InterOil to Sell Total 61.3% Interest in Petroleum Retention License 15 for $1.5B-$3.6B
InterOil Corporation (NYSE: IOC) has agreed to sell to Total S.A. (NYSE: TOT) a gross 61.3% interest in Petroleum Retention License 15 ("PRL15") which contains the Elk-Antelope gas fields in the Gulf Province of Papua New Guinea , and has also granted Total an exclusive right to negotiate a farm-in to all its exploration licenses in Papua New Guinea .
Agreements covering the sale and purchase of the PRL 15 interests, proposed liquefied natural gas ("LNG") project, and the exploration farm-in rights, were signed today in Port Moresby by InterOil's chief executive Dr. Michael Hession and Total Exploration & Production Senior Vice President Asia Pacific, Jean-Marie Guillermou.
The transaction price depends on appraisal and certification of Elk-Antelope, with illustrative payments of approximately US$1.5 billion - US$3.6 billion , *for a range of 5.4 trillion to 9.0 trillion cubic feet of hydrocarbon gas equivalent ("tcfe").
The agreement with Total provides for fixed and variable resource-based payments:
Fixed payments to InterOil include US$613 million on transaction completion, which is expected in Q1 2014; US$112 million on a final investment decision for a new LNG plant; and US$100 million at first LNG cargo from the proposed LNG facility. In addition to these fixed amounts, variable payments for amounts in excess of 3.5 Tcfe for the gas resource will depend on certification by two independent certifiers following up to three appraisal wells to be drilled in PRL15. In addition, Total has agreed to make a payment of US$100 million per tcfe for volumes over one tcfe for additional resources discovered in PRL15 from one exploration well. Any payment would be made at first gas from the proposed Elk-Antelope LNG facility.
Total will carry the cost of the drilling for the appraisal well program. The program and certification of Elk-Antelope is expected to be completed in 2015.
Total will lead construction of and operate the proposed integrated LNG project, a final investment decision on which will follow reserves certification, basis of design and front-end engineering and design.
Total also has an option to take an interest in all of InterOil's exploration leases in Papua New Guinea (PPLs 236, 237 and 238), which InterOil will continue to operate.
Total and InterOil have also agreed to explore other business opportunities both in Papua New Guinea and elsewhere in the Asia Pacific region.
Today's agreement follows an extensive international competitive bidding and evaluation process for development of InterOil's interests in Papua New Guinea .
Dr. Hession said today's transformational, company-making transaction would significantly benefit InterOil shareholders and the Papua New Guinea people.
"It is satisfying that Total, one of the world's largest international oil and gas companies, shares our faith in developing Elk-Antelope, a world-class hydrocarbon resource and one of the largest discoveries in Asia in the past 20 years," Dr. Hession said.
"Total is a world-class operator and will bring experience and expertise to a development that will diversify Papua New Guinea's hydrocarbon sector.
"InterOil, with more than 1,000 employees, is already a significant contributor to Papua New Guinea's economy and we remain confident that this deal will lead to continued investment, increased Government revenue and job creation, particularly in the Gulf Province.
"We will work alongside Total to help develop further expertise among Papua New Guineans in the country's oil and gas industry.
"We will also work with the Papua New Guinea Government to develop proposals for setting aside gas for generation of affordable electricity throughout Papua New Guinea .
"This is a great day for InterOil's investors, Papua New Guinea , and the people who work for us."
Dr. Hession added that the transaction was a key to meeting the company's priority objectives of maximising shareholder value, monetising Elk-Antelope, progressing development of an integrated LNG project, strengthening its financial position, and continuing its extensive exploration program.
Funds from the transaction will be applied to retiring debt, exploring and appraising activities and to funding InterOil's share of the Elk-Antelope development.
The Chairman of InterOil, Dr. Gaylen Byker , said today's transaction was a landmark for investors, who had stuck by the company since its formation in 1997.
"This is a significant event in the company's history, and we look forward to growing this company along with Total for the benefit of our shareholders and for Papua New Guinea ."
The transaction is expected to complete in Q1 2014.
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