RJ on A7

[Putncalls]

If three engineering firms could provide a resource estimate with Elk 1, 4, A1 and A2 why does a reserve engineering company get to decide if there is a need for A7 before it makes an estimate?

Me:

“Could I ask <analyst>  if he thought there would be a need to Drill Antelope 7 before the resource certification?”

<analyst>:

"That’s a technical question that will be up to the reserve engineers. The reserve engineering firms have not been appointed yet, by either InterOil to Total. Once they are appointed, the experts will internally decide whether additional appraisal drilling is needed. "

[Stavros]

Putz: You're absolutely correct.

That statement you quoted is not consistent with the SPA language regarding appointment of the two Resource Experts. The Experts will be hired after the Operator completes the drilling/testing of the last appraisal well. The Experts will then go about their business and report their findings.

The Clause is below:

3.3 Interim Resource Payment

(a) The Buyer must notify or must procure that the Operator notifies the Seller within five (5) Business Days of the completion of drilling (and testing) of the last appraisal well under the Appraisal Work Program. Promptly following such notification, the parties will procure the Interim Resource Certification in accordance with Schedule 4 and the Interim Resource Instruction.

In Schedule 4, it is stated that if one of the identified Experts responds that he cannot certify the resource (for whatever reason) the remedy is to throw him overboard and hire someone else.

Nowhere does it say that the Experts will determine (for TOTAL and IOC) whether additional appraisal drilling is needed.

[Putncalls]

This is how IOC IR puts it.

Hi
The JV has not yet decided if an Antelope-7 well is required. We may or may not have enough information as it stands. The certification process will take place after the last appraisal well of current campaign. At present that is Antelope-6.

Regards
Mike Lynn

[Stavros]

That's an accurate interpretation of the SPA to my view