>>> Total rumoured for InterOil bid (Full article)

Total rumoured for InterOil bid

Wednesday, 6 May 2015
FRANCE’S Total could be about to make a play for dominance in the Asian LNG sector by making a bid for Papua New Guinea-focused InterOil.

Antelope-5.

While Total isn’t commenting publicly on market speculation, having Europe’s third biggest oiler making a move on the Canadian midcap makes a lot of sense in the current market.

Total would not only secure 80% of PNG’s giant onshore Elk-Antelope gas-condensate fields, but significant exploration acreage that could lead to an even larger LNG project than is being considered for near Port Moresby.
Elk-Antelope could be as large as nine trillion cubic feet of gas, and InterOil’s internal assessment of its exploration portfolio indicates potential for about 8Tcf of gas equivalent in our Bobcat, Raptor and Triceratops discoveries as a gross, unrisked, contingent resource and about 9Tcf of gas equivalent at Wahoo and Antelope South/Antelope Deep.
Total is also in InterOil’s exploration program.
Shell’s recent $90 billion move by Shell on BG Group was driven by its long-term belief on Asian gas demand, and given Shell just published its worst production performance in 17 years it needs a win.
Shell’s move has yet to spark a new round of industry consolidation, but most market watchers believe that it is only a matter of time.
Elk-Antelope is almost development ready, and PNG has proven it can deliver a successful LNG project on time and budget despite significant geographical hurdles, while Total has shown a lot of interest in PNG in recently years, teaming up with Oil Search and drilling the first offshore wells in decades in addition to its move on Elk-Antelope.
ExxonMobil’s $19 billion PNG LNG project started up just over one year ago, and has exceeded expectations, and should produce nine trillion cubic feet of gas over 30 years, and it and its partners, primarily Oil Search, and looking at a third and fourth train.
Oil Search also owns a 23% stake in Elk-Antelope.
Total has another option beyond InterOil. It could take over Talisman Energy’s PNG unit.
For several years Talisman has been focused on a gas aggregation strategy with strategic partners Santos and Mitsubishi Corporation targeting 2-4tcf of gas in the Western Province.
In 2015, Talisman plans to continue supporting its gas aggregation strategy through further exploration drilling and the acquisition of additional seismic, however it is about to become part of Spain’s Repsol following a $15 billion takeover.
Talisman’s gas could be an ideal, simple option for an expanding Total, which paid a modest up-front purchase of a stake in Elk-Antelope with more due on reserves, but it will also soon be generating significant cash from its share of the Ichthys oil and gas project in Australia.
As with most majors Total has recently cut back spending and jobs in relation to the oil price drop, but it is also benefitting from the price drop in its refining business, so its bottom line looks healthy.
Lower oil prices reduce its input costs and generate higher profits on fuels such as diesel or gasoline.
At Europe's largest refiner Total, adjusted net operating income from refining and chemicals more than tripled from the first quarter last year to $US1.1 billion, almost matching contributions from upstream of $US1.36 billion, down 56%.
Total's overall profit was down 22% at $US2.6 billion, with strong refining performances meaning the company exceeded expectations.
The situation won’t last. New capacity is coming online in the Middle East, the US intends to increase exports and the price of oil will recover, but until that happens assets are relatively cheap.
Total and Shell are reportedly bringing their refining and trading operations closer together, seeking alternative ways to drive profits. They are boosting their trading teams, and Total restructuring its refining businesses to expand its product line, by converting its unprofitable La Mede plant in southern France to a biodiesel plant and upgrading its Donges refinery on the Atlantic coast to capture growing demand for low-sulphur marine gasoil.
It could be an ideal time for Total to pounce in PNG.
InterOil, which is listed in Singapore, is currently successfully testing the Antelope-5 well, and is about to drill Antelope-6 to assess the flank of its Elk-Antelope Complex.
FID for the Elk-Antelope LNG project is planned for 2017 and would open the door to what could some of the world’s lowest cost LNG and significant liquids production, right on Asia’s doorstep.
InterOil has been open to a takeover in the past.

>>> ANN updated thoughts with Golden Gate Reuters story yesterday



Golden Gate has 9.5% S/O of ANN and is in best position to take company private. Reported $2B MC deal equals $44-$45, which is not $50-$55 but the company standalone with no takeover potential would trade at $32.50 (16x P/E of FY16 EPS ended Jan 16) to $34.00 (15x P/E CY16 EPS). A $45 deal price would be a 35% premium to the unaffected ANN $33.25 midpoint price. The high ANN stock price over the last five years (really, last year) was $43, so maybe Golden Gate agrees to a go-shop period in the DA to give the ANN Board a fiduciary out in case someone comes out of the woodwork with a higher priced proposal. From 2/20: ANN - Reported to be working with JPM on sale (first reported back in August) , Golden Gate has 9.5% S/O (signed Confidentiality agreement October 2014) , and two small shareholders sent letter to Board in August (believed could be $50-$55 takeover value from financial sponsor). ANN lowered 3Q Revs guidance in November and provided 4Q Revs estimate based on low-single digit same store sales decline. Hockey stick numbers for CY16E do not tell whole story - CY15 estimates for Revs, EBITDA and EPS have all declined significantly over the past year. An 8x forward multiple of $253M EBITDA (reflecting the achievability of hockey stick-like 15% YoY growth after a very poor 2014 and more conservative bank financing leverage - 5x debt/EBITDA, excluding ANN's $100M net cash which would mostly be used for deal-related expenses) implies $46.50/share or a 34% premium to the prior 20 day average closing price. The implied EV/Revs at that price are 0.77x EV/Revs ($2.61B, up 4.1% YoY) and 23.4x P/E ($1.99 EPS, up 35% YoY). At $50/share (low end of August 2014 range), the implied takeover multiples would be 0.84x EV/Revs, 8.6x EV/EBITDA and 25x P/E. Last, ANN had been reported to have hired a banker in late August, but no particular firm was mentioned.

Some background and attached November blog
http://www.sec.gov/Archives/edgar/data/874214/000119312514371135/0001193125-14-371135-index.htm
 (Golden Gate 13da 10/14/14)
http://investor.anninc.com/phoenix.zhtml?c=78167&p=irol-newsArticle&ID=1977664
 (ANN release re Golden Gate 10/14/14)
http://www.changeatann.com/home.html
 (Red Engine Letter and Presentation)
http://investor.anninc.com/phoenix.zhtml?c=78167&p=irol-newsArticle&ID=1960597
 (ANN Statement 8/25/14 to letter)
http://investor.anninc.com/phoenix.zhtml?c=78167&p=irol-newsArticle&ID=1967923
 (Ann Reponse to Red Engine 9/15/14)

>>> US Gapping down


Gapping down
In reaction to disappointing earnings/guidance: NUS -19.7%, VRNS -15.7%, TUMI -14.5%, WFM -13.9%, NSIT -11.2%, GMCR -10.7%, MCP -10.4%, FRSH -10.1%, (files for ~7.92 mln share common stock offering by selling shareholders ), ENVA -9.6%, LCI -9.5%, FLTX -8.4%, TTPH -7.5%, CPA -7.3%, RDEN -6.8%, MTDR -6.3%, SN -5.1%, RESI -5%, QTM -4.8%, (also announces resignation of Jeffrey Smith from its board of directors and appointment of Robert Andersen pursuant to Starboard's replacement rights ), APO -4.8%, CRIS -4.6%, BREW -4.5%, SZYM -4.5%, SMLP -4.3%, (also announces a 6.5 mln common unit public offering), RWLK -4.2%, WRES -3.8%, TDC -3.8%, AGIO -3.7%, ALDW -3.4%, SD -3.4%, CODI -3.1%, TSLA -2.8%, SEAS -2.5%, FSYS -2.3%, MWW -1.9%, EVTC -1.7%, SPH -1.7%, ATVI -1.6%, SQNM -1.6%, PMT -1.6%, PTLA -1.5%, EXTR -1.5%, FIG -1.5%, MATR -1.4%, RST -1.3%, EFC -1.3%, CSLT -1.1%, MRO -1%, AG -1%, RRD -1%, WAC -0.9%, MET -0.7%, AREX -0.7%, CZR -0.6%

Select metals/mining showing early weakness: HMY -6%, AU -5%, BHP -3%, RIO -2.5%

Other news: AFMD -4.8% (prices 5,000,000 of common shares at $7.15 per common share), GSK -3.1% (still checking), CSIQ -2.7% (signs $250 mln loan agreement with China Minsheng Bank), VRSK -2.7% (prices 9,640,000 shares of its Class A common stock at $70.00 per share), DDD -1.7% (still checking), FCE.A -1.3% (prices 32.5 million shares of Class A common stock at $22.50 per share), LL -1.0% (CNBC reporting that the company plans to halt sales of laminate flooring made in China)

Analyst comments: TASR -3.2% (downgraded to Perform from Outperform at Oppenheimer), BONA -2.7% (downgraded to Underperform at BofA/Merrill). 

>>> US Gapping up


Gapping up
In reaction to strong earnings/guidance: BEAT +12%, BIOD +11.5%, HRTG +11.5%, QRVO +11.5%, HRTG +11.5%, BABA +10.4%, CHGG +9.2%, TA +8.8%, EMKR +8.1%, (also Announces That It Intends To Commence A Dutch Auction Tender Offer For Up To Approximately $45 Million of Common Stock), ENSG +7.2%, ATML +6.8%, ZNGA +6.1%, CBB +5.4%, CSOD +5.2%, TRIP +4.8%, SUNE +4.5%, MASI +4.4%, GOGO +3.4%, TAP +2.9%, CPE +2.7%, LXP +2.7%, PSEC +2.4%, BLUE +2.4%, CTIC +2.3%, DYN +2%, (also amends employment agreement with CEO Robert Flexon), HUBS +1.9%, COTY +1.8%, TOWR +1.8%, IVR +1.6%, TKMR +1.2%, TWO +1%, KIM +0.9%, CLR +0.9%, PRU +0.8%, VVC +0.8%, PDLI +0.6%

M&A news: QLTY +61.4% (agrees to be acquired by Funds Advised by Apax Partners for $16.00 per share in all cash), ANN +8.7% (Reuters reporting in talks with Golden Gate)

Other news: YHOO +7% (trading higher with BABA), ANY +6.5% (reported award of two patents for Peer-to-Peer Redundant File Server System and Methods),  GST +5.6% (enters into agreement to sell certain non-core assets in Oklahoma for ~$46.2 mln, with the transaction expected to close on or before June 22, 2015), NBG +5% (cont volatility with Greece), EQIX +1.8% (issues response to announcement by TelecityGroup), NBY +1.5% (announces the presentation of new research documenting the successful use of Avenova on patients with blepharitis ), QTM +1.4% (announced resignation of Jeffrey Smith from its board of directors and appointment of Robert Andersen pursuant to Starboard's replacement rights)

Analyst comments: ZQK +3% (upgraded to Buy from Neutral at B. Riley & Co ), TNXP +2% (initiated with a Buy at Janney), INFI +1.2% (initiated with a Buy at Deutsche Bank), DKS +0.9% (upgraded to Outperform from Market Perform at BMO Capital)