InterOil Corporation (NYSE:IOC) Q4 2015 Earnings Conference Call March 30, 2016 8:00 AM ET
Michael Lynn - SVP, IR
Dr. Michael Hession - CEO
David Kirk - SVP, Drilling and Development
Don Spector - CFO
Saxon Palmer - SVP, Exploration
James Byrne - Citi
Neil Beveridge - Bernstein
Evan Calio - Morgan Stanley
Pavel Molchanov - Raymond James
Jeff Fields - Raymond James
Ladies and gentlemen, thank you for standing by. Welcome to the InterOil’s Fourth Quarter 2015 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer-session. Instructions will be given at that time. [Operator Instructions]
As a reminder, this conference is being recorded. I would now like to turn the conference over to Michael Lynn, Senior Vice President of Investor Relations. Please go ahead.
Well, thank you and hello everyone. Before we start, I want to briefly remind everyone of the disclaimer on Slides 2 and 3. Some of the statements made during this conference call constitute forward-looking statements within the meaning of the U.S. and Canadian securities laws, including such statements as those regarding expectations of future results, general financial performance, future business prospects and strategies.
These statements are based on management’s current expectations and are subject to a number of assumptions, risks and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. Investors are cautioned not to place undue reliance on these statements.
Additional information about factors that could cause our results to differ materially from those in the forward-looking statements can be found in the Company’s Annual Report on Form 40-F for the year ending December 31, 2015, our Annual Information Form and other filings with the U.S. Securities and Exchange Commission and SEDAR.
Our speakers on the call today are the Chief Executive Officer, Dr. Michael Hession; our SVP of Development and Drilling, David Kirk; our SVP of Exploration, Saxon Palmer; and our Chief Financial Officer, Don Spector. We have a presentation to accompany our comments today. This presentation can be accessed on our website at www.interoil.com. You can find the link on the homepage.
Now at this time, I will turn the call over to Dr. Hession to open with Slide 4.
Dr. Michael Hession
Hello everyone and thank you for joining InterOil’s fourth quarter and 2015 full year results call.
In today’s presentation we will cover four key areas. Firstly PNG’s advantage as an LNG producer, and InterOil’s advantage within PNG. Secondly, the positive appraisal results to date and what this means. Third, the independent certification of Raptor and Bobcat, and finally, our liquidity position. More specifically, I will focus on cost reduction and enhanced access to capital.
Dealing with the first point, PNG has already proven it can be a reliable low cost and efficient LNG producer. More importantly, Papua LNG continues to be the most competitive new build LNG project not just in Asia, but globally.
With regard to the second point, David Kirk will take you through the reappraisal data shortly. Last year, Total produced the third [well], Antelope-6. And earlier this year they conducted a series of interference tests at Antelope-5 and Antelope-1. These results have again surprised on the upside.
We are also pleased to see that GLJ Petroleum has increased their 2015 year-end contingent resource estimate for Elk-Antelope. Third, we are pleased to announce the independent resource certification for our non-PRL 15 discoveries of Raptor, Bobcat and Triceratops. On a combined basis, these three discoveries have an estimated volume of over 6 Tcfe.
Late last year we also announced that we were in the process of monetizing our discoveries and exploration acreage. And while I cannot say much more on that today, I will say that we have been very encouraged by the level of interest from multiple strategic parties, and finally, our financial position. At the end of 2015, we had over a quarter of $1 billion in liquidity.
In the last two years, we have executed a major restructuring of the business to focus on the key value drivers for the company and our shareholders. Having sold our non-core assets, we cut our headcount from 3,000 to less than 100 in that same two-year period. We remain fully focused on Papua LNG and the very prospective acreage around it. Today, we announced another reduction in our expected spend in 2016 from our original guidance last quarter.
We are also confident that discussions with our lenders will conclude soon and when finalized will provide us with a larger credit facility and a longer maturity date. Don will talk to our financials in much more detail later on. And towards the end of the call, I will provide the 2016 outlook and then be happy to take your questions.
Let us turn to Slide 5. This gives a quick summary of all the factors that make PNG one of the most attractive and economically superior places to produce LNG. First and most importantly, PNG is the lowest cost developer of LNG for the Asian market. With the world’s largest LNG market within [Indiscernible], PNG also enjoys low transportation costs.
From an economic standpoint, many industry watchers expect the gap between LNG demand and contracted supply to widen in the early 2020s. This is due to current and existing contracts expiring, while high cost LNG projects faced investment delays. This works perfectly for Papua LNG, which we expect to start production just as this gap starts to widen.
And finally Japan, the world’s large LNG market, Japan has already publicly signaled their desire to procure more LNG from Papua New Guinea. PNG clearly has a very attractive [zip code]. It is low cost and close to market. In fact, [zip code] with PNG is also attractive, again low cost and close to infrastructure.
The math on Slide 6 shows three key regions in PNG where nearly 40 oil and gas discoveries have been made. To the left is the Foreland region, with smaller more dispersed discoveries. In the upper left are the Highlands, where it is the model and also operate the gas gathering project for PNG LNG.
In the center, we have the Gulf region, where InterOil owns around 80% across five different licenses and 36.5% of PRL 15, which contains the giant Elk-Antelope gas field. InterOil’s discoveries in the Gulf region are close to PNG’s current and future liquefaction sites.
So this translates to lower cost development, less pipelines, less onshore construction, and easier transport access. And very importantly, it also means any discoveries made in this region have a high chance of being developed.
Now at this point, I like to turn it over to David Kirk, our Senior Vice President of Drilling and Development to provide an update on the project and the most recent appraisal work. Over to you David.
Thank you, Michael. Let us start on Slide 7 with an update on the Papua LNG Project. Over the last 18 months we have been conducting an appraisal program. The results will help us specify the number and size of the processing trends, the size of the export lines [Indiscernible] and help us work through various project decisions.
In parallel to the appraisal drilling campaign, multiple teams in multiple locations are working on all of the different matters involved with an LNG project of this magnitude. The operator has a highly skilled development team in Paris, which is supported by the Total research center. In Port Moresby, Total continues to build capability working closely with the government departments and the local communities.
Numerous sites surveys have been completed, while others are underway are imminent. These include surveys such as metocean, geophysical, geotechnical, topographic, and environmental.
As you can see from the picture, the proposed Papua LNG site is literally next door to the PNG LNG site, and we continue to engage with our neighbors of opportunities to leverage value for all parties. There is tremendous energy, belief and stakeholder alignment behind this high-value project. The project is certainly gathering momentum.
The next slide, Slide 8, summarizes the key results from the appraisal campaign up to the end of last year. Antelope-4 defined the structure on the southern flank of the field. In addition, the extent of dolomite in this location was great news as it proves reservoir dolomite extent to the size of the field. Antelope-5 provided exceptional results. This well demonstrated that the main reef and the best quality reservoir extended further west unpredicted. The subsequent wells have proved world-class deliverability, good connection to Antelope-1 and a large connected volume.
Now on Slide 9, I give some details on additional appraisal information collected this year from Antelope-6 and the larger interference test between Antelope-5 and Antelope-1. Antelope-6 was drilled to increase the reservoir quality and define the structure on the eastern flank. The results to date have again surprised on the upside. The top carbonate came in at 3076 meters or 6811 feet, which is within the range of pre-drill estimates and overall the reservoir rock is indicative of a lagoonal environment.
The well reached total depth and is currently finalizing an injection test asses future water disposal options. The big surprise was again the presence of dolomite, in this case, a 138 feet. Not only does it support the [extent] of dolomite across the field, the high-quality dolomite layers provide a super highway for gas from the lower body rock to feed into future production wells.
A well test conducted over the top cored interval of the reservoir with a fluid of 13 million standard cubic feet per day confirmed the gas resource in this lagoonal rock environment. Here are some even more exciting news. Whilst conducting this test we took the opportunity to place pressure gauges in both Antelope-5 and Antelope-1 from 2.5 kilometers away from Antelope-6. And guess what, the gauges responded to the Antelope-6 test, validating connectivity between all three wells right across the field, again a nice surprise on the upside.
Turning to Slide 10, another major activity in the last three months has been the interference test conducted between Antelope-5 and Antelope-1. This test differed from that conducted last June primarily in terms of scale and accuracy of measurements. The test was conducted over 342 hours compared to 72 hours in the June 2015 test.
The total volume of gas load was 760 million standard cubic feet as opposed to 150 million standard cubic feet in June. There were more gauges deployed and more time allowed for the gauges to stabilize. Whilst of the data is ongoing, there are a number of conclusions that we can have some confidence in already. That is connectivity between Antelope-5 and Antelope-1 is confirmed. Reservoir quality and well deliverability are both excellent, and significantly no barrier such as a western binding fault could be seen on the flow test.
Let us summarize the latest results on Slide 11. Antelope-6 surprised on the upside with over 138 feet of dolomite and connectivity to Antelope-5 and Antelope-1. The interference test conducted between Antelope-5 and Antelope-1 in January supports the main conclusions from the original test conducted last June.
Finally as we complete this campaign we need to review the remaining volume uncertainty. While InterOil is feeling comfortable by putting a floor onto the volume and eliminating downside risk, the joint venture is considering the potential for significant volume upside on the Western flank. This moves us on to the decision on whether we need an Antelope-7. Now, InterOil has always been confident that Antelope has enough gas to support a two train LNG development. With the results to date, we remain just as confident. The recent positive data from Antelope-6 and the flow test results will all need to be considered by the joint venture before deciding if another appraisal well is needed. For InterOil, the Antelope-7 decision will be based on what provides the best value for our shareholders as well as technical merit.
Now if you will turn to Slide 12, I will hand over to our Senior Vice President of Exploration, Saxon Palmer, to provide a quick update on our exploration activities.
Thank you, David. On Slide 12, we give the independent report numbers for our discoveries made outside of PRL 15. After InterOil acquired more appraisal seismic over Raptor and Bobcat in 2015, Risk Advisory carried out a thorough technical review of the fields at the end of the year.
They have certified 2C natural gas and natural gas liquids as shown on the slide. Specifically Raptor has a 2C natural gas estimate of 2.95 Tcf of natural gas liquids - of natural gas and 117 million barrels of natural gas liquids. Please note that this level of liquids content could well prove to be economically significant. In addition, Bobcat was certified for the 2C natural gas estimate of 2.2 Tcf with natural gas liquids of 30 million barrels.
These equate to 3.6 Tcfe in Raptor, and 2.4 Tcfe in Bobcat. InterOil believes that certified natural gas volume is more than enough to support another additional train of Papua LNG or indeed PNG LNG. The Triceratops 3 appraisal well also provided enhanced development potential with a tubing constraint gas flow of 17.1 million standard cubic feet per day.
We have updated the resource volume at Triceratops, which now sits at 380 Bcfe. Importantly, Raptor, Triceratops and Bobcat are within 25 miles of Elk-Antelope and the planned development there. It is worth noting these discoveries are only 75 miles away from the existing PNG LNG project pipeline.
And so, with a successful 2014 and 2015 behind us, let me take you through some of our other analysis and forward strategy for 2016. On Slide 13, we take a step out from the Gulf region and look at our entire acreage. In red are the discoveries and in yellow are undrilled prospects and leads. In 2016, we will continue to advance our discovered and prospective resources towards commercialization with focus on the following low cost work streams.
Firstly we will unlock value in the [basin] by maturing the development options of our discoveries. Secondly, we will mature and hard drive the gas and oil prospectivity of that portfolio. And finally, we remain focused on our [strategy], and we will work on multiple options for commercialization and strategic partnering. As Michael said, we have been very encouraged by the level of interest in our assets.
With that, I will hand over to our CFO, Don Spector, who will take you through our financials.
Thank you, Saxon, and welcome to everyone listening to today’s presentation. Before I go through the Consolidated Income Statement, we should reflect on some of the significant events for 2015, which have been set out on Slide 14.
Firstly, at the end of 2015, our company had available liquidity of $252 million consisting of $170 million of the undrawn capacity in the current syndicated loan facility, and $82 million of cash and receivables.
Secondly with the transition of operatorship in PRL 15 to Total, our company has been restructured to ensure we size the organization appropriately. During 2015, our staffing levels were reduced by 60% with a further reduction of approximately 20% to be completed by the end of April. We also completed all of our first term commitments in our non-PRL 15 licenses. This would allow us to focus our capital resources on PRL 15 and the Papua LNG Project during 2016 and 2017.
This has led to a revision of our 2016 Work Program and Budget with the forecast expenditure now being reduced to a range of $155 million to $170 million. Finally in addition to actually reducing our cost, we have several strategies to increase our liquidity. For 2015, we saw the commencement of an extensive commercial process. As we have stated repeatedly we are in large percentage interest in all of our assets.
The level of interest that we have received during this process has been extremely high, which gives us the option to be able to monetize a portion of these assets at the appropriate time. And then subsequent to the end of 2015, we have now commenced the process to refinance the existing syndicated loan facility with the intention of being able to increase the amount of the facility and also to extend its term beyond 2016.
It is proposed that the refinancing will be completed during the second quarter of this year. If we now move to our financials on Slide 15, our company returned a loss for the year of $241.9 million. The majority of the loss was made up of one, the expensing of seismic and drilling related costs of $121 million; two, the full write off of $78.2 million of the expenditure incurred on the Wahoo exploration 1; three, general and administrative expenses of $42 million, which includes the costs associated with the restructure of the company; and then four, $11.9 million for the cost associated with our financing facilities.
Moving to our liquidity position, at the end of 2015 which is set out on Slide number 16, you will see from the slide that we finished 2015 with available liquidity of $252 million. Expenditure for the fourth quarter of 2015 consisted of $70 million for the redemption of the convertible notes in November. Those $46 million for the actual drilling costs associated with Antelope -4 side-track, Antelope-6 and the Triceratops-3 well. We have $25 million for work on the Papua LNG Project and seismic costs and other corporate expenditure. And we also had a negative movement in our working capital balance for the quarter of $80 million.
And as I mentioned earlier, we continue to review and refine both the size of our company and the level of activity we need to undertake to manage the acreage we have in our portfolio. This ongoing process has led to a reduction in our forecast expenditure for 2016, which now sits in a range of $155 million to $170 million. This reduction in forecast expenditure coupled with the proposed refinancing of the existing syndicated loan facility will ensure our liquidity position remains very strong.
On that note, I will hand it back to Michael.
Dr. Michael Hession
Thank you, Don. In summary, I'd like to recap on some of the highlights we've discussed today. PNG's advantage as an LNG producer, and InterOil's advantage within PNG. The positive surprises in the approved world program is confirmed [indiscernible]. The reason the extended welfare confirming excellent reserviour. The independent estimates wrapped up and [indiscernible] the combined volume of 60 [TNE]. The significant interest in our assets and strategic parties. And finally, the strengthening of our financial position going into 2016. With the reduction in our anticipated spend and a proposed increase in our liquidity.
On the appraisal process, we have always in confident that Antelope can support a 2-train LNG development. And the later data further reported this confidence. Let's not forget, InterOil has the ability to call a second certification between the volume upside and the Western flank is something we could determine later. While the JV is yet to make a decision, I can assure you that InterOil will only agree to another appraisal well if it is absolutely clear that it would add significant value for our InterOil shareholders. If we do not Antelope-7 we expect to initiate our certification process in the near future. This is a very important decision and we expect to make that decision soon.
Now, before we move on to the Q&A portion of this call, I want to briefly address the 13D filing from [indiscernible] yesterday. We value the views of all our shareholders and take that feedback seriously. We are reviewing [indiscernible] proposals. And with that said, the purpose of today's call is to discuss our financial results for the fourth quarter of 2015.
I want to thank everybody on the call today. Thank our shareholders for your continuous support. And with that we're happy to move into the question and answer session.
[Operator Instructions] And our first question go to James Byrne with Citi. Please go ahead.
Hi, guys. In the management discussion section, you said that you consider the sale of assets to strengthen your liquidity position as required. What assets in particular would you consider divesting, for example you have a preference to divest a small interest in Antelope as opposed to some of your discovery. And are you actively facing price to better in price at the moment?
Dr. Michael Hession
Thank you, James. And that's a very coherent issue that we’re dealing within the company, so it's an excellent question. Thank you for bringing it up. Now, with all asset fails, it is a confidential process and could be limited in what I can say here. Now let me assure you, it's all about value and value that we can deliver to our shareholders. We are in a very lucky position here, James. We got interest being betrayed and approached from a number of counter parties for assets throughout our portfolio. So, we are doing at the moment, is we are understanding the process that people have gone through, understanding their valuation. And then, once we’ve understood that thoroughly we'll engage and decide which asset we may decide to sell or refuse our equity.
What I have to say is that is not necessarily a done deal. What I can say, we are encouraged by what's come along and we are progressing that progress over the next few weeks.
Okay. And the question about the [Basin room]?
Dr. Michael Hession
I can’t confirm that we have had a data room open.
Okay. Look, I know that you can't answer this question directly, but in terms of some of the offers that you might have received today, how would they compare to the Delta and multiples because -- sort of in the same ballpark, particularly for any office to Antelope?
Dr. Michael Hession
James, it's highly likely that a number of the counter parties involved in this process around this call. So, I don't think you expect me to actually answer that question. What I can assure is that it's a very thorough process, it's very methodical and we are working through it.
Okay. Ask about Bobcat and Raptor, so there are two three numbers a quite large but how big is the one phase to three phase spread considering the wells, process well testing, so perhaps a bit early to get so excited about those numbers yet?
Dr. Michael Hession
What I can tell you with respect to Bobcat and Raptor and what I will do is I'll actually ask somebody across to David Kirk. Now, Bobcat and Raptor, we have an independent verification of 6 Tcfe. I think what's very important is that includes a 150 million barrels of condensate. But you are absolutely right, it's early days of Bobcat and Raptor, but I wonder if David or in fact Spector to talk about the actual size of these structures and how big these possibly could be.
Yes, thank you Michael. The process that we went through obviously we had initial gravity inside mix and we've also had a single well on a structure. Now these are very large structures of the order of 50 to even 100 square kilometers of closure. So, with one well bore in such a large area, obviously there is a very large range of outcome. So, in answer to your question what is the sort of spread between the 1C and the 3C, there is at least 50% around the 2C number. So, particularly in the case of Raptor, the upside is very large and the downside is reasonably small. And what we need to do is keep working our side mix and determine how we will go forward on the price.
Thank you very much.
Dr. Michael Hession
I think the thing that we've been trying to communicate today, is two to three expiration wells have delivered discoveries. I think that particularly -- is for instance the area extend the Raptor. Raptor today, in terms of its area extent is bigger than Antelope. But we do need to do more work on it. But we have some very big structures out there, but it appears be full [indiscernible].
Great. Thanks very much, that's all from me.
Dr. Michael Hession
Thank you very much, James.
And we'll go to Neil Beveridge with Bernstein. Please go ahead.
Yes, thanks very much guys for the update, just a couple of questions. Firstly, on the updated resource estimate from GLJ, we got a one to 3C range of seven to 11 Tcf and a 2C number of 9 Tcf. Does that reflect all the appraisal data from losing campaign, including the well data from Antelope-5 and Antelope-6? And should we expect this estimate to be something similar to what you would put into the reserve certification process.
The second question is really around Antelope-7. I think David mentioned that you would see from the full test that that the field quite likely expands over Antelope-7 area. Does that 2C resource include what's likely to be in that part of the reservoir to the West and if not what sort of size are we talking about for that additional section on the Western part of the field?
Dr. Michael Hession
Well, thank you Neil and good evening to you. What I'll do is I'll just give an overview and then I'll pass across to David, we have to give you a bit more technical details because I know how much you enjoy the technical details now. Including, just look at the trends here. What we're seeing GLJ is an example is that resource is getting bigger. And we're actually seeing that from a number of estimates that resource is getting bigger. So, that gives us some comfort that we are in detail and will join.
Now, the GLJ results do not incorporate all of the Antelope-6 results because the GLJ was driven by December 31st, 2015. But what we'll do is I'll let David talk a little bit about what we've seen in the extended well test what is meant for Antelope-7 and generally what and how we look at this resource certification process.
David, can I pass across to you?
Yes, thank you Michael. Just to give you a little bit of more information on the GLJ numbers. Yes, as Michael says, that was at the end of December 2015, so it does not incorporate the recent Antelope-6 results or indeed the interference test conducted between five and one. I would say that GLJ like all resources certified and service people, they have a number of assumptions that they make and what their overall guided by is making sure that their models their views and things has to be honored and they were available. And GLJ's models and resource numbers would come from those models, do honor the data that they had at that time. So, that they have a view.
Now GLJ, interestingly, addressing your comment on the Western flank, GLJ's model do give us some credit to volumes on the West and other resource certifiers may not do, but GLJ do give credit to that. They have some confidence in that from the side mix that they have seen. And interestingly they also are one of the access is that have actually predicted they'll might be and thoroughly extensive throughout the reservoir. Our own internal work, we in fact didn't have done -- eastern part of the fields in our reference case. So, that was a nice surprise to us and but GLJ called up in correctly.
And in terms of the extended well test, that -- I know you were listening but that basically gives you a minimum connective volume to the well that is flowing and any wells connected through that well. So, it does not tell you how much what the upside is in terms of what other volume might be out there. It is purely what is available seen in the well test during the period of that test. I think it is interesting and I pointed that out and earlier that we did not see events of a Western finding fault during that test which lends credits to both GLJ's view and in fact InterOil’s view in terms of that Western fault and the good reservoir rock extending further West than has been thought off previously.
Does that answer your question, Neil?
Yes. No, I think that's very helpful. And just one quick follow-up on that. I think it was mentioned on the potentially high compensate volumes in Raptor over a 100 million barrels. Is there any thought to compensate recycling scheme, I think InterOil had looked to that in the past potentially fair, Antelope has had something that you could look out potentially for Raptor?
Dr. Michael Hession
A very interesting question here. But just on David's point, with respect to the intended well test. Let me tell you what excited the CEO. This connectivity issues significant because it looks like this is a relatively simple reservoir which can be drained by relatively few wells. That connectivity will translate to lower CapEx. We can see a scenario where this field may well be drilled and developed from what had. Now, as normal, you would have a reserve pad, but that's quite extraordinary and that's something what we're working through further.
So, that both got me really going when we talked about the expected well test. Something that saying that we didn't have great expectations for Antelope-6. We didn't predict the [dollar mine], we didn't predict the high vulnerability out there and the connectivity. So, that was something that leads me. Now, want to say the Raptor.
Say, would you want to talk about what we've been doing to understand that and what we might do since we've developed it?
Yes, sure. It's certainly very early days in terms of looking at highly world monetized Raptor, Bobcat and the Triceratops, either individually or collectively in a different whatever development schemes. But we have gone up a list of number of development options and content sized stripping is one of the options that we have on our list of developments through consider, and particularly for Raptor.
Thank you, David. Okay, that's great. Thanks guys.
We will go to line of Evan Calio with Morgan Stanley. Please go ahead.
Hi, good morning guys and congratulations on today's well results. But my first question Michael, is on Antelope-7. Again, I know that the JV will decide in the second quarter and your position is oscillating between supporting Antelope-7 to the potential material uplift, economic uplift versus getting paid in 2016. What is your recommendation today as one of three parties in JV on whether to proceed or recommend proceeding with Antelope-7 going into that JV meeting?
Dr. Michael Hession
Good morning, Evan. A very important question, and it's something that we are working through internally but let me step back. Since we last met and since I last met you, Antelope-6 has come along and it's done it again. It's a big pay order surprise on the upside. It did it in Antelope-4, it's done on Antelope-5, and now it's done Antelope-6. A very important thing, we have been confident that we had a two trying development from some time. Well, this dolomite, this fantastic connectivity has just increased our confidence with respect to a two trying development.
What they're doing now, I mean Antelope-6 is just finished and as of today like the absolutely clear, Antelope-6 is the last JV approved well. That's it. Now what we're faced with is should we do another. Things has come to the full, this well test has told us that we don’t see a barrier out towards the West. So what we need to do and the JV need to do is put the pieces of the puzzle that it literally just arrived on our desk together. But there is one thing and I think I've been absolutely consistent about, we will only agree to Antelope-7 and this is an object because as you say it requires unanimity, we will only agree to Antelope-7 if it delivers materials upside to our shareholders. That's the only lens that I am looking at it through.
But I'll go back to, today there is no Antelope-7. It will be our JV decision and we are working through that at the moment.
And what are you trying to say, does your position at least relate to analyzing this newly arrived data to understand how confident it maybe to derisking a larger number and there Antelope-7 not being necessary. I am just trying to understand what InterOil's trying to decide whether or not they would support it or what you are waiting or analyzing at this point?
Dr. Michael Hession
Yes, you've actually got it there. I mean there is two things here that we've taken about. It's the time and then the potential size of the price. Now this extended well test, what we need to understand is has this group or helped improve the position of the flank further out to the West. So, what we have to do is we have to understand has that reduced a need for Antelope-7, which is entirely possible, Evan.
Dr. Michael Hession
And I'll go back to it about we didn't expect, we didn't have great expectation from Antelope-6. Remember, Antelope-6 was off to the flank to the East. So, three, two and a half, three kilometers away and now what we need to do is we need to sit down and put the pieces of that portfolio together and see how that affects the potential size of the price for an Antelope-7 well. And I will look at that and I will look at the timing. And we will just literally towards the value equation and decide there in it.
Great that's helpful. And I think I have my follow-up to what you just stated is really a broader question I mean it's a more direct, I mean what do you think the resource estimate is at this point I know it's in the context of new data where you have hard GLJ estimate additional flow data at N5 and details from page ten of your slide was some more to the prior but even more convincing from the prior flow test Antelope-6 data. I guess just specifically why isn't the GLJ 350 estimate is your multi-year auditor supported by the flow test why isn't that your reference cases as you think about it today?
Dr. Michael Hession
That’s absolutely fair question Evan. As we go through this process we started and I started fairly conservatively what needs to be happening is that GLJ appears to be getting it right again and again for instance I mean David can confirm this, GLJ field [Medalma]
GLJs are the one that predicted and we didn't see it East.
Dr. Michael Hession
Yes, so GLJ were more correct than we were. So GLJ also do as David said see volume out towards the West and they agree likely Western extent to the field. So you got to wonder whether the end of this process GLJ may be right. But what we have done is we have tried to go through a very conservative process and we always said we believe there is enough gap between the two. Now I would also say as David commented earlier different auditors have different processes and the thing that will bring them together is the wealth of data we are data driven company and what to ensure here is now that the data we have got would drive it to the best result. But if you look at the predictive nature of the GLJ work they have said to get it right which is somewhat [indiscernible]
Maybe last if I could. Somewhat of a summary to understand this so and it relates to I think Neil's part of question. I mean the difference between GLJ 350 right and the steel gas decline is 3 Tcf of gas right and that the primary difference and correct me if I am wrong relates to that the western flank assessment right and so that's 1.2 billion under the payment mechanism with -- right there right but the difference between those two estimates so is that a fair assessment between those two as you think about Antelope seven and it sounds as though what you are saying some of the data you have today may have bridged that 3 Tcf difference without the need to drill Antelope seven where Antelope seven maybe I guess conclusive which is those two end points of the resource is that too simplistic or can you comment on that summary?
Dr. Michael Hession
I mean, the expensive nature of this mine has been a game changer for us but I will do I will actually pass across to David who has been working with this very closely.
Yes. You are correct as much as western volume is certainly significant part of the difference between GCA and GLJ. GCA has a very conservative view of where that western fault is which is not supported from these well test data which didn't see the fault and there are other differences though there is difference in terms of hiding up the structure and in terms of the gas water contact. We have some differences of the old days and continue to have, but as Michael said GLJ has been right in the number thing and certainly right in the [indiscernible] and again and GCA are more closely to the coral reef and not to the flanks. So, the key thing is what will for certain things all of the different way of doing it and we can't predict exactly what the outcomes going to be. So we just have to make sure we get as much as possible and present them with the data that they can make up for fair analysis.
Great. I appreciate thanks for the color guys.
[Operator Instructions] at this time we will go to Pavel Molchanov with Raymond James. Please go ahead.
Thanks for taking the question. When we look at the GLJ estimates for Elk Antelope and Triceratops on the one hand and the risk estimates for Bobcat and Raptor are they directly comparable in other words where they have done on a methodology that make some direct one to one comparisons against each other?
Dr. Michael Hession
I am just going to hand on across to David. David seems to be looking at.
They are both basically done on the same methodology the PRMS system so not again you know there is everything is interpretation I thought making sure your data is honored but they do have interpretation so you won’t necessarily say one [indiscernible] another.
Okay. And then clearly Antelope seven is still an option you have made that point clear by presumably later this year as both sides are ready to move into the certification process can you remind us which reserve engineering firms will be eligible to participate from your side and from Total side in handling the certification?
Dr. Michael Hession
First of all, with respect to the certification process this last -- opportunity remind people that I will say between four to six months after the appraisal finishes. Now, company that are on the list and it was jointly agreed list [indiscernible] so we had five potential orders that we can select and Total can select from that list, is that clear Pavel?
That I appreciate the list. I suppose though one company on that list that has previous participation in already doing an appraisal for this resource is of course Gaskin Klein, so are they suitable to do it with new information since they already have maybe some influence from their prior work?
Dr. Michael Hession
That's an excellent question and we spent a lot of time working through this list of who will be suitable. All loan auditors are internationally recognized very, very reputable organizations so as we stand today that whole list is viable. Now that doesn’t mean we won’t have a conversation with Total if we both decide one of them decides the maybe one of those parties is completed or may not be suitable but since as of today those five are eligible.
Alright. Appreciate guys.
Dr. Michael Hession
[Operator Instructions] And we will go to line of Jeff Fields with Raymond James. Please go ahead.
Good morning gentlemen. I appreciate to be on the call. Regard I believe that oil search and there that another resource estimate by the parties chosen between oil search and the other group I feel with their transaction may come out sooner that would not include any Antelope seven if Antelope seven is real. How relevant would that estimate be to what the resource estimate will be with the Total agreement?
Dr. Michael Hession
Thank you very much for that question Jeff. At the end of the day an independent, any independent estimate of the resources on Antelope will be relevant and will be important. I think you have got it exactly right. It depends on the data they have and this doesn't necessarily mean that they will get to the same answer. And in my understanding that process is already done. And as I’ve stated on this call, we’re still researching the extended well set data and we are still working through the results of Antelope six. So it may not be the same data and I am not privy to the methodology that they are using. So you probably need to act oil search and the fact companies as the -- to see how relevant it is so I have no doubt people will in the market will be very interested in that number.
Okay. Thank you very much.
Dr. Michael Hession
Thank you and I will turn it back to CEO Dr. Michael Hession for closing remarks.
Dr. Michael Hession
Well, thank you everybody. 2015 was amazing year for Interoil with momentum building LNG. Importantly the key takeaways are the PNG advantage as an LNG producer and Interoil’s advantage within PNG. It's a very positive approach with surprises particularly with [indiscernible] activity. GLJ petroleum increasing at year end estimates to Elk Antelope. Independent estimates for Raptor and Bobcat because combined volume of 6 Tcfe which includes 100 million barrels of condensate. The very significant interest in our assets for multiple strategic parties an indication I believe the bluechip nature of our assets. And finally, as Don said the strengthening of our financial position in 2016 through reduction in our anticipated spend and proposed increase in our liquidity. So with that I would like to close the call, I appreciate your attendance and look forward to update you again. Thank you and good night.
Thank you ladies and gentlemen. That does conclude your conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.
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