fids and off-takes re: png lng project

Below some comments copied from www.investorvillage.com:

Ray Jay this AM
Exploration and Production ____________________________________________
IOC Thoughts from the Road: Q&A on the Roadmap to FID
♦ Following InterOil's annual shareholder meeting last week, we hosted a series of investor
meetings with management, and in this brief we discuss our takeaways. To most directly
address what is currently the central focus of investors - the final investment decision (FID)
on InterOil's integrated resource development - we are taking a Q&A approach.

♦ Will FID be reached by year-end 2011? In our meetings, management unambiguously
stated that InterOil and its partners are on track to reach FID by the end of the year.
Barring some extraordinary turn of events, they are wholly comfortable with this timeline.
Furthermore, we believe they recognize that, after several delays in the recent past,
another delay this time would be exceedingly damaging for the stock. Also of note: earlier
in the week, senior executives from two of the three partners - Energy World and Flex LNG
- stated publicly that they are fully committed to the project. As a tangible sign of the
company's confidence in reaching FID, last week the board approved spending up to $100
million on long lead time hardware for the project's midstream infrastructure.
♦ Will it be one FID, or multiple FIDs? Given the technical alignment of the resource
development's three components - condensate stripping (with Mitsui), onshore LNG (with
Energy World), and floating LNG (with Flex LNG) - a single FID late in the year seems to be
the most likely outcome. However, management nudged open the door to staggering the
FIDs. Because the condensate plant is directly connected with LNG via a gas reinjection
system, there could be a joint FID with Mitsui/Energy World or (less likely) Mitsui/Flex,
followed by the other LNG partner's FID later in the year. We got a clear sense, though,
that management is not especially concerned with the precise sequencing of events. This is
where there is a contrast between management's focus on execution and the market's
fixation with near-term newsflow.
♦ What are the specific tasks that must be completed prior to FID? Broadly, the work can
be categorized into three concurrent tracks. First, there is a bureaucratic track. Having
already finished environmental studies and social mapping, InterOil is about to file
documents to acquire land for the onshore LNG plant. In addition, the company is working
on securing multiple licenses, including a Petroleum Development License (PDL), which by
law must be processed within four months of being filed. The company's close engagement
with the Department of Petroleum and Energy should enable a conclusion well in advance
of the four-month statutory period. Second, there is an operational track. Energy World
and Flex are in the process of performing site-specific FEED (front-end engineering and
design). Third, there is a financing track. Financing for the Flex plant is done. InterOil is
finalizing its financing agreement with Mitsui. And Energy World is in advanced stages of
financing discussions with its lenders.
♦ Will there be offtake agreements prior to FID? Offtake agreements are not a prerequisite
for reaching FID, but management seemed comfortable that one or more offtake
announcements will be made by year-end. Documentation is currently being exchanged
with prospective LNG buyers. Some of the buyers with which InterOil is in talks want only
offtake, while others want both offtake and ownership of a portion of the Elk/Antelope
resource. It's worth noting that LNG pricing is not at issue in these negotiations; InterOil is
using the exact same "slope" set by ExxonMobil (XOM/$76.78/Market Perform) for its PNG
LNG project. Slope refers to the LNG price as a percentage of the Japanese Crude Cocktail
oil benchmark, and Exxon's figure was 14.85%.