More and more, we’ve become convinced this is a screaming buy..
With the downside risk limited due to the refinery, retail business, not to mention the gas and liquids reserves, the sheer competitiveness of these (three wells in a low cost environment already enough to supply an LNG facility), and the 4.6 million acres full of other opportunities we really think the risk/reward ratio has never been better.
There are numerous and serious potential game changing events possible in the near future:
- Further significant reserve upgrades
- Finalizing condensate winning investment plans
- Several possible deals on farm out drilling opportunities, strategic investors, long-term supply arrangements, and the like. InterOil has hired two banks to assist with the negotiations
- More analyst coverage now that they have a capital markets director and a NYSE listing
And, the new kid on the block is the possibility of an oil leg. The details are still very sketchy, it’s not a dead certainty, but we belief the odds have now increased considerably, and we mean considerably, for a commercially viable oil leg.
That really would be a game changer. Together, the oil and condensates could de-risk the LNG project to such an extent that one could consider that almost a done deal, and on InterOil’s terms. It will greatly reduce the financing needs, and any dependence on third party financing. It would dramatically increase cash-flow.
All of a sudden, we could have the makings of a new, completely integrated energy play here, being the master of it’s own destiny, and due to the excellent well deliverabilities and low cost environment, producing very fat margins indeed.
We’ve written some more details recently, which you can find here and especially here, but we would say that this company just has a screaming buy written all over it. And in our view, a serious lift-off could be imminent.
We think that if you’re not in, the pull back that might last another couple of days provides what with hindsight could be the last station before the train takes off.