At first glance, the reports that Thailand's PM is headed to PNG partially to discuss a potential investment in IOC's LNG project may not seem like a very big deal. Here's why it's much more significant than most have grasped thus far...
The short case has been reduced from devastating arguments such as elevated political risk, lack of adequate resources, etc... to the simple argument that though the sell-down will soon happen, the terms may not be as optimistic as some expect. While I strongly believe that the implied price will exceed $2 per mcf and result in the stock appreciating 3-fold in a very short period, let's assume that IOC concludes a deal with a major at only $0.80 or $1 per mcf (still significantly in excess of its current valuation excluding Triceratops and the surrounding acreage). Subsequent to that transaction, the project will largely be derisked and thereafter sell-downs will come at significant premiums to the initial transaction. PTT is a large and well capitalized entity that could buy into a substantial stake in E/A and/or Triceratops.
The last transaction on PNG LNG was Marubeni's acquisition of a 1% stake for about $3 per mcf. So for those who take comfort in the idea that maybe the deal terms on this initial sell-down won't be great, I would argue that:
1) You're almost certainly going to be wrong given that several bidders are competing for the asset, and
2) If the project gets derisked with the addition of a major operator, subsequent sell-downs could occur at vast premiums and in a short period subsequent to the initial sell-down. Just look at Oil Search - with XOM coming on as PNG LNG's operator, the company grew into a very healthy derisked valuation of $10 billion.
Sentiment: Strong Buy
andrwlp/bertl/ezdzit or what you go by these days, only thing certan about deal this size is not one knows with certainty like you pretend to have. Why you pretend to know all? Who is the source of your certainty? If that person is feeding this to you it is for his own gain. Negotiating is going on round the clock with parties none of us can be certain of. Watch your back as far as who you trust and weigh everything with your own mind.
Pick, think you nailed it. One of the key factors for short squeezes based on my work is having a line of catalysts so that longs never want to sell while shorts know the hits will keep coming. The deal announcement will be a buy on news and squeeze on news event but there will be almost no stock for sale until there's a big gap up.
Sentiment: Strong Buy