What a Fool believes
Interoil may be left with few options if the deal with Exxon were to fall through. The company has been free cash flow negative for three straight years as it has invested heavily in its exploration and production activities. The company has already burned one bridge in a failed negotiation with Royal Dutch Shell, and not having access to Exxon’s facility means investors will have to wait several years before the company can realize any gains on its natural gas assets. If the deal were to go sour, a possible backup plan would be to work with TOTAL S.A. (ADR) (NYSE:TOT). Total has been rather unsuccessful during a two-year natural gas exploration program in Papua New Guinea, and it would certainly be a candidate that would pass the government test as one who could provide funding and expertise for LNG and well development. Also, with a market cap of just over $3.5 billion, it would not be a complete shock to see Exxon, TOTAL S.A. (ADR) (NYSE:TOT), or one of the other integrated majors make a play to buy out Interoil for its natural gas assets.
The article Is This Natural Gas Company Putting Its Fate in Exxon’s Hands? originally appeared on Fool.com and is written by Tyler Crowe.
Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter: @TylerCroweFool.The Motley Fool recommends Total SA. (ADR).
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