Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
So what: Total is buying a gross 61.3% stake in InterOil's petroleum retention license 15 in Papua New Guinea, including the Elk and Antelope fields. Fixed payments for the purchase will include $613 million on closing, $112 million in final investment decision for a new LNG plant, and $100 million at first LNG cargo from the proposed plant.
Now what: This is a lot for InterOil to give up and investors clearly aren't impressed with the price. But talks with ExxonMobil had slowed and Total was a logical partner because of its interests in the area. There's upside if production exceeds 3.5 Tcfe, but we're a long way from that paying off for investors.
The bottom line today is that investors feel that InterOil gave up too much for too little from Total and that's why shares fell like a rock.
Fool contributor Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Total SA. (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.