Also note that a chunk of the drilling and appraisal work gets deducted from future payments.
Still modeling this thing out. What it comes down to it seems is simply whether or not you think it's 5.4-6.5 tcf, or 9.9tcf+. The numbers I'm getting on a preliminary basis don't even support a $50 price if you use Total's stated expectations. Lots to do though, no conclusions yet.
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.
Getit: I believe the shoe is soundly on the other foot and you are distorting things. Profoundly. And you are one of the clowns here, Getit, that deserves losses (or opportunity costs) . You are an embarrassment to the CPA profession, IMO, who has truly added nothing to the IOC discussion other than threats and name-calling. Sad really.
"You don't know Total's expectations"
Actually we do Art, I don't really understand why people keep saying this. The PR is clear:
"with a contingent payment estimated by Total at approximately $590 million."
So you think Total is lying? Just a coincidence that the SPA has a baseline of the same amount?
Bonk, a couple of questions as I think it makes a big difference in whether you are modeling the deal (as presented in the SPA) or whether you are modeling from the Total PR. If the latter, I believe you are being unfair. So,
1. Are you at least modeling the three tiers shown in the example in the SPA?
2. Are you modeling the value of just the deal with Total (again IMHO it should be per my comments above), or will you be valuing the whole company? There's a bit of a difference because you keep saying that the value of IOC's remaining percentage should not be included. I agree if you are just valuing the terms of Total's 61.3% buy-in, but disagree if you are putting a value on the whole company after the buy-in because the formula in the SPA takes the TCFE tier amounts x 61.3% x /mcfe amounts of .60, .80 and 1.00.
Sentiment: Strong Buy
There never was a chance that E/A would solely support the grandiose stock price projections. Please include the Triceratops discovery in your model. Hope a sale of reserves to XOM by TOT constitutes FID.
YES Bonk you are correct!! In all the years posting here, I think you have made a brilliant decision, and this is what the street calculated in a few minutes! Driving the stock to where it should be - however, if you NET the payments TOTAL will maybe make, the value is more like $12-14 price range! We longs got the shaft on this one guys! All companies in the USA have "future value" of course they do, but this is not a done deal and TOTAL can walk anytime!! That is why Wayne Andrews and Mike Hession should leave now!!
You have harped for some time that IOC was running out of cash. Does the 600 million payable in January alay that worry, for lack of a better term? Also, given that the short argument was that IOC cannot get a deal with a sm, are you now thinking that this is a safer investment? It seems all this is being lost in the shuffle. All short arguments appear to have been put to rest. Interested in your comments as you have been the most openly critical of the company in these regards.
THIS IS NOT A DONE Deal jdeo, don't you realize that? TOTAL has just tied up ALL of IOC resources and IOC is locked up and cannot do squat about it! Nothing is signed and no payments have been made to IOC as of yet!
"Does the 600 million payable in January alay that worry, for lack of a better term?"
Absolutely. That should last them a couple of years at least. Unless they do something wonky like buy in the IPI group for cash.
"are you now thinking that this is a safer investment?"
Of course. Phil is gone, they have a good deal, and the price has been cleaved. I wouldn't call it "safe" but definitely much much safer and more attractive that last week and the previous 4 years I've been following IOC.
IMHO the key short arguments now would be of the more mundane variety - valuation, execution, timing, etc. If I were to short IOC right now it would be because I think the the 6.5 tcf or lower will play out. It's pretty clear that Total's estimated is 5.4 tcf. If it ends up at that number I think the price is still quite rich. But if one is a "true believer" in the GLJ number (and recall that GLJ isn't one of the parties making an estimate) then there is upside from here. The delineation wells will be critical in this regard. We won't really know more for a couple of years. I'm not sure the current shareholder base is down with that noise some some of the hot money is probably fleeing.
The drill bit will matter as well. Hitting another Moose or Elk and it's wasted money. Hit another Antelope and cha ching.
It will be interesting to see how the stock behaves now that the era of the uber-deal-next-week has passed.
And again, I have no problems whatsover with this deal - it s good and fair. The read-through per mcf values are pretty disappointing but in line with what I expected. I think Calio is a tool and his target of $85 is a slap in the face. These guys had no shame humping $2.00/mcf comparable deals that made no sense, and Calio was obsessed with "the shorts" too. For shame.