Combining your analyses (papaloapan and bonk), the "moderate" case is well stated.
Given the current mid-$50s stock price, there is both an upside and downside case, depending on future outcomes -- like with any stock.
The moderates will get neither too optimistic nor pessimistic without further verification, but recognize the risk vs. reward.
My stance is to take the risk at this point, believing that the probabilities favor the upside.
PS Where's my dividend? LOL
Sentiment: Strong Buy
The current certification supports the 9.9 Tcf, almost double the 5.4, and is likely to increase with more appraisal wells. IOC is likely to get a huge multi-billion dollar resource payment in 2015, in addition to the $613 million in the next few months. The professional analysts currently have targets from $71 to $105 per share, and are more objective and competent at this than you.
Hi, VS et al. Forgive my relative lack of posting of late, but I am up to my eyeballs for better or worse. It seems to me that you and the other "moderates", as well as some of the more rational longs here, understand where things stand. To continue long and believe that reasonable upside exists (say $70+) you really have to believe that the recertification will generate resources above the 5.4 Tcfe baseline, that FID will come in a reasonable time frame, and that the additional contingent resources will add more value that same reasonable time frame. That is not wholly unreasonable with the stock where it is now. BUT, there is downside as well, of course, since significant uncertainty still exists.
If I step back, Bonk is the one who really provided all the evidence here to help longs and shorts out, that comprehensive review of prior transactions, which really showed what folks were paying for resources. When you think back and recall how Phil threw out $5-$7 figures, you realize how absurd that was, and how he was basically lying (is there a nicer way to put it?). Frankly, I am really surprised that a shareholder lawsuit (or lawsuits) have not been filed given all that transpired and all the bee-s that Phil said on numerous calls. Maybe it is a jurisdictional thing, that the assets are all not here. That likely explains it IMO.
OK, enough rambling. Hope everyone's holidays are going well in spite of this saga.
Hot off the rumor wire of another elimination:
The Psychological Effects of Repeated Soiled Lederhosen Episodes 2013
"The elimination of other courses is under consideration."
I sure hope not. It would be a shame if Calvin had to cut:
What New York Desks Say 207
How Much Is Tilson Payin A Huh? 101
*Hic* Shorts Shorts *Hic" Workin Out For Ya 311
Physiology Of Twerking 402
Ken - i am not short - or long - i sold ages ago at $54. I am trying to work out if i can buy in again. IOC is a dilemma to me at the moment - it has 2 views - obvious of you read these boards. Regards Green
Good analysis - it would be good if Kenny could insert his figures into your meodel and then comment on where he thinks it is wrong / short etc.
Then we would have 2 clear and maybe opposing modles on valuation to analyse and start to arrive at a view of the value.
Base case is 71, High case is 90, low case is 30. Projections are excellent all depending on resource. Sned me your email bonk and I will send it to you.
Sentiment: Strong Buy
Very reasonable papa. GLJ was at 9.9 so that is most certainly a plausible scenario. The question is how much people are willing to pay in advance for that.
How come so many people on here ,have so much time on there hands
To be able to spend all day on here posting ? To which most of it is second guessing or
Just utter #$%$ from both sides.
No; just trying to quantify what this complex deal means to me as a shareholder - my conjecture relates to how much cash they could receive, and I am not conjecturing on share price. However, as Bonk points out below, I have missed a few things, and the numbers are not as good as my draft.
Unfortunately for Kenny and his clan, the following classes have been eliminated in the cutbacks:
1) Burger Gourmet 101
2) Square Dancing for Pound Packers 310
3) Skirting the FINRA Shoals 2014
4) Reality Check 14
5) Curing Sophistry Habits 5.4
6) Connecting The Dots 65
7) Source Verification for Non-Listeners 69
8) Alias Selection Made Easy 17
9) Consortium Building 12
The above are "what we hear......." for the present time.
Unfortunately, due to a recent plunge in the stock of a certain company, the cutbacks will likely have to be expanded. The elimination of other courses is under consideration.
Thanks Bonk - helpful clarifications. I fully agree the thing that counts here is the re-certification, and that the buyout talk is useless and delusional. My own expectation - and hope - is that the re-certification is going to come in the come in between the 6.5 - 9.9 numbers, but we'll see.
Hilarious. No qualms about posting past Westlake reports that were uber bullish, and no qualms about posting MS research provided by Gator, but somehow this one is stamped top secret. Not because it has a $71 target and a $30 scenario, surely.
Are you suggesting that upon payment of the $613 million, the stock should rise to 69? I am just trying to make sense of your conjecture here.
Good luck longs
Papa - I think your overall thinking process is the right one, but you are double-counting the $613M, and ignoring the IPI interest in the payments. E.g. at the 5.4 Tcfe level , the contingent resource payment is $698.7M in total (less appraisal cost adjustment) plus an FID payment ($112M) - IOC gets about 75.6% of this (assuming pass-thru economics to IPI) - so you are thinking IOC will get a check for $1.5 Billion ($30 per share), but in fact that check would only be about $600M ($12 per share). Of course IPI would get their share of the initial $613 also, so your downside scenario of $42 ($12.5+$30) is actually $9.25+$12 = about $21 per share. But IOC retains a 30% stake stock that adds about $10 (at Total's price/mcf) so a realistic view is in the low 30s at the 5.4 Tcfe level. I assume the other assets are a wash with the debt that IOC has already racked up (e.g. the $70 convert has to be paid off in 11 months, refinery mortgage, bridge loan, etc.
My math using a 100% chance of FID and a modest 10% discount rate is 5.4 Tcfe = $31 per share, 6.5 Tcfe = $43 per share, and 9.9 Tcfe = $87 per share. Of course Calio uses a "base case" of 9.9 Tcfe and gets an $85 target, and Westlake's downside is $30 so my math fits.
It's best to focus on what really matters - the deal is known and a huge piece of it is getting sold off, so the thing to focus on is what Tcfe number will come back at the recertification. Total thinks 5.4. IOC is putting on a brave face and hoping for more. Place your bets accordingly.
With the amount of misunderstanding of the deal and the delusional hopes for bidding wars in a few weeks my sense is some air still needs to come out of the stock as reality slowly creeps in.
I have some detailed queries into Total IR and will report back anything of interest, in the most objective and dispassionate way, as always.