Interoil partners with Total for LNG in PNG

[ghrcap]

Should anyone here be interested in a play on the LNG market for Southeast Asia where commodity sales prices are ~$15 Mcfe, IOC announced a deal yesterday with TOT and saw its stock body slammed (off 37%) over confusion on the deal terms, contradictions in the way each party described the terms in their press releases, time value discount to IOC receiving funds and a large short interest who do not believe IOC has 9.9 Tcfe of NG in the ground as GLJ, reservoir engineer for IOC, says in its Best Case certification.

If the 9.9 is correct, IOC will receive a total of US ~$4.1B in progressive payments through 2016, retain ~30% interest in the LNG plant to be built and operated by TOT which may enjoy 20 years of forward sales or likely more as IOC proves up additional gas resource. Additionally, IOC owns the only oil refinery in PNG, and associated gas stations. Following the collapse in the price of the stock Friday, IOC's market cap is $2.7B.

Morgan Stanley, Westlake Securities and Raymond James are the only firms maintaining coverage with the latter reiterating Friday their $100 target and MS and WS yet to be heard from.

[dan_s]

IOC is a very interesting company. I went to visit them three years ago when it was extremely speculative (to say the least). The deal with Total is great news for little IOC.

I saw a report a couple weeks ago saying that Asia market for LNG may go up to over $20/mcf in 2014.