WHY is the MARKET reacting so badly to the CC?
1: After listening to the CC, the TONE of Hession and the others was if anything, downbeat, not optimistic and energized.
2: the perceived timing of positive events does not look that good; heck, Pacific Rub drilling plans not done? (even though our partner announced plans 4th quarter, sounds like there could be complications that may delay that. November spud ding at Wahoo at best? Market does not like it any better than we do.
3: No implication that they have made progress on any other partnerships (e.g., for Tri or other opportunities); only that they PLAN to do so.
Other opinions welcome.
Did some of you actually listen to the CC? IOC is getting out of the Mitsui-condensate deal because XOM or the new owner wants the product. Dave Holland, who heads up exploration said they are NOW doing additional seismic on 237 & 238. They have discovered a big "anomaly" between PRL 15 and PRL's 237 & 238. Wahoo was found to be similar to Antelope. It is only 9 KM from the coast and has the best logistics of all the prospects (i.e. roads and other infrastructure). reading between the lines, they must think Wahoo and triceratops are going to approach what they found at E/A.
And why did Shell visit the refinery?
Sentiment: Strong Buy
Even though they fumbled the timing on the earnings release, I like the way the CC was handled. Don't say a thing. No wandering musings on acts of God or lengths of string..... Its simple do a deal, don't talk about it. Only a fool (or Ken) thought a deal would be done today or this month for that matter. Nothing has changed, except we owe mitsui some money, and we don't have much. Will IOC do a secondary? Who knows. If they do they BETTER use the money to drill and not pizz it away like the last secondary. They drilled 2 WELLS with 280 million secondary! Maybe they will access the debt markets instead. Overall it seems to me like the call was a non event, without the Phil psycho babble added.
I don't know that the call was handled well. I have no problem with the lack of info on the deal. But the timing of this change in strategy is curious. Hession should have known the market would not react well to the change in strategy (AT THIS TIME) as it just adds it's own set of uncertainties. Has he not followed IOC history well enough to know that the market does not react well to uncertainty in IOC's future? Why then not hold off on the announcement of a change in strategy until it coincides with some good news (like the actual deal announcement). THEN it would simply look like they were focusing on a strategy that had just succeeded. They have now announced that all their eggs are in a basket that, because the deal has not yet been consummated), is an unproven strategy.
But to the question of why the market has reacted so negatively, stop losses don't explain it...they don't kick in until the stock goes to under $75. That does not explain how the stock loses over 10% in getting to 10%. I don't agree this is just short manipulation. Also, Mitsui was to be expected. Clearly some longs don't like the reduced set of options now available to IOC based on Hession's new strategy. Why he needed to take options off the table is a mystery to me. If they are so hesitant to talk about good news, why talk about options being eliminated. Just gives the majors more leverage in negotiations. I am disappointed in Hession's communications approach here (not as bad as Phil, but I believe this was a blunder). What is gained by announcing you have narrowed your options other than "putting your mark on the company"?
It's down because this sell down process started in November of 2011. In a January 24th press release, IOC stated final binding bids were due on March 1st and that the Board would consider the bids the first half of March. It is now August 13th, and there has been no deal. All of this around a battleground stock that has to prove itself at some point. Plus, they just came out and siad they will not being building an LNG plant, which is where much of the upside was.
I didn;t think his tone was downbeat at all. I thought the comments regarding streamlining the comany to do what they do best was great. Keep finding gas and partnering with majors to get it to market. That is a proftable track. The problem as I see it today is that everyone ALWAYS expects to hear news on these conference calls. it's like clockwork. The shorts know it, and I am sure they pounced on that fact this morning. They have done it before, and they will likely do it againn until the deal is announced. November drilling for Wahoo isn;t relevant to today's action IMO. That is another asset to be found and I thought he made that clear. I wish we could have gotten details on the EA negotiations, but I knew we wouldn;t because that has been the mantra all along. I believe some longs are selling today out of a) frustration, which is justified IMO and b) panic because they saw red at the open. I'm sure tons of stop losses have been triggered, I've been around long enough to see this before. I recall the stock opened down big on some Duma comments, then finished green, up 3 or 4% after the market shook out what was a misinterpretation. To make a long story short, I don;t blame anyone for selling because it takes a strong stomach with IOC at times. I'm holding as usual, but I am certainly ready for this deal to be announced, and Hession and the BOD need to get this thing done.
Good luck longs
Sentiment: Strong Buy