Thu, Nov 27, 2014, 9:07 PM EST - U.S. Markets closed for Thanksgiving Day

Recent

% | $
Quotes you view appear here for quick access.

InterOil Corporation Message Board

  • mulletman99 mulletman99 Dec 6, 2013 3:17 PM Flag

    Raymond James note just released

    Pavel PT $100 and Outperform

    Selldown to TOT Is Announced; Despite Question Marks, Deal Makes Sense

    Recommendation.

    The resource selldown to Total represents a key milestone in InterOil’s history,
    and as investors know full well, it’s been a long time coming. This concludes the monetization
    process with a credible partner - one of the five western supermajors. While Total hasn’t been
    widely rumored as a partner for InterOil - in contrast to Exxon and Shell - from every objective
    angle, it is an equally solid company. Thus, if nothing else, today’s news should put to rest any
    lingering perceptions in the market that InterOil cannot be a trustworthy counterparty for a large
    multinational energy company. Assessing the deal in its totality, we think it makes sense. This is
    not to obscure the fact that the structure of the deal carries some uncertainty, but under the
    circumstances, the transparency is as high as could be hoped. While we recognize that the market
    wants greater clarity on deal economics - which is simply a matter of time - our NAV is
    substantially unchanged (as shown below), and thus we reiterate our Outperform rating and we
    remain buyers in today’s sentiment-driven weakness (down ~ 39% currently).

    Here is what we like about the deal. First - to restate this point - it is readily apparent that
    Total is a strong partner. Also, the upfront (1Q14) payment of $613 million is substantial
    figure - around 20% of InterOil’s current market cap - and, to be crystal-clear, it is larger than
    we had expected. As management clarified on today’s call, the upfront payment and all
    future payments will be regarded as capital gains, and because Papua New Guinea has no
    capital gains tax, these payments will be tax-free to InterOil. Also confirmed on the call is the
    fact that the government has extended InterOil’s acreage licenses - a concern that we had
    heard from investors in recent months.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • ctd:
      ♦On the flip side, there are some elements of uncertainty/ambiguity that will not be fully
      resolved until 2015.

      As is typical in these kinds of transactions - that is to say, large preproduction
      resource quantities, especially in frontier markets - the total transaction value will
      not be known until 2015 at the earliest. Over the next 12-18 months, there will be an
      appraisal drilling and certification process - fully funded by Total. In essence, Total wants to
      develop its own resource estimates - above and beyond the existing estimates provided by
      InterOil’s reserve engineering firm, GLJ Petroleum Consultants - and the total deal value will
      only be determined once the certification is complete.?

      How does this change our NAV? Not much at all. As detailed on pages 58 and 59 of the Sale
      and Purchase Agreement filed today with the SEC, the valuation multiples (above and beyond
      the fixed payments) will vary with how much resource is certified. The “brackets”, adjusted
      for the government back-in, are: $0.77/Mcfe for 3.5 to 5.4 Tcfe; $1.03/Mcfe for 5.4 to 6.5
      Tcfe; and $1.29/Mcfe above 6.5 Tcfe. Based on GLJ’s 2P (mid-case) resource estimates at
      year-end 2012, we estimate the aggregate resource value net to InterOil at $4.9 billion, which
      is a bit higher than our prior “guesstimate” of $4.7 billion. (At this point, we are not ascribing
      any value to the economics of the prospective LNG plant.)

      Valuation.

      Our updated NAV estimate of $102.87 per share comprises a sum of the parts
      valuation, as detailed on page 2, and our target price of $100 (unchanged) is in line with the NAV.
      The resource value embedded within our NAV reflects the key metrics of the Total selldown, with
      the important caveat that it will not be firm until the resource is certified.

      • 1 Reply to mulletman99
      • Valuation.

        Our updated NAV estimate of $102.87 per share comprises a sum of the parts
        valuation, as detailed on page 2, and our target price of $100 (unchanged) is in line with the NAV.
        The resource value embedded within our NAV reflects the key metrics of the Total selldown, with
        the important caveat that it will not be firm until the resource is certified.

 
IOC
58.60-0.61(-1.03%)Nov 26 4:02 PMEST

Trending Tickers

i
Trending Tickers features significant U.S. stocks showing the most dramatic increase in user interest in Yahoo Finance in the previous hour over historic norms. The list is limited to those equities which trade at least 100,000 shares on an average day and have a market cap of more than $300 million.