Does anyone remember when we used to talk about the possibilities IOC had to move forward with the exploration of their ~4 million acres of PNG licenses? One of the options that was mentioned was to sell off all of the Elk/Antelope Field and use the money to drill and develop the other ~35 prospects.
Our brilliant Management has figured out a way to sell all of the Elk/Antelope Field and to give away everything else. The only thing OSH or Total or Exxon is paying for is the Elk/Antelope Field. Why didn’t our management just sell the Elk/Antelope Field and keep IOC as an independent Company for developing our ~4 million acres? The answer is, of course, so that Dr. Hession would achieve a “change of control” of the Company and collect his (our) ~$39 Million.
Here is how this smoke and mirrors deal developed. It is an anti-Robinhood deal, ie steal from the poor and give to the rich.
First Hession struck a deal with Total to sell them 40.1% of the field and they signed the SPA that allowed Total to have their portion of the first 3.5 TCF for free. Then Hession agreed to let Total pay for the rest of the gas they are buying over time, ie the completion payment, the certification payment, the carry for drilling wells, the FID payment and the First Cargo Payment. So what have they paid us so far for their 40.1% of the Field? The completion payment of $401 million and the carry for drilling three wells which they recover from payments owed to IOC. So basically they have paid $401 million for their 40.1%. So we can quit feeling sorry for Total for having to pay IOC or our purchaser the certification payment. They are just paying for the part of the Field they bought. They have 40.1% of the Field but they have never paid for it.
Now comes the next stage of this development with the OSH proposal to buy IOC with Total support in the background. They want to start paying at 6.2 TCF instead of the SPA agreed 3.5 TCF. Here is what the SPA certification payments were supposed to look like:
Less than 3.5 TCFe - Zero
Under the OSH agreement they eliminate the FID payment so no one gets paid for the gas from 3.5 TCF to 5.4 TCF. Why is that? Because they never plan to reach FID on a Total operated plant.
Next they want to start paying at 6.2 TCF instead of 3.5 TCF. We lose our payments from 3.5 TCF to 6.2 TCF. Then they only want to pay $0.77/ MCF for all of the gas above 6.2 TCF instead of the agreed amount as stated above ie $0.80/MCF from 6.2 TCF to 6.5 TCF and $1.00/MCF for all gas above 6.5 TCF. And Dr. Hession and our BOD agreed to do this.
Resource Level IOC’s Percentage $/ MCF
So all they are paying for is the IOC share of the Elk/Antelope Field and they are not paying much for that. Again, why didn’t we just sell them the Field (since that is all they are paying for) and keep the rest of our assets ie ~4 Million acres and ~35 prospects to develop plus, of course, Triceratops, Bob Cat and Raptor?
Now the next phase. Exxon sees this grand theft taking place and they say: Look at that, Hession is willing to sell the whole Company for a cheap price of just the Elk/Antelope Field. Let’s improve on this proposed theft and offer them a little more.
So they offer us $45/share in Exxon stock and payments for the certification results on the same format as the OSH deal but they offer 0.90/MCF instead of the 0.77/MCF for the gas above 6.2 TCF offered by OSH/Total. Note that they are still not paying us according to the SPA agreement where we were supposed to start getting paid at a resource level of 3.5 TCF.
So, once again, all they are paying for is the Elk/Antelope Field but Hession is throwing in everything else for free so he gets his “change of control” bonus of ~$39 Million.
What is Exxon paying for IOC’s 36.54% of the Field? $45/share x 51.1 million shares = $2.3 Billion. What are they getting? At the following resource levels IOC’s 36.54% of the gas would be:
Resource Level IOC’s Percentage $/ MCF
And then the certification payment due from Total. Remember the payment schedule from the SPA agreement:
Less than 3.5 TCFe - Zero
Total will have to pay Exxon for their 40.1% of the Field according to the SPA agreement starting at 3.5 TCF as shown above. So they will be getting much more from Total than they are willing to pay IOC shareholders under the present Exxon proposal. They have a lot of room to improve their bid just to make the IOC shareholders whole based on our original SPA agreement. If they are buying IOC they are buying the SPA agreement which will pay them the full price but they are not willing to pay the IOC shareholders the full amount they will receive from Total.
The only way for a Papua LNG plant to happen would be for Total to over bid Exxon in which case they would own the majority share of the field and could proceed with their planned project. They would be buying back their SPA agreement so they would not have to pay anyone the FID and First Cargo payment.
Hopefully the bidding will continue until we get a decent price for OUR field and Company.