Botten said that the deal provides OSH with 90% of what the company was aiming at when it made it's own bid. But TO/ merger plans are currently stymied. Exxon’s bid for InterOil whose key asset is a 36.5 per cent stake in the large Elk-Antelope gas field, the source of gas for the proposed Papua LNG, project has been blocked in the Yukon courts. Exxon will have to pay even more cash fort InterOil if it wants to proceed. They already offered 5% more than Oil Search bid and Botten wouldn’t raise his offer and implied Exxon were paying top dollar. Exxon has its back to the wall, they are not saying they will pay even more, they say they will seek a new pathway and no new deal has been announced. That suits the PNG Govt that has said all along that they strongly prefer two LNG ventures not one ie an expanded Exxon's PNG LNG, and the greenfield Total-led Papua LNG venture. The reasons are obvious. Building an additional plant will create 10,000 new jobs in a country with massive unemployment. A greenfield project will provide competition where currently the PNG Cabinet is being roasted for allowing an uncompetitive gas monopoly. Two projects will provide more royalties to fuel the cash strapped economy and get angry land owners off their backs. Importantly for Horizon two plants will process more gas and utilize stranded LNG resources. Looking at the gas reserves needed for the combined project and the separate projects it is clear that far more gas reserves will be needed to feed both PNG LNG as well as the separate Papua LNG venture. Out of the blue when everyone thought that the TO of InterOil was a done deal, it's looking shaky and two separate LNG projects are back on the table. That has major implications for OSH but not all are negative. Economies of scale would be lost but PNG gas is already a world beater in COP and is perfectly situated in proximity to the highest demand growth area. More gas would be needed for two projects rather than one and OSH would benefit from tapping reserves that would not be needed in a combined project.
OSH Price at posting:
$7.40 Sentiment: Buy Disclosure: Held
