With all concessions elapsing in 2014 and a 180 day ultimatum IOC choose for a safe roadmap together with Total.

Now the deal is written in stone, there is no obstacle to start with the CSP-plant and build a tie-in to the XOM pipeline which is not maxed out. This will guarantee feedstock supply for XOM's third train between 2016 and 2020. I am sure XOM is willing to pay a good price for this.

The long term picture

[Kaliboo]

Dr MH may be setting himself up for one of the greatest "under promise / over deliver" events, or at least the perception of one, in recent oilfield history. 

[Palm]

And he has very good points. With the possibility of 6 rigs in action it will not take long to have wells ready in EA which can support a CSP. All we need do is look in Western Province at the Stanley "Condensate" project. First thing planned was to reinject gas and produce the condensates. With PRL15 the same could be done, but then if Exxon needs the gas, that still could be done. And, that was an original plan with IOC; reinject and produce the liquids. But first we must finsih the deal and start drilling.

[SamAdams]

From a stock (not a deal) point of view, MH made a huge mistake.  He did not set expectations properly for what was too come.  HE should have known what they were.  Many times the company, and not pumpers, either said or supported the notion that the deal price would be multiples of the current implied value.  I think the market expected $1 or better per mcf to sustain the price.  With the stock trading in the high $60s prior to the last cc, that was the time to set expectations for what was to come.  He nailed the timing but should have set expectations better for what was to come, particularly with what we know - there was no huge/blowout deal.  Had the stock remained in th $60s into the dedal announcement, the $0.80 per mcf gross # actually could have made the stock go up from there.  And then there was the botched delivery of the message.  Just my opinion, but in a way he inadvertantly over promised on the last cc by not setting expectations properly.  Yes the deal is great long term but this was a big pooch by the Dr.