InterOil Corporation (NYSE: IOC; POMSoX: IOC) has agreed to sell to Total S.A. (CAC: TOT; 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").
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."
About InterOil
InterOil Corporation is developing a vertically integrated energy business with a primary focus on Papua New Guinea and the surrounding region. InterOil's assets include petroleum licenses covering about 3.9 million acres (about 1.6 million hectares), an oil refinery, and retail and commercial distribution facilities, all in Papua New Guinea. The company employs over 1000 people and is listed on the New York and Port Moresby stock exchanges.
About Total
Total is the world's fifth largest publicly traded, integrated oil and gas company with nearly 100,000 employees in more than 130 countries and oil and gas exploration and production in more than 50 countries. The company's head office is in Paris and more than a quarter of Total's shareholders are based in France. Total has a market capitalization of more than US$120 billion. The company was founded in 1924 and was a pioneer in the creation of the liquefied natural gas industry in Algeria in 1964. Total has LNG interests in Australia, Angola, Indonesia, Nigeria, Norway, Oman, Qatar, Russia, United Arab Emirates and Yemen. Total is listed on the Paris, New York, London and Brussels stock exchanges.
