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From: CommanderCricket2/7/2012 8:45:36 AM
1 Recommendation   of 198409
From the Wall Street Journal this morning. Interoil is getting some press this morning. Wonder when the shorts will blink. With the institutional buying lately, there isn't much of an available float.

Korea Gas, Japex, Mitsui eye LNG riches in Papua New Guinea

by: David Winning and Min-Jeong Lee
From: The Wall Street Journal
February 07, 2012 11:10AM

IN the race for Papua New Guinea’s gas riches, there’s been a notable absentee up to now: Korea Gas, the world’s top importer of liquefied natural gas by volume.

Not any longer.

Korea Gas, known as Kogas, is stitching together a consortium involving Mitsui and Japan Petroleum Exploration that aims to join InterOil’s proposed gas-export project in PNG as a strategic partner, a person familiar with the matter told Deal Journal Australia.

InterOil said in September 2011 that it had mandated Macquarie Capital, Morgan Stanley and UBS to bring in a company with experience in operating large LNG production facilities.

“The considerable strengthening of the Asian LNG market, the increased interest in exploration and investment in Papua New Guinea, as well as the company’s reservoir analysis and project design fundamentals lead the company to believe that now is an attractive time to seek a partner,” InterOil said at the time.
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On offer is an equity stake in the $US6 billion ($5.59bn) plant that will convert natural gas to a liquid for export as well as associated infrastructure in PNG’s Gulf province. InterOil says it is also willing to sell interests in the Elk and Antelope gas discoveries, along with exploration tenements in PNG.

PNG has an estimated 22.6 trillion cubic feet of natural gas reserves, according to UK-based consultancy Wood Mackenzie, but little new local demand for the clean-burning fuel is expected beyond mining developments such as Xstrata’s Frieda River copper-gold project and greater use by households.

That’s created an opportunity for some of the world’s biggest energy companies to invest in developing the gas reserves for export as LNG. PNG is poised to join the ranks of LNG exporters in 2014 when the ExxonMobil-led $US15.7bn PNG LNG project is slated to start up.

InterOil, which is listed on the New York Stock Exchange, is proposing to build a minimum 7.6 million-tonnes-a-year LNG plant fed by the Elk and Antelope fields. Once construction starts, it typically takes around four to five years before a facility is able to chill its first gas for export as LNG.

The person said Korean and Japanese companies initially planned to compete separately to join the InterOil project, but changed tack to work together partly to avoid bidding up the price.

InterOil’s advisers asked for bids to be lodged by early December 2011, but this was extended by a couple of months, the person said.

Kogas is more interested in operating the LNG plant, while Mitsui and Japan Petroleum Exploration – better known as Japex – are focused on securing interests in gas fields and associated liquids such as condensate, a type of light oil, the person said.

Kogas would likely then select a Korean engineering company to build the plant, giving it an opportunity to learn the technology, the person added.

In an interview with Dow Jones Newswires last year, Kogas president and chief executive Choo Kang-soo named PNG among four countries that it was targeting for a major natural-gas field development in the near term. The other countries were the US, China and Venezuela.

Kogas imported nearly 34m tonnes of LNG last year – equivalent to nearly triple the LNG volumes shipped into neighbouring China.

InterOil isn’t alone in hunting for a partner to help develop gas reserves in PNG.

Deal Journal Australia reported in December that Canada’s Talisman Energy has appointed Sydney-based advisory RFC Corporate Finance to find an investor for four licences in the forelands of western PNG, which contain a mix of gas discoveries and exploration targets. The company reckons it can aggregate between 2 trillion and 4 trillion cubic feet of gas in Papua New Guinea – enough to underpin a single unit producing LNG for export.

ASX-listed Oil Search also opened a data room on its offshore gas fields in the Gulf of Papua in the final quarter of 2011, and has already held preliminary talks with international companies with LNG expertise.

“More detailed discussions and active engagement with a number of well qualified parties will occur in the first quarter of 2012, with a view to a farm-down of our large Gulf area interests in due course,” Oil Search managing director Peter Botten said in a statement January 24.

However, potential new investors in PNG need a strong appetite for risk.

Last month, political tensions flared when a former colonel mutinied and detained the head of the armed forces, seeking to restore former prime minister Michael Somare to power. The mutiny was quickly suppressed by forces loyal to current PM Peter O’Neill, who took office when Mr Somare was out of the country due to illness last year.

“These developments have increased the risks of the country losing donor support and much needed investments, in our view,” Standard & Poor’s said in a January 27 note as it cut the outlook on PNG’s long-term sovereign credit rating to negative from stable.

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From: kidl2/7/2012 9:35:27 AM
3 Recommendations   of 198409
Brent / WTI Differential
(thanks to charterholder on IV)

Here are some comments from Simmon's this morning:

Canadian/Bakken crude prices in free fall. Canadian heavy crude prices were about $85/bbl at the beginning of the year and closed yesterday at $61/bbl, down $24/bbl ytd and down $15/bbl over the last week. Canadian Syncrude has plunged from over $100/bbl to $74/bbl. Bakken crude at Clearbrook, which competes with Canadian crude, plummeted from $95/bbl to $72/bbl. The declines have been driven by congestion in the market, as production growth has exceeded infrastructure development. Canadian production is growing rapidly, including the ramp-up on new oil sands projects, Firebag 3 – 62 kb/d, Christina Lake – 40 kb/d, Jackfish – 35 kb/d, Leismer – 40 kb/d and record production from some Canadian upgraders, combined with production growth in excess of 100 kb/d in the Bakken. The rapid production growth is exceeding infrastructure development. Excess supply in the north has contributed to WTI weakness relative to LLS and Brent, with WTI now trading almost $20/bbl below Brent. Supply growth in the north has contributed to increased pipeline nominations for Feb (and likely Mar/Apr) for crude movement from Canada and Chicago into Cushing, which should result in crude inventory builds at Cushing in Feb (continuing in Mar/Apr). Cushing inventory is about 30 mb currently. Capacity has been expanded to 66 mb of shell capacity, roughly 50 mb of operating capacity. The congestion is likely to continue until the Seaway Pipeline opens for line fill (May, 2-3 mb of line fill) and ultimately for deliveries to the USGC (150 kb/d, schedule to begin deliveries on June 1st, increasing to over 400 kb/d by late 2012/early 2013). In addition to the congestion in the Mid-Continent, growing tensions in Iran are supporting Brent and other international crudes, contributing to wide Brent/WTI differentials.

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To: Ed Ajootian who wrote (163536)2/7/2012 10:35:13 AM
From: RevoltNapper6
1 Recommendation   of 198409
Ed, Thanks for XBOR. It is a fascinating company with a lot of acreage in New Mexico and Texas. Do you have a feeling for their 2012 CAPEX, number of wells they plan to spud in 2012, underwriting plans and how to participate? It would seem logical to keep the focus on Bone Spring vs Wolfberry, but they seem to have several good prospects. I added 5000 shares this AM and would like to buy more, but knowing they will need additional capital. Commom sense tells me to be patience. Given their prospects I would think they would want to double their capital in 2012. Thoughts? Great find.

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From: 16bit2/7/2012 10:37:28 AM
1 Recommendation   of 198409
Americans gaining energy independence

Workers move a section of well casing into place at a Chesapeake Energy natural gas well site near Burlington, Pa. (AP Photo/Ralph Wilson, File)

The U.S. is the closest it has been in almost 20 years to achieving energy self-sufficiency, a goal the nation has been pursuing since the 1973 Arab oil embargo triggered a recession and led to lines at gasoline stations.

Domestic oil output is the highest in eight years. The U.S. is producing so much natural gas that, where the government warned four years ago of a critical need to boost imports, it now may approve an export terminal.

Methanex Corp., the world’s biggest methanol maker, said it will dismantle a factory in Chile and reassemble it in Louisiana to take advantage of low natural gas prices. And higher mileage standards and federally mandated ethanol use, along with slow economic growth, have curbed demand.

The result: The U.S. has reversed a two-decade-long decline in energy independence, increasing the proportion of demand met from domestic sources over the last six years to an estimated 81 percent through the first 10 months of 2011, according to data compiled by Bloomberg from the U.S. Department of Energy. That would be the highest level since 1992.

“For 40 years, only politicians and the occasional author in Popular Mechanics magazine talked about achieving energy independence,” said Adam Sieminski, who has been nominated by President Barack Obama to head the U.S. Energy Information Administration. “Now it doesn’t seem such an outlandish idea.”

The transformation, which could see the country become the world’s top energy producer by 2020, has implications for the economy and national security — boosting household incomes, jobs and government revenue; cutting the trade deficit; enhancing manufacturers’ competitiveness; and allowing greater flexibility in dealing with unrest in the Middle East.

Output Rising

U.S. energy self-sufficiency has been steadily rising since 2005, when it hit a low of 70 percent, the data compiled by Bloomberg show. Domestic crude oil production rose 3.6 percent last year to an average 5.7 million barrels a day, the highest since 2003, according to the Energy Department. Natural gas output climbed to 22.4 trillion cubic feet in 2010 from 20.2 trillion in 2007, when the Federal Energy Regulatory Commission warned of the need for more imports. Prices have fallen more than 80 percent since 2008.

At the same time, the efficiency of the average U.S. passenger vehicle has helped limit demand. It increased to 29.6 miles per gallon in 2011 from 19.9 mpg in 1978, according to the National Highway Traffic Safety Administration.

The last time the U.S. achieved energy independence was in 1952. While it still imported some petroleum, the country’s exports, including of coal, more than offset its imports.

Environmental Concern

The expansion in oil and natural gas production isn’t without a downside. Environmentalists say hydraulic fracturing, or fracking — in which a mixture of water, sand and chemicals is shot underground to blast apart rock and free fossil fuels — is tainting drinking water.

The drop in natural gas prices is also making the use of alternative energy sources such as solar, wind and nuclear power less attractive, threatening to link the U.S.’s future even more to hydrocarbons to run the world’s largest economy.
Still, those concerns probably won’t be enough to outweigh the benefits of greater energy independence.

Stepped-up oil output and restrained consumption will lessen demand for imports, cutting the nation’s trade deficit and buttressing the dollar, said Sieminski, who is currently chief energy economist at Deutsche Bank AG in Washington.

Cutting Trade Deficit

With the price of a barrel of oil at about $100, a drop of 4 million barrels a day in oil imports — which he said could happen by 2020, if not before — would shave $145 billion off the deficit. Through the first 11 months of last year, the trade gap was $513 billion, according to the Commerce Department. Crude for March delivery settled at $96.91 a barrel yesterday on the New York Mercantile Exchange.

The impact on national security also could be significant as the U.S. relies less on oil from the Mideast. Persian Gulf countries accounted for 15 percent of U.S. imports of crude oil and petroleum products in 2010, down from 23 percent in 1999.

“The past image of the United States as helplessly dependent on imported oil and gas from politically unstable and unfriendly regions of the world no longer holds,” former Central Intelligence Agency Director John Deutch told an energy conference last month.

Arab Oil Embargo

That dependence was underscored in October 1973, when Arab oil producers declared an embargo in retaliation for U.S. help for Israel in the Yom Kippur war. The U.S. economy contracted at an annualized 3.5 percent rate in the first quarter of the next year. Stock prices plunged, with the Standard & Poor’s 500 Index dropping more than 40 percent in the year following the embargo.

Car owners were forced to line up at gasoline stations to buy fuel. President Richard Nixon announced in December that because of the energy crisis the lights on the national Christmas tree wouldn’t be turned on.

Today, signs of what former North Dakota Senator Byron Dorgan says could be a “new normal” in energy are proliferating. The U.S. likely became a net exporter of refined oil products last year for the first time since 1949. And it will probably become a net exporter of natural gas early in the next decade, said Howard Gruenspecht, the acting administrator of the EIA, the statistical arm of the Energy Department.

Cheniere Energy Partners LP may receive a construction and operating permit as early this month from the Federal Energy Regulatory Commission for the first new plant capable of exporting natural gas by ship to be built since 1969 in the U.S.

Houston-based Cheniere said it expects the $6 billion plant to export as much as 2.6 billion cubic feet of gas per day.

Mitchell the Pioneer

The shale-gas technology that’s boosting U.S. natural gas production was spawned in the Barnett Shale around Dallas and Fort Worth by George P. Mitchell, who was chairman and chief executive officer of Mitchell Energy & Development Corp.

Helped by a provision inserted in the 1980 windfall oil profits tax bill to encourage drilling for unconventional natural gas, the Houston-based oil man pursued a trial-and-error approach for years before succeeding in the late-1990s. The fracking method he devised cracked the rock deep underground, propping open small seams that allowed natural gas trapped in tiny pores to flow into the well and up to the surface.

Recognizing that Mitchell was on to something, Devon Energy Corp. bought his company in 2002 for about $3.3 billion and combined it with its own expertise in directional drilling, a method derived from offshore exploration.

Hunting for Oil

Traditional vertical drilling bores straight down, like a straw stuck straight in the earth. Directional drilling bends the straw, boring horizontally sometimes a mile or more through the richest layer of rock, allowing more of the trapped fuel to make it into the well. This slice of rock is like the kitchen, where ancient plants and creatures came under so much pressure that they cooked into natural gas and oil.

The oil boom a century ago tapped reservoirs of fuel that rose out of those layers and got trapped in large pockets closer to the earth’s surface, or used vertical wells that could get out only a portion of the fuel stored in the rock. The new technology has Devon and its competitors hunting beneath decades-old oil plays long thought depleted.

About an hour’s drive north from where Devon’s soon-to-be- completed new glass headquarters towers 50 stories above downtown Oklahoma City, the company is exploring for oil in the Mississippian and other formations, where oil majors once made their fortunes. It’s racing companies such as Chesapeake Energy Corp. and SandRidge Energy Inc. to buy leases and drill wells.

North Dakota Booming

Crude production in the U.S. is already increasing. Within three years, domestic output could reach 7 million barrels a day, the highest in 20 years, said Andy Lipow, president of Lipow Oil Associates in Houston, a consulting firm. The U.S. produced 5.9 million barrels of crude oil a day in December, while consuming 18.5 million barrels of petroleum products, according to the Energy Department.

North Dakota — the center of the so-called tight-oil transformation — is now the fourth largest oil-producing state, behind Texas, Alaska and California.

The growth in oil and gas output means the U.S. will overtake Russia as the world’s largest energy producer in the next eight years, said Jamie Webster, senior manager for the markets and country strategy group at PFC Energy, a Washington- based consultant.

While U.S. consumers would still be susceptible to surges in global oil prices, “we’d end up sending some of that cash to North Dakota” rather than to Saudi Arabia, said Richard Schmalensee, a professor of economics and management at the Massachusetts Institute of Technology in Cambridge.

1.6 Million Jobs

The shale gas expansion is already benefiting the economy. In 2010, the industry supported more than 600,000 jobs, according to a report that consultants IHS Global Insight prepared for America’s Natural Gas Alliance, a group that represents companies such as Devon Energy and Chesapeake Energy.

More than half were in the companies directly involved and their suppliers, with the balance coming at restaurants, hotels and other firms. By 2035, the number of jobs supported by the industry will rise to more than 1.6 million, IHS said. Some 360,000 will be directly employed in the shale gas industry.

The oil boom is also pushing up payrolls. Unemployment in North Dakota was 3.3 percent in December, the lowest of any state. Hiring is so frantic that the McDonald’s Corp. restaurant in Dickinson is offering $300 signing bonuses.

State governments are reaping benefits, too. Ohio is considering a new impact fee on drillers and increasing the tax charged on natural gas and other natural resources extracted, Governor John Kasich has said.

In Texas, DeWitt County Judge Daryl Fowler has negotiated an $8,000-per-well fee from drilling companies to pay for roads in the district, southeast of San Antonio.

Lot of Traffic

“It takes 270 loads of gravel just to build a pad used for drilling a well, which means a lot of truck traffic on a lot of roads that nobody except Grandpa Schultz and some deer hunters may have used in the past,” said Fowler, whose non-judicial post gives him administrative control over the county.

The federal government will see tax payments from shale gas rise to $14.5 billion in 2015 from $9.6 billion in 2010, according to IHS. Over the period 2010 to 2035, revenue will total $464.9 billion, it said.

Manufacturing companies, particularly chemical makers, also stand to win as the shale bonanza keeps natural gas cheaper in the U.S. than in Asia or Europe.

Dow Chemical Co., which spent a decade moving production to the Middle East and Asia, is leading the biggest expansion ever in the U.S. The chemical industry is one of the top consumers of natural gas, using it both as a fuel and feedstock to produce the compounds it sells.

First Since 2001

Midland, Michigan-based Dow is among companies planning to build crackers, industrial plants typically costing $1.5 billion that process hydrocarbons into ethylene, a plastics ingredient.

The new crackers will be the first in the U.S. since 2001, said John Stekla, a director at Chemical Market Associates Inc., a Houston-based consultant.

Vancouver-based Methanex said last month it plans to take apart the idled Chilean factory and ship it to Louisiana to capitalize on natural gas prices.

The shift to increased energy independence is also the result of government policies to depress oil demand.

“Vehicles are getting more efficient, and people who travel won’t be driving more miles,” said Daniel Yergin, chairman of IHS Cambridge Energy Research Associates.

Automakers have agreed to raise the fuel economy of the vehicles they sell in the U.S. to a fleetwide average of 54.5 miles per gallon by 2025 under an agreement last year with the Obama administration.

No ‘Silver Bullet’

The 2008-09 recession helped lower oil demand, and consumption has lagged even as the economy has recovered, said Judith Dwarkin, director of energy research for ITG Investment Research in Calgary. Coupled with higher domestic output, “this has translated into an import requirement of some 15.4 barrels per person per year — about on par with the mid-1990s.”

She cautioned against thinking that rising oil and gas production is a “silver bullet” for solving U.S. economic woes.
Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, agreed, saying in a Jan. 20 note to clients that oil and gas output accounts for just 1 percent of gross domestic production and isn’t likely on its own to be able to pull the economy into above-trend growth.

Cooling on Wind

Some companies are hurting from the shale gas glut. With abundant supplies making it the cheapest option for new power generation, Exelon Corp. scrapped plans to expand capacity at two nuclear plants, while Michigan utility CMS Energy Corp. canceled a $2 billion coal plant after deciding it wasn’t financially viable. NextEra Energy Inc., the largest U.S. wind energy producer, shelved plans for new U.S. wind projects next year.

Investors also are cooling on wind investment, partly because of falling power prices. T. Boone Pickens, one of wind power’s biggest boosters, decided to focus on promoting natural gas-fueled trucking fleets after dropping plans for a Texas wind farm in 2010.

“Wind on its own without incentives is far from economic unless gas is north of $6.50,” said Travis Miller, a Chicago- based utility analyst at Morningstar Inc. Natural gas for March delivery settled at $2.55 per million British thermal units on New York Mercantile Exchange yesterday.

When Obama lauded increased energy production in his State of the Union speech on Jan. 24, he drew criticism from some environmentalists opposed to fracking.

Waning Confidence

“We’re disappointed in his enthusiasm for shale gas,” said Iris Marie Bloom, director of Protecting Our Waters in Philadelphia. Obama “spoke about gas as if it’s better for the environment, which it’s not.”

Deutch, who headed an advisory panel on fracking for the Energy Department, voiced concern that public confidence in the technology will wane if action isn’t taken to address environmental concerns. The potential positive impact of increased North American production are “enormous,” he said.

Higher U.S. output lessens the ability of countries like Iran and Russia to use “energy diplomacy” as a means of strengthening their influence, Amy Myers Jaffe, director of the Baker Institute Energy Forum at Rice University, and her colleagues wrote in a report last year.

While the U.S. will still have to pay attention to issues such as Israel’s security and Islamic fundamentalism in the Mideast, which could affect oil prices, it won’t have to be as worried about its supplies.

Positive ‘Shock’

Carlos Pascual, special envoy and coordinator for international energy affairs at the State Department, suggested at a Council on Foreign Relations conference in December that the increased production in the U.S. and elsewhere gives Washington more “maneuverability” in using sanctions to deal with Iran and its nuclear aspirations.

The increased U.S. production of oil and natural gas is a “positive supply shock” for the economy and for national security, said Philip Verleger, a former director of the office of energy policy at the Treasury Department and founder of PKVerleger LLC, a consulting firm in Aspen, Colorado.

“We aren’t there yet, but it looks like we’re blundering into a solution for the energy problem,” he said.

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To: CommanderCricket who wrote (163537)2/7/2012 10:39:16 AM
From: Salt'n'Peppa
1 Recommendation   of 198409
Wrote Mar95 covered calls against my 2K IOC shares today @ $1.71 - nice premium!


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To: Salt'n'Peppa who wrote (163541)2/7/2012 10:43:17 AM
From: CommanderCricket
   of 198409

Wrote Mar 80 puts for $3.48 - was a little early but I'll take the money.

IOC at $80 is grand slam for portfolios.


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To: Salt'n'Peppa who wrote (163541)2/7/2012 10:44:45 AM
From: CommanderCricket
   of 198409
RJ IOC comments on DJ article

7-Feb-12 09:19 am

InterOil Corp. (IOC/$67.32/Outperform) reportedly gets LNG project interest from Kogas, Japex, and Mitsui. According to a Dow Jones article published yesterday after market close, three large Asian companies - Kogas from Korea, along with Japex and Mitsui from Japan - are in talks to form a bidding consortium for joining InterOil's LNG project. The article cites unnamed sources. Some specific highlights from the article: (1) the three companies originally planned to bid separately but now want to collaborate "partly to avoid bidding up the price"; (2) bids were due in early December, but the deadline was extended "by a couple of months"; and (3) Kogas aims to be the LNG plant operator, while Mitsui and Japex want to buy a stake in the underlying resource. None of this is especially surprising; Mitsui, after all, is already an InterOil partner (for the condensate stripping plant), and the other two companies are known for their interest in Asia-Pacific energy projects. However, the specificity with which the companies are identified by a major newswire service is not something that we've encountered in the past. We would expect IOC shares to do well today as the market begins to price in a greater likelihood of the long-awaited resource selldown to one or more strategic partners.

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To: CommanderCricket who wrote (163543)2/7/2012 11:15:09 AM
From: The Reaper
   of 198409
Might finally be the time for LNGYF

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To: Ed Ajootian who wrote (163536)2/7/2012 11:59:10 AM
From: RevoltNapper6
   of 198409
Go XBOR. As I am sure you know, XBOR is an ultra thin stock. Picked up 15,000 this AM around $1.90. Extremely difficult to accumulate. I am stepping back and taking a wait-n-see for now.

Are they partnered with Cimarex for a 37% working interest for the entire 54,000 acre Bone Spring (BS) play or just for select wells? Cimarex has completed 60 wells since mid 2009. This implies approximately 20 wells per year at a cost of $5.5 million per well. The wells have average 540 BOE/D (82% oil). Based upon by back of the envelope calculations each well would cost XBOR approximately $2.2 million. If they participate in 10 BS wells in 2012, they will need a lot of jack in 2012. I would think they could raise equity capital in a private placement with a few phone calls.

According to Yahoo, insiders own 53% and float is 8.6 million shares and 10-day average volume of 16,000 shares. At noon, approximately 78,000 shares traded. Also, XBOR on the "Threshold Securities" report. More than 10,000 shares not delivered to market maker for the last 6 days. I wonder how many shares are in limbo?

Fascinating situation. Thanks again Ed, and congratulations. You deserve these type of problems!


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To: CommanderCricket who wrote (163542)2/7/2012 12:12:24 PM
From: mach
   of 198409
you must mean calls - LOL. naked or covered?

My remaining IOC shares are covered with Mar85 calls. I'll be happy with $85. Yesterday, bought back some Feb75 covered calls and sold the underlying long shares - too impatient!


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