ExxonMobil/InterOil -- summary under Canadian Buyco

Overview of previous proposal

The proposal for the Exxon acquisition of InterOil contemplated that a newly-incorporated B.C. subsidiary of ExxonMobil would acquire InterOil under a Yukon Plan of Arrangement, with the consideration for each InterOil share comprising that number of ExxonMobil shares having a fixed value of U.S.$45.00 per share, plus a cash payment of U.S.$26.87 per share (or U.S.$1.37B in total). However the cash “contingent resource payment” (or “CRP”) of U.S.$26.87 per share, was to be held under an escrow arrangement, to be repaid in full if an interim resource assessment of a Papoua New Guinea natural gas project of InterOil (slated to occur in the 2nd quarter of 2017), showed a resource of less than 6.2 trillion cubic feet equivalent ("tcfe"), and with the CRP having to be repaid on a pro rata basis if the interim assessment showed a resource of between 6.2 and 10 tcfe.

Response to Yukon Court of Appeal decision

Following a decision of the Yukon Court of Appeal reversing approval of the Plan of Arrangement, ExxonMobil has returned with the same offer (set out in a more detailed Circular of InterOil), except that the CRP cap occurs at 11 tcfe rather than 10 tcfe – and also secured a fairness opinion from BMO to InterOil which was paid for on a fixed fee rather than contingent basis.

Overview of Canadian tax disclosure

The Canadian tax disclosure is essentially the same as before, and indicates that the full per share CRP consideration (now of U.S.$ $33.94 rather than U.S.$26.87 per share) - as well as, of course, the share consideration of U.S.$45 per share - will be required to be included in computing a resident InterOil shareholder’s proceeds of disposition, but (under s. 42) if the repayment obligation is triggered before the filing due-date for the shareholder’s return, the repayment would reduce those proceeds of disposition.

Table summarizing contingent payments

The table below shows the CRP payments on a per share and aggregate basis based on the quantum of the interim resource assessment. It also shows the payments which would be received from Total S.A. (pursuant to the 2014 agreement for Total S.A.'s purchase of a 40.13% interest in the natural gas field) resulting from the same interim resource assesssment. The payment due pursuant to the Interim Resource Certification will only be paid by Total S.A. upon completion of the interim resource certification if they average resource as per two independent certifiers is greater than 5.4 tcfe - and for each tcfe that is certified above 12 tcfe, an additional U.S.$401.28 million would be payable to InterOil. The Circular also states that "in the professional judgment of GLJ [Petroleum Consultants Ltd.], based on information available at the effective date of the Updated GLJ Certification, there was a less than 1% probability that the volume of contingent resources in the Elk-Antelope Fields would equal or exceed 11 tcfe."