We already could not evaluate the "DEAL" because we weren't told how much of Total's payment was going to the IPI interests. Now we find out that Total has been "granted" an "Exclusive Option" to acquire a net 37.5% interest in PPLs 236, 237, and 238. Seems like a material event to me, but no information is available as to what IOC got for granting the option, or the terms of the option. Wayne has not responded to e-mails or a phone call. We are not told if PRL 39 is included in the PPL 237 option. ( Seems important to me!)
Shame you didn't read the thing. We agree--IPI payment coming out of IOC's pocket, that is, out of the supposed payment by Total to IOC. I guess we are both "lying crim fraud(s)". You just seem to have a problem with reading comprehension and written expression.
From my reading, it looks like IOC is responsible under the DEAL" to buy out the IPI investors, who have a 19% share in E/A. We are not told how much that will cost. Hession has said that transaction will be "neutral", by which I intuit that IOC will merely be a conduit to move the price paid from Total to IPI.
Assume for a moment that the size of E/A is such that the Resource Payment due is $4.1B. couple that with the initial payment of $613mm, and you have Total paying $4.7B for a 47.5% interest in E/A, after the PNG Gov't back in. that makes each percent worth more or less $100mm. Thus, the IPI investors would get $1.9B of the $4.7B paid by Total. IOC would get $2.8B net, plus a 30% retained interest with an implied value of $3B, valuing IOC's interest in E/A at $5.8B, less the time value until payment.
The is no commitment or promise to build a LNG facility IOC's 30% of E/A is still stranded gas. Assuming a LNG facility is built and IOC has a right to buy in, I think you have to assume a cost of $20B. It is generally assumed that 70% of that 20 can be financed, meaning IOC must come up with 30% of $6B or $1.8B for its share of the equity in the LNG plant.. Suddenly that net cash of $2.8B after buying out the IPI folks, doesn't look so big. Not much of a safety margin. Or am I wrong?
At E/A, the IOC Presentation shows Resource Estimates of 9TCF (that's 9 Billion MCF) of recoverable gas and 135 million bbls of recoverable condensate. 135 million divided by 9 billion is .015. That makes one and one half percent of a barrel of condensate per mcf of gas. What is a barrel of condensate worth? $50? $100? In between? At $75/bbl, the condensate from E/A is worth more than $1.00/mcf.. Do you think IOC sells its interest in E/A for $1/mcf? That would be giving away the gas for free. I think IOC is holding out for more, paid in cash or paid in an interest in the PNG LNG facility doesn't really matter.
Suppose IOC contributes its E/A interest to the PNG LNG venture at an implied value of $1.50/mcf. That would give IOC a more or less 20% interest in the whole project after the building of the gas processing plant and the pipe spur to the existing pipeline. Meanwhile the PNG LNG Project is wildly profitable, getting its dry gas (after condensate removal) for less than $1/mcf, doing the liquefaction, and selling the gas for at least $12/mcf, FOB Port Moresby. Such a deal actually lowers the PNG LNG Project cost of gas and solidifies its position as THE low cost producer in Austral-Asia.