Bloomberg on Botten

[jft310]

Oil Search Managing Director Won’t Leave for at Least 18 Months

By James Paton  Jul 22, 2014 2:34 AM ET  0 Comments  Email  Print

Facebook

* Price chart for OIL SEARCH LTD. Click flags for important stories.

OSH:AU9.540.04 0.42%

9.54

07/22/2014

Oil Search Ltd. (OSH) Managing Director Peter Botten said he plans to stay with the Papua New Guinea oil and gas producer for at least another 18 months as the company considers expansion opportunities.

“I won’t be leaving this organization in the short term,” Botten, 59, said today in a phone interview.

Botten, who has led Oil Search for 20 years, said he considered his role after the start earlier this year of the $19 billion liquefied natural gas project operated by Exxon Mobil Corp. (XOM) He said the company is working on a succession plan and has a range of potential candidates to replace him.

The gas export project in Papua New Guinea will allow Oil Search to fund its growth plans and pay investors higher dividends, the Port Moresby-based company has said. The company expects two or three more LNG production units to be built in Papua New Guinea with the development of InterOil Corp.’s Elk and Antelope discoveries, Botten said earlier this year.

“I’ve recommitted to see the company through the next 18 months plus through a critical period of delivering and cementing the growth opportunities we see,” Botten said today. “It’s a more complicated company to run than most and clearly part of our success has been relationships and understanding of PNG processes and culture and how to work with government.”

Oil Search rose 0.4 percent to A$9.54 today in Sydney.

The company, whose market value has risen to A$14.5 billion ($13.6 billion) from about A$200 million with Botten at the helm, faces a significant “key man” risk, and replacing him could be difficult, Mark Wiseman, a Sydney-based analyst at Goldman Sachs Group Inc., said this month in a note.

Botten told the Australian Financial Review in May that he had opted to stay in his position for 12 to 18 months.

Oil Search expects the PNG LNG development to reach full production some time this year, Botten said.

To contact the reporter on this story: James Paton in Sydney at jpaton4@bloomberg.net

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net Keith Gosman, Reed Landberg

[jdeo1969]

I still think EA gas goes to PNG LNG ultimately. It makes too much sense for all parties not to. Quicker monetization for IOC a big win IMO. I think the LNG plant with Total is a possibility, and will come to fruition if Exxon and OSH don;t pay the right price, but I think it is also a great bargaining chip for us to say "pay up or we will build our own plant."

Nice to see some green here today.

Good luck longs
Jdeo

[Putncalls]

I don't think anybody but XOM would want ONLY PNG LNG.

[Getitrt2]

I still think EA gas goes to PNG LNG ultimately. It makes too much sense for all parties not to. Quicker monetization for IOC a big win IMO. I think the LNG plant with Total is a possibility, and will come to fruition if Exxon and OSH don;t pay the right price, but I think it is also a great bargaining chip for us to say "pay up or we will build our own plant." Nice to see some green here today. Good luck longs Jdeo

With all due respect, I beg to differ.  IOC gas may ultimately go to PNG LNG, if Exxon wants it badly enough, but not likely E/A gas, as I have been saying consistently for a long time, and as Hession and Total have been saying since December.  The competition ended in December, and Total won the partnership, hands down.  It's a done deal.  I get the impression from Hession that Total wanted it badly after Mulacek's exit, and it wasn't even close.  It's no "bargaining chip".  LNG with Total, "Antelope LNG" per Macquarie Research,  ensures monetization of ALL of PRL 15 with maximum upside for IOC, unlike with Exxon, which is very unlikely to have a sudden epiphany or change of heart, even if IOC and Total were interested.  Not even "quicker monetization" would be assured with Exxon, for just part of E/A.   Furthermore, Antelope LNG provides expansion opportunity with additional IOC gas, with what is now IOC's "strategic partner" they were looking for, Total, if Exxon still will not offer a better deal in the future.  Continuing to be the subject of competition among majors is good, I would say, whether it be for an LNG deal or to buy the Company.

[ArtM72]

I still think EA gas goes to PNG LNG ultimately. It makes too much sense for all parties not to. Quicker monetization for IOC a big win IMO. I think the LNG plant with Total is a possibility, and will come to fruition if Exxon and OSH don;t pay the right price, but I think it is also a great bargaining chip for us to say "pay up or we will build our own plant." Nice to see some green here today. Good luck longs Jdeo

I thought E/A would go to PNG LNG a few years ago.  But then I thought IOC would get $2.50/mcf.  Made sense.  But when PNG LNG is selling gas on the spot for $14.80 at a processing cost of less than $5 and XOM is presumably offering less than a buck?  No way.  The only way IOC gets fair value for its gas is to own a competing plant.  That way, if XOM really wants gas for another unit they can offer a real price or ownership.

Stated another way, there's a pretty huge opportunity cost to XOM associated with offering IOC $1/mcf.  Even $3.

[Getitrt2]

I don't think anybody but XOM would want ONLY PNG LNG.

Great point, very simply put, Putn!

[Getitrt2]

I still think EA gas goes to PNG LNG ultimately. It makes too much sense for all parties not to. Quicker monetization for IOC a big win IMO. I think the LNG plant with Total is a possibility, and will come to fruition if Exxon and OSH don;t pay the right price, but I think it is also a great bargaining chip for us to say "pay up or we will build our own plant." Nice to see some green here today. Good luck longs Jdeo

I thought E/A would go to PNG LNG a few years ago.  But then I thought IOC would get $2.50/mcf.  Made sense.  But when PNG LNG is selling gas on the spot for $14.80 at a processing cost of less than $5 and XOM is presumably offering less than a buck?  No way.  The only way IOC gets fair value for its gas is to own a competing plant.  That way, if XOM really wants gas for another unit they can offer a real price or ownership.

Stated another way, there's a pretty huge opportunity cost to XOM associated with offering IOC $1/mcf.  Even $3.

You got it right, Art!

[kommonsents]

I think the time element is a bit overblown. The process is within about a year for expansion with a new train at PNG LNG versus a new IOC/Total/OSH plant.

The time difference is not enough to send gas to PNG LNG, IMO.

[Putncalls]

I think the discussion should move on to 5 bucks versus 50 cents per MCF and when.

[Getitrt2]

I don't think there is any way in the world a deal could be negotiated among IOC/Total/OSH and PNG LNG, PRL 15 appraisal completed, reach FID, and start production of a third train with E/A gas in one year, not even close, not to mention other critical issues; and I don't think there is even any worthwhile discussion to be had, including here.