From Macquarie research this morning:? Still a number of steps...

From Macquarie research this morning:

? Still a number of steps to occur before licences are granted: While the approval is an important milestone that sets in motion remaining regulatory activity, there still are a number of formalities remaining. With formal signing
of the Gas Agreement expected to occur this Thursday 17 April, a development and pipeline licence (PDL 10 & PL 10) will be granted in the subsequent 2 weeks. Separately, the approval of the Benefits Sharing Agreements by the Minister will also allow the Development Forum to commence in Kiunga, a process that will likely take 1-2 weeks. We expect all these activities to be concluded by the end of April.

? Favourable fiscal terms subject to Ok Tedi gas sales: Importantly, the gas agreement will include project fiscal terms where the ultimate corporate tax rate will heavily depend on conclusion of a gas sale agreement to Ok Tedi. If
the project is limited to liquids stripping, the tax rate will remain at 45%, however this would fall to 30% if regional gas sales can be delivered. In its latest quarterly, HZN highlighted that negotiations with Ok Tedi had progressed significantly, with technical and commercial issues in the detail term sheet resolved and pricing remaining the only outstanding item. With Ok Tedi consuming 60ML/yr of diesel, we have previously estimated that gas supply could commercialise ~3bcf/a (or 60bcf over a 20-year contract period).

? Osaka Gas deal completion imminent: Granting of the Stanley development licence (PDL 10) is last CP remaining regarding HZN's May-13 divestment of 40% of its PNG Western Forelands position to Osaka Gas. This will see HZN receive U$77m in upfront payments (including a U$23m working capital adjustment relating to capital spent since this date). This, in combination with the significant cash flow on offer from Beibu Gulf during the plateau period, sees HZN well funded (even if the JV commits to a wider development of PRL 21 liquids later this year).