How should we value IOC now? I think one LNG train is about 5 million tonnes per year, which is about 250 billion cubic feet, or about 250 million mcf. If Exxon is building one train at a plant that is already Exxon's, then that would seem to put Exxon in a good position in negotiations. If they pay as little as $1 per mcf, then the deal is worth about 250 million per year to IOC sometime in the future, when the pipeline and train are built. In that case, the stock might be over-priced right now, even though of course they would have other gas they could develop in the more distant future. On the other hand, Exxon might pay more than $1 per mcf, in which case, depending on the price, IOC might still be undervalued. PNG will also take a big cut.
I would not go out and buy any at the current price. Fut to watch, though.
how about this: at E/A alone, ioc has about 6 tcf net to its interest.. Multiply that by even $1/mcf, you get $6b, or $123/shr just for its stake in E/A. Everything else, including tri and the refinery, would add to that.
Yes, I did that calculation. But under the Exxon deal, IOC isn't going to get $6 billion tomorrow. They'll sell the gas at a quarter of a tcf per year. So it would take 24 years to sell 6 tcf. The present value of that income stream (PV10) is probably around $2 billion (haven't done the calculation, though). And we still haven't taken into consideration that PNG will take a big slice, maybe a third or even a half.
Still, they would have other gas, and maybe they can monetize that.