February 11, 2015
Oil Search Ltd.
Quick Comment: Arbitration
claim dismissed
InterOil has advised
that the International Chamber of
Commerce arbitration panel has dismissed OSH’s claim
to a pre-emptive right over the December 2013
transaction between InterOil and Total.
This ruling admits Total SA to PRL15 petroleum licenses
which host the Elk / Antelope gas fields, and resolves,
for the time being, ownership issues. It now appears
highly likely that this project will move forward as an
independent JV. Integration in some form with the
Exxon-operated LNG project, while potentially desirable,
now looks a little harder and adds a degree of
commercial complexity.
Our base case valuation is unaffected by this decision,
but given the reduced probability of a faster, integrated
development, it attenuates a potential source of upside.
Our last published valuation included 73c for OSH’s
23% share of PRL15, which is book value and is small in
the context of the current share price. The size and
timing of a future project are subject to successful
appraisal of the gas fields, which is ongoing through
2015.
We retain an Equal-weight rating.