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InterOil’s attackers lack any credibility

February 3rd, 2010 · 4 Comments

Daily Distortions No.33 It’s the usual suspects again…

In a “report” here, full of easy to detect bad intentions. Let’s get some quotes from this “report” and see for ourselves..

1) [“An iBusiness Reporting analysis of a half-dozen other publicly-owned oil and gas exploration companies’ press releases in 2008-2009 show they rarely issued media statements solely to tout potential finds, but instead mainly publicized proven resources—commercially viable oil and gas.’]

If one needs this kind of cheap shots, it doesn’t bode well for the integrity of the “analysis”:

InterOil has no production facilities yet, so by definition they cannot report proven resources. Good job to compare them with companies that have production facilities, real integrity here…

According to the logic of these people they shouldn’t have reported ANYTHING. We wouldn’t have known about Elk1, Elk2, Elk4, Antelope1, Antelope4..

2) [“InterOil’s press releases—some of which give investors the impression that the company has found or is on the brink of confirming world-record reserves”]

Where do they say they have “world-record reserves”, or even on the brink of confirming “world-record reserves”?????

What they have is world record flow rates and these are not in dispute. Deliberate confounding of language here, again not a good sign for the integrity of this “analysis”

3) [““InterOil has attracted and then repelled (Texas oil and gas executive) T. Boone Pickens and Merrill Lynch”]

That quote comes directly from Howard Sirota. InterOil hasn’t “repelled” Boone nor Merrill. Both went almost bust. Merrill’s wings were cut after BoA takeover. And we all know what Howie hasn’t delivered..

[“InterOil has leaked or floated the name of every major Asian energy giant as a bidder, but to date there are no bids whatsoever.”]

They cannot know this for a fact. Period. Again shows the level of integrity of their “analysis”. There are plenty of press stories confirming interest in InterOil (see here, here, here here, here, here, and here

4) [“Critics include two ex-cons-turned-fraud investigators Sam Antar of White Collar Fraud and Barry Minkow of the Fraud Discovery Institute (which funds iBusiness Reporting), and the ValueHuntr who recently recommended shorting the stock on the Motley Fool investment website. Minkow, who also holds a short position with InterOil, accused the company in a December press release of being “nothing more than hype.”]

That’s interesting. This website is financed by Barry… Barry himself admitted in a CC organized by Stansberry that he has never been to PNG, never visited the wells, lacks any experience in valuating resource exploration companies and was highly impressed with the analysis of Stansberry, who actually did go to PNG and visited the well site and do have ample experience with exploration companies. Morgan Stanly has rubbished Barry’s critique and called the Bertoni report (the geologist he hired) “not meaningful“. As late as yesterday they reiterated their stance on the critics.

5) [In the recording, Andrews also predicted a market cap for InterOil in coming years in the $10 billion range [it was $1.3 billion at the time], and told the undercover investigator that the company had 3 trillion cubic feet of certified gas resources, though company states in public documents that it has no proven finds.]

Of course it has no proven finds! It doesn’t have production facilities so by definition it hasn’t proven finds. What they do have is two independent resource evaluations. One by GLJ, which argues InterOil has 3.43Tcf of recoverable gas (P2) and one by Knowledge Reservoir which argues InterOil has 6.7Tcf of recoverable gas (P2).

To put that into perspective, one has to realize that the GLJ report was brought out before it could include any meaningful data from Antelope1 (and none from Antelope2), and that Antelope1 compared to the Elk wells has:

  • 15-25x the net payzones of the Elk1&4 wells
  • with 8.8% average porosity considerably higher and dolomite and reef rock being of much better quality

The question is, would including the data from Antelope1 lead to an increase in the resource estimate? We already know the answer, because that is exactly what Knowledge Reservoir did and it came out with an estimate of 6.7Tcf of recoverable gas (P2).

But even the Knowledge Reservoir report doesn’t include anything from Antelope2, which:

  • Proved out the Antelope structure 2.2 miles south of Antelope1
  • Proved the formation being 100 meters higher than previously estimated by seismics
  • Has a substantially higher average porosity compared to Antelope1 (14% versus 8.8%), resulting in doubling the gas flow to improve the previous world record set at Antelope1

Now, the question is, would including these data from Antelope2 result in a higher resource estimate? Asking that question is answering it, but if you still doubt that just wait until these reserve reports are updated in March.

6) [“On June 26, 2006, InterOil announced a gas and gas liquids discovery at a test well called Elk 1 and its stock jumped as high as 25% that day. But to date, Elk 1 has produced no gas resources.”]

This is even laughable. “But to date, Elk 1 has produced no gas resources”… No, of course not. They have no pipeline or LNG plant. But that doesn’t mean the gas isn’t there…

7) What is actually misleading about these PR’s?

Perhaps that’s the reason the article acutally doesn’t dare to say specifically where they are misleading. The one time the do that, the result is laughable (see point 6 above).

Is this all surprising? No. We have warned you before:

  2. Drawing ridiculous conclusions from available data has been done before: Barry Minkow hired a geologist and really abused his report (that report written by Bertoni predates Antelope2 anyway)
  3. Their “prime arguments” resource compartmentalization and pressure depletion

And some more background from the beginning of their campaign:

Conclusion: if one needs such lame and easily refutable “arguments”, one’s “analysis” cannot amount to much, and indeed it doesn’t.

Tags: Daily Distortions · IOC

4 responses so far ↓

  • 1 kencooksam // Feb 3, 2010 at 8:14 pm

    He affects the stock short term Days. Nobody can hold IOC down for long. The assets are to powerful.The deals will get done. Another solid write up.

  • 2 rory mcgowan // Feb 4, 2010 at 8:03 pm

    cnoocc looks to be the partner who receives the largest % of the lng and probably the property sale. Cnocc looks to be buying into the tullow property in Uganda also . They’re going spending Billions on both projects. Do you think cnooc can do both at the same time, or is somebody going to be disappointed?

  • 3 Some observations from the Peters case against InterOil — // Mar 28, 2010 at 5:59 pm

    […] Let’s not forget the “quality” of Lobdell’s prior “reporting” on InterOil (see here) […]

  • 4 Has Barry Minkow changed his ways? — // Oct 15, 2010 at 7:39 pm

    […] Barry Minkow and co.  (On, beginning here, then here, here, here, here, here and Seeking Alpha, here, here and here). Apparently, we’re not the only ones, here is a good […]