This press release caught my eye today-
May 22 (Bloomberg) -- Exxon Mobil Corp. and its partners in an $11 billion liquefied natural gas project in Papua New Guinea decided to start initial engineering work, increasing the likelihood the plant will get built.
The decision follows the signing of an agreement on fiscal terms with the government, Exxon said today in an e-mailed statement. The engineering and design work, known as FEED, will take about 16 months and the venture aims to commit to building the plant in late 2009, said Oil Search Ltd., a project partner.
I racked my mind for two seconds who was that other company mucking around in PNG? Ay yes Boon Picken's investment in Interoil and that supposedly huge find that drove this stock to the moon and right back. What happened. Well there are a ton of shorts against this name and there is some good reason. There are some shady types who supply financing and a confusing ownership structure with lots of limited partners and such. Our very own high flying brokerage houses are in on this one and it remains to be seen weather bankers are good oil men!
Still the news today and the knowledge that IOC has been in talks with the gov down there all just kind of made me buy today. Could Exxon buy Interoil? Possibly could Interoil start finally making some money off their darn refinery down there? Will exports from Australia ruin all of this?- lots of questions.
Now can PNG handle two new refineries? It sounds crazy but Trindad has shown that if you build the right infrastructure you can save the whole country.
This I pulled as well- Liquid Niugini is not a hot new rock band! It's our Interoil in one of it's sub divisions.
Liquid Niugini Gas CEO Dr Jack Hamilton told PNGIndustryNews.net that discussions had picked up considerably between his company and the PNG Government over the last week.
He said he looked forward to a gas agreement for Liquid Niugini Gas in the near future.
The PNG LNG project ownership consists of ExxonMobil at 41.6%, Oil Search at 34.1%, Santos 17.7%, AGL Energy 3.6% and Nippon Oil 1.8%. Landowner interests hold the remaining 1.2%, with Oil Search expecting sales to go to Asian markets in late 2013 or early 2014.
Liquid Niugini aims to build an LNG plant next to InterOilâs refinery in Port Moresby and is backed by InterOil, Merrill Lynch and Clarion Finanz AG affiliate Pacific LNG Operations.
Once Liquid Niugini obtains government approval, production is expected to start in 2012 using gas sourced from the Elk-Antelope structure.
Well you can see we don't have quite the gusto finacing of the others but nor are we without cash. In fact the last earnings report showed a lot of good financing activity.
The biggest bull all along has been raymond James.
The company's big find in 2006 was called Elk 1 and it created a lot of hoopla and just as many disbelievers I always thought the bear argument was weak that they drilled near a fault line and got better results due to pressure but one cannot deny there has been no massive well doing anything at this point. Still a recent announcement of a new and perhaps even larger find just adds more logs to the fire and shorts on the case. Now we have " Antelope "
According to Wayne Andrews, an analyst from Raymond James.
Elk is a sliver of limestone thrust upon the much larger Antelope structure.
So it's entirely possible that there is a whole lot more gas at Antelope then at Elk itself.
However promising this looks, no DST test has been performed yet; this might provide an extremely good entry point, before they do.....
here's some drilling notes from an article I found on Seekingalpha-
InterOilâs Elk prospect is currently estimated to contain between 3.5 and 18.8 Tcf of natural gas. Theyâve drilled two wells so far; Elk1 was the discovery well and Elk2 the first appraisal well.
While the first (Elk1) was a runaway success (measuring pressures of 100MMcf+ through a 5 inch tube), the second well (Elk2) was, somewhat unfairly, seen as a failure by the markets.
That failure becomes relative if you consider that the resource estimate actually went up, and T. Boone Pickens (who happens to hold a masters degree in geology), both privately and through his fund, took a 10% stake. Wayne Andrews, analyst at Raymond James, argued that the positives outweighed the negatives and upped his target to $65..
A DST test showed that the well flowed 40.000 barrels of (highly gas saturated) water (the limestone is a lot deeper at Elk2 compared to Elk1, so it was below the water contact). Hardly the dry hole the shorts claimed it was. More importantly, that flow indicated the all important good porosity and permeability, hence the increase in the resource estimation (the limestone containing the gas is also thicker than previously estimated) and Booneâs buying.
As a side note, we have to say that InterOilâs CEO Mulacek argued that Elk2 showed that there is enough gas for a two train LNG facility, which they are currently in the advanced state of planning (together with Merrill Lynch and Clarion Finanz) through a vehicle called Liquid Niugini.
Elk4/Antelope
Now, in a brief PR on Thursday, the company announced the following:
The Elk-4 well has successfully penetrated the Antelope structure, a new discovery which will significantly augment the gas found at the Elk-1 discovery well. Drilling operations experienced a gas kick and a flow of gas and gas liquids to surface which was circulated and flared. The well is now being prepared to drill deeper under pressure followed by comprehensive evaluation.
"This well confirms the presence of hydrocarbons in the Antelope structure," said Mr. Phil Mulacek, CEO and Chairman of InterOil. "We are very excited about this early result and we look forward to drilling ahead to establish the commerciality of this discovery."
It might be somewhat confusing that they are talking about Antelope while the well is called Elk4, but one has to realize that itâs a connecting field. No DST test was performed yet, but having to flare gas against heavy mud pressure sure looks promising.
At their initial big discovery well, Elk1, a similar event took place (in fact, the gas pressure was so high that they almost blew the well, and CEO Mulacek likened the fight to control it to âstemming the tide of the Mississippiâ). The DST test to prove Elk1 was performed considerably later.
Performing the DST test at Elk4 will take some time (although not as much as at Elk1, where they had to fight to stabilize the well), giving investors a unique opportunity as the price reaction to the news is still somewhat muted.
If a DST test proves what InterOil announced Friday, then resource estimates will go up, as Antelope now turns out to be a second (but connected) field containing natural gas.
And it doesnât even have to stop there. There could also be oil. There have been indications of oil before, and every oilfield in PNG has natural gas, so they seem to come as a package deal. Both Elk1 and now Elk4 contain liquids (which, if in sufficient quantities, can also be used in InterOilâs refinery, providing almost immediate cashflow).
A popular argument used by the shorts is that 'no matter how much gas, itâs stranded', strikes us as particularly nonsensical. The demand (and price) for LNG is exploding, especially in Asia, where it trades at a very significant premium, and big producer Indonesia is diverting gas away from export towards domestic use.
The odds have improved that there is more than enough gas at Elk/Antelope to supply such an LNG facility. There are plenty of Asian parties interested in financing it. And InterOil is in talks with quite a few already.
As promising as it looks today, we need a DST test to nail it.
>>> What's also interesting (and scary) is that Merryl Lynch who certainly needs money is 1/3 owner of Liquid Niugini, and they have had a loan out at 4% and extended it a few times and looks to me like they want to stay involved even if Merryl no longer exists!.... And of course the shorts there are a lot of them almost half the float. this is the sort of investment you are asking a lot from either total 100% double or look out below. Who's right here?
It may seem crazy to be long DUG (short oil) and turn around and buy IOC today. Or it may be a very interesting hedge. You decide. ~ stoney
May 22 (Bloomberg) -- Exxon Mobil Corp. and its partners in an $11 billion liquefied natural gas project in Papua New Guinea decided to start initial engineering work, increasing the likelihood the plant will get built.
The decision follows the signing of an agreement on fiscal terms with the government, Exxon said today in an e-mailed statement. The engineering and design work, known as FEED, will take about 16 months and the venture aims to commit to building the plant in late 2009, said Oil Search Ltd., a project partner.
I racked my mind for two seconds who was that other company mucking around in PNG? Ay yes Boon Picken's investment in Interoil and that supposedly huge find that drove this stock to the moon and right back. What happened. Well there are a ton of shorts against this name and there is some good reason. There are some shady types who supply financing and a confusing ownership structure with lots of limited partners and such. Our very own high flying brokerage houses are in on this one and it remains to be seen weather bankers are good oil men!
Still the news today and the knowledge that IOC has been in talks with the gov down there all just kind of made me buy today. Could Exxon buy Interoil? Possibly could Interoil start finally making some money off their darn refinery down there? Will exports from Australia ruin all of this?- lots of questions.
Now can PNG handle two new refineries? It sounds crazy but Trindad has shown that if you build the right infrastructure you can save the whole country.
This I pulled as well- Liquid Niugini is not a hot new rock band! It's our Interoil in one of it's sub divisions.
Liquid Niugini Gas CEO Dr Jack Hamilton told PNGIndustryNews.net that discussions had picked up considerably between his company and the PNG Government over the last week.
He said he looked forward to a gas agreement for Liquid Niugini Gas in the near future.
The PNG LNG project ownership consists of ExxonMobil at 41.6%, Oil Search at 34.1%, Santos 17.7%, AGL Energy 3.6% and Nippon Oil 1.8%. Landowner interests hold the remaining 1.2%, with Oil Search expecting sales to go to Asian markets in late 2013 or early 2014.
Liquid Niugini aims to build an LNG plant next to InterOilâs refinery in Port Moresby and is backed by InterOil, Merrill Lynch and Clarion Finanz AG affiliate Pacific LNG Operations.
Once Liquid Niugini obtains government approval, production is expected to start in 2012 using gas sourced from the Elk-Antelope structure.
Well you can see we don't have quite the gusto finacing of the others but nor are we without cash. In fact the last earnings report showed a lot of good financing activity.
The biggest bull all along has been raymond James.
The company's big find in 2006 was called Elk 1 and it created a lot of hoopla and just as many disbelievers I always thought the bear argument was weak that they drilled near a fault line and got better results due to pressure but one cannot deny there has been no massive well doing anything at this point. Still a recent announcement of a new and perhaps even larger find just adds more logs to the fire and shorts on the case. Now we have " Antelope "
According to Wayne Andrews, an analyst from Raymond James.
Elk is a sliver of limestone thrust upon the much larger Antelope structure.
So it's entirely possible that there is a whole lot more gas at Antelope then at Elk itself.
However promising this looks, no DST test has been performed yet; this might provide an extremely good entry point, before they do.....
here's some drilling notes from an article I found on Seekingalpha-
InterOilâs Elk prospect is currently estimated to contain between 3.5 and 18.8 Tcf of natural gas. Theyâve drilled two wells so far; Elk1 was the discovery well and Elk2 the first appraisal well.
While the first (Elk1) was a runaway success (measuring pressures of 100MMcf+ through a 5 inch tube), the second well (Elk2) was, somewhat unfairly, seen as a failure by the markets.
That failure becomes relative if you consider that the resource estimate actually went up, and T. Boone Pickens (who happens to hold a masters degree in geology), both privately and through his fund, took a 10% stake. Wayne Andrews, analyst at Raymond James, argued that the positives outweighed the negatives and upped his target to $65..
A DST test showed that the well flowed 40.000 barrels of (highly gas saturated) water (the limestone is a lot deeper at Elk2 compared to Elk1, so it was below the water contact). Hardly the dry hole the shorts claimed it was. More importantly, that flow indicated the all important good porosity and permeability, hence the increase in the resource estimation (the limestone containing the gas is also thicker than previously estimated) and Booneâs buying.
As a side note, we have to say that InterOilâs CEO Mulacek argued that Elk2 showed that there is enough gas for a two train LNG facility, which they are currently in the advanced state of planning (together with Merrill Lynch and Clarion Finanz) through a vehicle called Liquid Niugini.
Elk4/Antelope
Now, in a brief PR on Thursday, the company announced the following:
The Elk-4 well has successfully penetrated the Antelope structure, a new discovery which will significantly augment the gas found at the Elk-1 discovery well. Drilling operations experienced a gas kick and a flow of gas and gas liquids to surface which was circulated and flared. The well is now being prepared to drill deeper under pressure followed by comprehensive evaluation.
"This well confirms the presence of hydrocarbons in the Antelope structure," said Mr. Phil Mulacek, CEO and Chairman of InterOil. "We are very excited about this early result and we look forward to drilling ahead to establish the commerciality of this discovery."
It might be somewhat confusing that they are talking about Antelope while the well is called Elk4, but one has to realize that itâs a connecting field. No DST test was performed yet, but having to flare gas against heavy mud pressure sure looks promising.
At their initial big discovery well, Elk1, a similar event took place (in fact, the gas pressure was so high that they almost blew the well, and CEO Mulacek likened the fight to control it to âstemming the tide of the Mississippiâ). The DST test to prove Elk1 was performed considerably later.
Performing the DST test at Elk4 will take some time (although not as much as at Elk1, where they had to fight to stabilize the well), giving investors a unique opportunity as the price reaction to the news is still somewhat muted.
If a DST test proves what InterOil announced Friday, then resource estimates will go up, as Antelope now turns out to be a second (but connected) field containing natural gas.
And it doesnât even have to stop there. There could also be oil. There have been indications of oil before, and every oilfield in PNG has natural gas, so they seem to come as a package deal. Both Elk1 and now Elk4 contain liquids (which, if in sufficient quantities, can also be used in InterOilâs refinery, providing almost immediate cashflow).
A popular argument used by the shorts is that 'no matter how much gas, itâs stranded', strikes us as particularly nonsensical. The demand (and price) for LNG is exploding, especially in Asia, where it trades at a very significant premium, and big producer Indonesia is diverting gas away from export towards domestic use.
The odds have improved that there is more than enough gas at Elk/Antelope to supply such an LNG facility. There are plenty of Asian parties interested in financing it. And InterOil is in talks with quite a few already.
As promising as it looks today, we need a DST test to nail it.
>>> What's also interesting (and scary) is that Merryl Lynch who certainly needs money is 1/3 owner of Liquid Niugini, and they have had a loan out at 4% and extended it a few times and looks to me like they want to stay involved even if Merryl no longer exists!.... And of course the shorts there are a lot of them almost half the float. this is the sort of investment you are asking a lot from either total 100% double or look out below. Who's right here?
It may seem crazy to be long DUG (short oil) and turn around and buy IOC today. Or it may be a very interesting hedge. You decide. ~ stoney
Sweet!