Seeking Alpha

Chris DeMuth Jr.'s  Instablog

Chris DeMuth Jr.
  • on Portfolio Strategy & Asset Allocation
  • on ETF Long & Short Ideas
  • on Fund Holdings
Send Message
"It's not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it - who look and sift the world for a misplaced bet - that they can occasionally find one." - Charlie Munger I look... More
My blog:
Rangeley Capital on Harvest
My book:
Rangeley Capital Best Investment Ideas
  • Big Bird On The TOT-IOC Deal 4 comments
    Dec 6, 2013 11:09 AM | about stocks: IOC, TOT

    One Of These Things is Not Like The Other

    One of these things is not like the other,
    One of these things just doesn't belong,
    Can you tell which thing is not like the other
    By the time I finish my song?

    Did you guess which thing was not like the other?
    Did you guess which thing just doesn't belong?
    If you guessed this one is not like the others,
    Then you're absolutely...right!

    - Big Bird

    InterOil (NYSE:IOC) Says:

    PORT MORESBY, Papua New Guinea and HOUSTON, Dec. 5, 2013 /PRNewswire/ -- InterOil Corporation (NYSE: IOC; POMSoX: IOC) has agreed to sell to Total S.A. (CAC: TOT; NYSE: TOT) a gross 61.3% interest in Petroleum Retention License 15 ("PRL15") which contains the Elk-Antelope gas fields in the Gulf Province of Papua New Guinea, and has also granted Total an exclusive right to negotiate a farm-in to all its exploration licenses in Papua New Guinea.

    Agreements covering the sale and purchase of the PRL 15 interests, proposed liquefied natural gas ("LNG") project, and the exploration farm-in rights, were signed today in Port Moresby by InterOil's chief executive Dr. Michael Hession and Total Exploration & Production Senior Vice President Asia Pacific, Jean-Marie Guillermou.

    The transaction price depends on appraisal and certification of Elk-Antelope, with illustrative payments of approximately US$1.5 billion - US$3.6 billion, *for a range of 5.4 trillion to 9.0 trillion cubic feet of hydrocarbon gas equivalent ("tcfe").

    The agreement with Total provides for fixed and variable resource-based payments:

    • Fixed payments to InterOil include US$613 million on transaction completion, which is expected in Q1 2014; US$112 million on a final investment decision for a new LNG plant; and US$100 million at first LNG cargo from the proposed LNG facility.
    • In addition to these fixed amounts, variable payments for amounts in excess of 3.5 Tcfe for the gas resource will depend on certification by two independent certifiers following up to three appraisal wells to be drilled in PRL15.

    In addition, Total has agreed to make a payment of US$100 million per tcfe for volumes over one tcfe for additional resources discovered in PRL15 from one exploration well. Any payment would be made at first gas from the proposed Elk-Antelope LNG facility.

    Total will carry the cost of the drilling for the appraisal well program. The program and certification of Elk-Antelope is expected to be completed in 2015.

    Total will lead construction of and operate the proposed integrated LNG project, a final investment decision on which will follow reserves certification, basis of design and front-end engineering and design.

    Total also has an option to take an interest in all of InterOil's exploration leases in Papua New Guinea (PPLs 236, 237 and 238), which InterOil will continue to operate.

    Total and InterOil have also agreed to explore other business opportunities both in Papua New Guinea and elsewhere in the Asia Pacific region.

    Today's agreement follows an extensive international competitive bidding and evaluation process for development of InterOil's interests in Papua New Guinea.

    Dr. Hession said today's transformational, company-making transaction would significantly benefit InterOil shareholders and the Papua New Guinea people.

    "It is satisfying that Total, one of the world's largest international oil and gas companies, shares our faith in developing Elk-Antelope, a world-class hydrocarbon resource and one of the largest discoveries in Asia in the past 20 years," Dr. Hession said.

    "Total is a world-class operator and will bring experience and expertise to a development that will diversify Papua New Guinea's hydrocarbon sector.

    "InterOil, with more than 1,000 employees, is already a significant contributor to Papua New Guinea's economy and we remain confident that this deal will lead to continued investment, increased Government revenue and job creation, particularly in the Gulf Province.

    "We will work alongside Total to help develop further expertise among Papua New Guineans in the country's oil and gas industry.

    "We will also work with the Papua New Guinea Government to develop proposals for setting aside gas for generation of affordable electricity throughout Papua New Guinea.

    "This is a great day for InterOil's investors, Papua New Guinea, and the people who work for us."

    Dr. Hession added that the transaction was a key to meeting the company's priority objectives of maximising shareholder value, monetising Elk-Antelope, progressing development of an integrated LNG project, strengthening its financial position, and continuing its extensive exploration program.

    Funds from the transaction will be applied to retiring debt, exploring and appraising activities and to funding InterOil's share of the Elk-Antelope development.

    The Chairman of InterOil, Dr. Gaylen Byker, said today's transaction was a landmark for investors, who had stuck by the company since its formation in 1997.

    "This is a significant event in the company's history, and we look forward to growing this company along with Total for the benefit of our shareholders and for Papua New Guinea."

    Total (NYSE:TOT) Says:

    Paris, December 6, 2013: Total today announces the signature of a farm-in agreement with InterOil Corporation that gives it a 61.3% interest in Petroleum Retention License (PRL) 15 in Papua New Guinea. The Elk and Antelope gas fields, two of the biggest finds in the Asia-Pacific region in recent years, were discovered in the license in 2006 and 2009 respectively.

    Total and InterOil Corporation retain the flexibility to farm-down an aggregate of up to a 19.3% interest (before any election by the government to exercise its option to join the project with a 22.5% interest) to a strategic partner.

    The common objective of Total, who will operate the project, and InterOil, is to complete the delineation of the two discoveries and to continue to explore for new resources in the license area. Depending on the results, this could lead to a final investment decision by 2016 for the development of the fields and the construction of a liquefaction plant located onshore on the Gulf of Papua.

    In addition, Total has an option to take an interest in Petroleum Prospecting Licenses PPL 236, PPL 237 and PPL 238 in the same area.

    "Following Total's entry into exploration in Papua New Guinea in 2012, this new acquisition of an interest in significant discovered resources is an exciting opportunity for Total to develop a new gas production and liquefaction hub in the Asia-Pacific region, where gas demand is very dynamic", stated Yves-Louis Darricarrère, President Upstream at Total. "Total will leverage its technology and experience in major LNG projects to reinforce its long-term production post-2020."

    Total will pay $470 million for a 42% interest (32.5% if the government executes its option to join the project) with a contingent payment estimated by Total at approximately $590 million. The transaction remains subject to the approval of the Papua New Guinea government.

    Stocks: IOC, TOT
Back To Chris DeMuth Jr.'s Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (4)
Track new comments
  • TimeOnTarget
    , contributor
    Comments (3254) | Send Message
    Chris --


    Maybe IOC has just never done a press release before . . . . .
    6 Dec 2013, 01:44 PM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (6299) | Send Message
    Author’s reply » Ha! They must have deforested PNG given all of the press releases they have printed.
    6 Dec 2013, 02:59 PM Reply Like
  • CDM Capital
    , contributor
    Comments (444) | Send Message
    This is hilarious Chris. Never have been really sure what exactly was going on over at IOC with this ongoing saga. This is like the Davy Jones project, just 10x worse.
    6 Dec 2013, 05:10 PM Reply Like
  • aretailguy
    , contributor
    Comments (1446) | Send Message
    IOC - corporate management by community organizers....
    6 Dec 2013, 05:35 PM Reply Like
Full index of posts »
Latest Followers


More »

Latest Comments

Most Commented
  1. GCVRZ Forum Archive (1,000 Comments)
  2. GCVRZ Forum (896 Comments)
  3. Event Driven Q&A Forum (240 Comments)
  4. GPT Forum (132 Comments)
  5. Shorts Forum (125 Comments)
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.