Mkt. Prefers Rumors - Here's Rumors
From 3 sources in different US and Asian timezones:
Report on breakout session today:
WA made a point of stating PNG transactions have been from $.80-$1.20/Mcf .- Why say that unless IOC can beat it?
WA alluded to a fully funded 8 well annual drilling program - Wowzer.
Some say rumor of a $3-$4 billion transaction. - Is this 25% of PRL15?
"We've got good interest and great advisers and should be able to announce something soon (soon = speedily, without delay, immediate),"
Some say SM will be operator as choice is between 2 now - SM yields larger pps pop upon announcement
IOC received PNG JVOA approval for LNG project - if true this is huge
Last weeks rumors:
IOC ready to announce Shell as partner
~$1.40 Mcf bids
IOC BoD headed to PNG this weekend.
Q: Put it all into the rumor grinder and what comes out?
A: Insighter Info.
So what happens and when kids?
What have others heard?
A few observations and one comment.... First What the hell is "insighter" info? Sounds like a "Wowzer" quality info. Second, Asian time zone? Never heard of that one either... And Third while you are it.. since it's a rumour... Jack it up.. 10-15 billion dollar deal.. These are WORLD class reserves, don't you know?
And the comment.. Speaking of "World" class reserves..Imagine this story.... Exxon and Shell were sitting around in PNG twirling their thumbs unaware of these WORLD class reserves (except for the bozos on this board), UNTIL IOC got tired and said.. "THAT's IT.. final bids, or you are all OUT".. Then, Shell said,, "wowzer.. wait a minute, Please let us bid for you WORLD class reserves.. We are sorry that we had been sitting with our thumbs up our butts doing nothing.. Thank you IOC, for giving us a deadline and the opportunity to get our act together and BID for your WORLD class reserves."
I agree with Tree's analysis, and WA apparently listed the superior traits of the Gulf deal relative to the Cove transaction (offshore deepwater F&D costs much higher, Rovuma at least 3-5 years further out than the Gulf project, no gas act in Mozambique, no project agreement to produce at Rovuma, Rovuma has much higher infrastructure costs than the Gulf project and there's no readily available labor and equipment as there is in PNG from XOM's project), which some think means that he expects a much higher value than the $1 or so that Cove got. The purpose of writing this wasn't to engage in an argument about the relative merits of each project but rather to make the point that it confirms Wayne' belief that $1 an mcf, which is ~70% above the stock's current valuation, is too low. I'm guessing that, by now, he knows exactly what the bids for Elk/Antelope look like.
Tree makes some very compelling points, and although the rumors he cites are logical, they're still so far away from consensus and the stock's $.60/mcf valuation that the upside is stunning. I calculate the PRE deal to have been above $1.50/mcf on 2C (on an apples to apples basis with Elk/Antelope, meaning post certified resources) and that deal was done without any competition and the resource flow is further out unless it goes to XOM's project. The competition for Elk/Antelope has been much more fierce, the project is coming on stream much sooner, the resource is much less speculative, and majors are involved, so I think the valuation of this sell-down could imply a value of at least 2-3X InterOil's current valuation. And based on Wayne's comments, it seems to be coming very soon!
Last point - why is InterOil so focused on drilling Elk-4 and another Antelope well (yesterday was the first time we've heard this...) unless the project is going to be much bigger than investors think? I wouldn't be surprised if the Gulf project were 8-12mtpa.
Sentiment: Strong Buy
Shmori, here is some history for you. Shell and other majors knew the PNG had huge hydro-carbon deposits. They owned 50 year leases and did NOTHING with them. They were to busy developing the N Sea, M/E, Alaska parts of Africa and other regions. IOC in the mid 90s came in and built a refinery. They also purchased 60% of all the retail stores in the PNG from Shell and BP. IOC has always treated the locals and the Govt with respect and in return received respect. As crazy as this appears when the 50 year leases were about to expire IOC was approached by the PNG Govt and asked if they were interested. The majors had no idea that the PNG Govt would go in a different direction. At midnight, the day of termination of the leases, with IOC paying the over time, the leases were granted to IOC. The PNG Govt was tired of having their assets being shelved until those majors felt it was worth ther while. The only condition was that IOC was to explore and develop the property. IOC agreed. 8 million acres of some of the most prolific energy fields in the world became IOCs. You see the PNG Govt trusts IOC, the majors treated the PNG as a chattel did nothing for the country. The shorts completely under estimated the relationship IOC has with the Govt. Go there. You will understand that the Govt considers IOC a local company. There was never really any doubt that IOC would get the approval of the Govt. There is more detail of course but the shorts have NEVER understood IOC. They have shorted a stock that does not exist..
I'm tempted to say something repugnant such as: "That's a stupid post. Keep that garbage over at shu." But we have a lot more class here. Thanks for sharing ken
Good luck longs
Sentiment: Strong Buy
I am a small long but that reply was truly funny! I have liked this project for over six years but have steadily reduced my position size as delays have undermined my confidence level while resources have grown. I hope to increase my exposure after a deal fully derisks the project.