Unfiltered Notes IOC 1Q2010 Earnings CC | IOC Message Board Posts


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Msg  5032 of 13357  at  5/13/2010 9:37:11 AM  by

JBWIN


Unfiltered Notes IOC 1Q2010 Earnings CC

  • Anesti D., VP IR
  • Welcome to 1Q2010 earnings CC
  • Safe harbor
  • PM, CEO, Bill Jaspar, Pres and COO, Colin CFO, Wayne Hamel, E&P, Wayne Andrews VP, Corp
  • PM
  • Quick review of accomplishments in 1Q2010
  • Deliver on commitments to del value to S/H
  • Most signif accomplishment, GLC estimates, best estimate from 3.8 TCFe to 9.1
  • Approx 5.3 TCFe incr at less than 0.02 per, added certified BOEs, record organic growth
  • Applied modern explo techn
  • Build on world scale resource
  • Proud of accomplishment
  • Now monetize h/c asset, off to great start
  • Compl of condensate agreement, define FEED with Mitsui, Triple A firm in Japan
  • Competitive bidding process re LNG partner
  • Not provide details, but provide steps, to be sel re LNG
  • Bidding process 25-30% of ELK/ANT
  • Conforming bid, interest in LNG plant and off-take
  • Following intial bids, talk to 1 or more bidders
  • Take several months to get to definitive
  • Confident complete by YE2010
  • Mult objs, believe superior economics vs other projects in region, 10-15 cents per MCF, adv over other
  • On-share and near caost
  • Brown field, use roads, govt lands
  • Proven mgt, major addition of Henry Alford, world class experience in under budget on time LNG, ex-Marathon
  • Known commodity, respect w/LNG contractors, exp w/Marathon, Mitsui, Marubeni, well respected
  • Condesnate facility w/Mitsui, build cash flow for condensate facility
  • PNG stable regime, near major LNG mkts, considerably derisked
  • Exxon paved way re discounts
  • LNG off take interest, incr signif since Exxon deal closed
  • Almost 4m acres in carbonate play, only beg of exploration
  • Thesse adv not the same for other nearby projects
  • Not overlooked by JV partners, add reall barrels to their reserves, stable LT supply at competitive prices
  • Removed risk re 4 cash flow
  • Strengthn overall value
  • B/S strong, op bus segments profitable, talented, experienced mgt
  • Colin, CFO
  • IOC 1Q2010 continued improvement, demo path to succ
  • 11% gearing vs 36% in 1Q2009
  • Current ratio, 1.7x 31Mar2010, 1.5x in 1Q2009
  • Quick ratio 1.1x vs 0.9x
  • Total assets incr 22%, 123M , incr book value of O&G props re resource estimates
  • Recognize tax losses in future periods
  • Total liabilities decr 29%
  • Converted remaining part of 95M debentures,, buyback 4.8% of IPI interest in 2009
  • Opp segments, midstream, downstream 3.9M, upstream and mistream liquefaction offsetting 7M loss, net 3.1M loss, signif value added to investment
  • Net loss 3.1M, decr 5.9m
  • EBITDA 4.9M, reduction of 6M
  • Key movements, 5.7M decr in GM, volatility of Tapis, price diverged from benchmarks, lower diesel margins, 2.2M lower derivative gains, decrs # derivative, 2.3M incr in rig and maint, legal
  • 2.8M decr in int exp re conv debenture, 2.5M incr in income expense re downstream profits
  • 3.3M decr in f/x losses
  • Lower rates in f/x conversion
  • Fluctuate signif based on other PNG players, no opp for hedging
  • Profit forecast much improved margins in 2Q2010
  • As of 31Mar2010 cash, eq, restricted 75.8M, BNP Paribas restricted
  • 41.5M unrestricted cash in bank, rest restricted
  • 47.5M revolving, Bank of South Pacific, Westpac
  • 151.1M availability
  • Restricted cash protects op bus
  • Access to 186.2m robust
  • In disc re LT fin
  • Book gearing 11%, signif off b/s re ELK/ANT, borrowing prudent way to access capital
  • Not contemplating issuing equity
  • Unencumbered ELK/ANT, not fully reflected in our share price
  • Est credit line, low gearing vs underlying value of assets, accel dev
  • Realize early condensate FID, sustainable cash flows
  • Select and transact with strat partner(s) for LNG and growth accel, when reached add value to all stakeholders
  • Advance monetization of resoures is next step
  • Trust comments clearly articulate
  • Bill Jaspar, Pres
  • In 1Q1010, refinery GM 10.6M, EBITA 4.4M, remarkable in tough env
  • Result lower than 1Q2009, lower IPP premiums and absence of hedging gains from last yr
  • Naptha crack spreads pos in 1Q2010, impr pricing for exports
  • Impr term premium for naptha, and LSR sales at record levels
  • Refinery run rate 19.6K barrels per day, 3.x% higher
  • Refinery sales 18.9K per day, 11.4K domestic, balance to export prod, naptha, LSR exports
  • Dom demand string, expect downstream growth
  • 7.5% incr dom growth 144 liters
  • Gen 14.5M EBITDA
  • Excited to see growth, cont in 2010, more mining and explor in PNG
  • Signed deals re 26M with PNG Power and Light, when goes online in 3Q2010
  • Nicel mine signed for 30m liters, construct this yr and then in production late 2011
  • Jan2010, received second charter vessel
  • Switched from high sulfur fuel to much lower LSWR prodat refinery
  • 1st ship in PNG, and in line w/region’s cleaner fuel initiatives
  • Tremendous flex to del to PNG and nearby islands
  • For safe system of work, believe all bus where safety and health of all people assured, paramount
  • To date 3 bus units and corp offices, 7.8M man hors w/o lost time injury
  • Considering drilling in jungle env, people transported by helicopter, is remarkable, resp safety culture
  • PM
  • Special thanks for all hard working people, work diligently, safely
  • Wayne Hamel, GM Exploration
  • Cover key op areas in E&P
  • Reiterate, this qtr, another example of travck record of succ
  • Certied resource 9.1 TCFe, phenomenal incr, aggr appraisal program and succ w/drill bit
  • Said reach horiz at ELK-2
  • Op benchmarks set and achieved
  • Start w/Ant-2 horiz, target total vertical depth drill horiz, cement plug, drill 279 vertical feet, some mechanical diffs, dealt with them to reach goal
  • Worked thru diff, build to 90 degrees done
  • Liber to TD, 5.5 inch liner, not done oftem through small
  • Example of diff techn achievement to drill and evaluate
  • Forward plan, complete log and test
  • Test flow caoacity at this level, valid recovery ylds, and
  • All val info to , define final condensate stripping plan
  • Seismic over Alntelope finished, analyzed
  • Acq techniques better and better, understand quality of reservoir away from wells
  • Update geologic model, dev dynamic model, how massive reservoir behave during production
  • Sub-surface evaluation lead to FID
  • Documents to start w/Mitsu, proposed condensate facility prior to LNG processing
  • Drive construction, engineering
  • All well, etc. will also be used for LNG
  • FID target late 2010, production late 2012
  • Acq new drilling rig, buolt by Parker, packaging in Australia, make some mods at Port Moresby, then put to use
  • Exploration around ELK/ANT, 2 rigs allow to dev ANT, top priority and cont expl plans, greatest growth impact for us, PNG, S/H
  • Exploit potential resources
  • Any addit discoveries, likely very fast t mkt, due to I/S building
  • Drive tdown already low FID
  • Bring in C/F early, dual E&P
  • All op activities foundation for monetizing resources, del strat, greater value to all stakeholders
  • PM
  • In summary, IOC never in better fin pos or resources/assets
  • Record 2009 fin perf, string b/s, soild rel w/partners, PNG and Mitsui
  • Certified 9.1 TCFe, low FID cost, most advantaged
  • Realistic execution plan
  • In closing, have what takes to achieve success
  • Q&A
  • Q1: Brian Tong, MS
  • Seismic chute, 2nd rig 4Q2010, how many wells drill on ANT structure, what miught learn, impact on resources, seismic?
  • A1: Stated last qtr, not put new rig and have it crimp cash position. Running that to make sure healthy and strong, make sure not compromise negot. Accel growth plans, est credit line, active sell down process progressing. Lead to accel re explo and dev. Picked up really good reef indication. Reefal dome betw ELK and ANT, lot of excitement. Couple of wks away from final processing. 2 locations built, now looking at 2 more, based on recent seismic, seen build up for reef capacity. Drilling not driving factor. Wells so prolific, not req for lots of wells. Stay ahead w/drilling. Fully del gas for condensate. In field, working on new structures. Tail of programs, looks like 3 new reefal indications, quite exciting.
  • Q2: Have ELK3 and ELK4 locations?
  • A2: Yes, reefal tide just discovered. Found out in last 10 days. Doig adv proc and migration. Another few wks away, do full eval, interpret internally and associated contractors, then decide which location to go to.
  • Q3: ANT3 high on structure, fourth on flank?
  • A3: New structural. Figure out where it goes. Adds more clear vol, Impact on resource overall #. Some exciting things,don’t want to jump gun.
  • Q4: On drilling process, resource impact, figure into negot re equity selldown or indep?
  • A4: Like 2 part pos, as incr, is compensation. Some may want capped pos, some may want upside. Detailed diosc having, over next couple of months.
  • Q5: FEED process, hope to complete late 2010. Any intermediate steps, data points or not hear much until late 2009?
  • A5: Working thru data, iterative things may affect resource. It is process getting info in place, subsurface info to support FEED. Jointly w/Mitsui, fully fund prelim work. Jointly decision on FID, progress condensate stripping and build facilities. Subsurface by Wayne’s team, helps re disgn of facility. Henry and his team work on EPC, bid contracts and scoping re condensate. In Korea, Joapan, in region, with interested parties, get thise wrapped up in next few weeks, could incr w/horizontal, over bal of the month. Can talk 1 or 2 LNG trains, same w/stripping, # of plants, look at horiz, help us and Mitsui def how many condensate stripping plants we build.
  • Q6: Curtis, Natixis
  • More info on bid process, # of conforming bids, # people at table?
  • A6: No and we don’t, not appr. Someone wants to be closest to home plate, not helpful to S/H. JV partners have experience, work w/fin folks, we are busy.
  • Q7: Assume several months based on your comments and then package, is that reasonable expectation?
  • A7: Our partner waited until completed FID. How disclose not yet det. We are very confident, one of most advantage asset, on door setp of Asia.  Clearly negot underway, under conf agreements, not much more we can disclose. When all parties agree, happy to make announcement.
  • Q8: Re Mitsui, post-FID< able to announce cash payments or expect JV?
  • A8: Abolutely. Have cash AFE, calls, will be able to update, as Henry stated, Mitsu int in LT partnership. They are major partners in EG, Thailand. With their assistance and approval we can make statements.
  • Q9: Pavel, RJ
  • Some color on prelim work w/Mitsui. What specific tasks done by FID?
  • A9: Clearly working w/them on strategy for partnering. Already gone out for expression of interest, ongoing. Cont to have engineering going on, formulated Mitsui partnership, do jointly, once know how formulate partnering strat, move to FEED/EPC. As Colin said, fairly standard. Working w.Mitsui re fin.
  • Q10: New vessel, for export opp? What is margin profile outside PNG?
  • A10: Done 2 exports already using that vessel. Look for South Pacific opps. Equal to dom sales. Equal parirty price, similar pricing, all about import parity. If doing del to northern part of island, economies of scale re freight. Some have abusive import costs. Until ctl of freight destinay, couldn’t start, now can.
  • Q11: Disclose where export shipments went?
  • A11: They went to Naru.
  • Q12: Sal, Monte Crispi
  • Horizontal started again?
  • A12: It was cased, 2 stage cement process. On verge of drilling out, formation test, casing in place, cleaning out show of cement, then commence drilling, Riight at threshold of getting horiz leg started.
  • Q13: 6-8 window?
  • A13: Not sure rate of penetration. Hoping couple weeks to drill, loggingm then DST.
  • Q14: Tell whether oil in produceable and liquids?
  • A14: We have taking out probability of super heavy, but not material. Upside is what does condensate bring. Henry brought lots of value re Marathon exp.
  • Q15: Henry’s CC very informative, assume you agree?
  • A15: Yes, he has wealth of exp. 1 of 3 people dev LNG on time under budget 10% below and 7m early.
  • Q16: His projections more optimistic than IOC talks about.
  • A16: He has better track record. He has a lot of respect within industry, at levels never achievable for us as small newcomer.
  • Q17: New contracts for product on island. Minimum 10% incr in refinery volumes, correct?
  • A17: That is correct, really close to that. That is why tough 1Q2010. Had to import diesel to build inventory, now set for that growth.
  • Q18: Correct no work done on Exxon project yet?
  • A18: We see some activity. Ramp up next year or two.
  • Q19: Combo of Exxon and IOC, some signif growth going thru refinery.
  • A19: You bet, burn more diesel.
  • Q20: Building roads, infrastructure for condensate stripping, get reimb by Mitsui?
  • A20: Yes, that is in capital call. Currently, IOC owns 100% of upstream. Once partner and govt come in, have to reimb re costs expended. Cash influx from Mitsui in 2Q2010. We do work, intiate, then get reimbursed.
  • Q21: Expanded seismic. Done much on unexplored structures?
  • A21: Put tails on lines that picked up reefal areas, well received by geologic team. Doing on others like Wolverine, lines been cut, under drilling and recording in May and Jun. Very excited about results from ELK/ANT, found reefal dome, so wide, tighter grid provided some promise.
  • Q22: Chafing at bit, ready to go.
  • A22: Yes
  • Q23: Jeffrey, ? Capital
  • Re c/f, 14m proceeds re sale of expl assets?
  • A23: Related to indir particp waivers. IPI agreement, we acct 100% on IOC books, Reason, conversion feature remains w/IPI investor, once IPI investors waives feature, then only acct for IOC’s int by proportion.
  • Q24: Petromin gave 11M advance payment, indicates intention to buy in?
  • A24: Yes. We have agreement re their investment in upstream. GOvt 20.5%, they are funding govt portion. Once in place, they will fnd certain expenses.
  • PM
  • Thank everybody. Hope everyone understand call and look forward to next qtr.


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