Ann: Project Restructure To Give Arrow LNG Produc, page-17

re: Ann: Project Restructure To Give Arrow LN... EL, I would have to agree. This deal does look much better when you scratch the surface and compare it to what it used to look like.

"Under the previous structure, the Fisherman's Landing project, expected to be the first of five liquefied natural gas projects to export by 2012, was arranged as a joint venture between LNG Ltd (40 per cent), Golar LNG (40 per cent) and Arrow (20 per cent)."

http://www.smh.com.au/business/arrow-in-deal-on-gladstone-gas-project-20100104-lq74.html

To me, the ann reads as though Golar will have the option to increase its stake, however, Arrow has increased its effective stake in the project by much more than the original 20%. They now own the TRAIN, as well as 49% in the infrastructure and controlling venture. The 51% controlling stake by LNG still gives them control, however, Arrow do have directors with LNG and also hold just under 8% of the company.

You could quite convincingly say now that Arrow has its paws wrapped around LNG project owning:
-100% of the LNG train
-49% of the infrastructure
-4% of the 51% LNG stake

This latest move is not surprising considering the capital commitments. Arrow may be best placed to execute, however they are still a light weight. to execute on almost $6B comittment over a proposed 3 year program, commencing in March 2010. What are Arrows options?
a. go into debt
b. raising
c. share the venture
d. get taken over

I think that Arrow could achieve it through one or a combination of all of the above. The move to acquire more of the project however could be seen as bullish towards a takeover as accepting (significant) more debt/dillution, would not necessarily be the preferred move while in developemental stages for a MAJOR project (unless of course you considered your partners as a liability and wished to derisk that). It is still a HOA, but sets the strategic direction nonetheless.

Why was the previous FID date delayed? Was it Arrow, Golar or LNG who pushed it out?

Something that I had not seen before was the supply exclusively from the Surat; or more that only the Surat was mentioned. This implies the significant Bowen CSG reserves are very open to exploitation.


LNG Summary:
LNG has a MC of $259m
SOI are 212m
Golar holds 6.33%
Arrow holds ~7.5%

Cheers,
SF