InterOil Sells Stake in PNG Gas Assets to Total

InterOil Corporation has agreed to sell to Total 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.

According to a company statement, 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 on Thursday in Port Moresby.

“The transaction price depends on appraisal and certification of Elk-Antelope, with illustrative payments of approximately $1.5 billion – $3.6 billion, for a range of 5.4 trillion to 9.0 trillion cubic feet of hydrocarbon gas equivalent (tcfe),” the company said.

The agreement with Total provides for fixed and variable resource-based payments:

• Fixed payments to InterOil include $613 million on transaction completion, which is expected in Q1 2014; $112 million on a final investment decision for a new LNG plant; and $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 $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.

The French company 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.

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