Interesting stuff..
You can read the PR here. We’ll highlight two items:

1. After mechanical completion of the CSP, Mitsui has a right to convert its contributed investment in the CSP into a 2.5% interest in the Elk and Antelope fields and the proposed LNG Plant.
2. Mitsui also has conditional rights under a separate call option to purchase an additional 2.5% interest in the Elk and Antelope fields and the proposed LNG Plant.

So, let’s see some of the implications:

1. It’s contributed investment is $550M
2. They can convert this into a 2.5% stake of Elk/Antelope and LNG plant
3. This implicitly values Elk/Antelope and LNG plant at 40x550M=$22B
4. IOC has a 57%+ stake (taking the 22.5% of Petromin into account) at present.
5. Mitsui has a second option to buy another 2.5% stake at the exact criteria of a strategic partner.
6. Valuation wise, $22B is really not such a stretch, as it includes the LNG plant, and it’s comparable to the 3.6% sale of OilSearch fields and LNG plant by AGL to Nippon Oil in Dec 08 for $800M, which also happens to be, well, $22B (and change)!
7. We think the OilSearch part was based in the order of 9Tcf so indeed this is remarkably similar. Ramond James analyst Pavel Molchanov, by the way, has made exactly such a calculation a year or so ago..
8. There are pretty good reasons to assume the IOC project is better than the Oil/Search one. There is probably more upside in Elk/Antelope, compared to the five OilSearch fields (GLJ hasn’t included the large amount of dolomite found in the horizontal). The LNG plant is way cheaper (locational and infrastructural advantages). Elk/Antelope wells flow much more profusely and are much larger.

So in the end, we think Mitsui has done a good deal. So has InterOil. They’ve given Mitsui a “first mover discount” in the form of interesting options because this also helps them, they gain credibility, cash, and improving their negotiating position vis-à-vis others.