Antelope-3 spud looms


Friday, 28 September 2012

INTEROIL will spud its Antelope-3 well in Papua New Guinea’s Gulf province this weekend.


InterOil's Antelope-2 well flowed 705 million cubic feet of gas per day and yielded 11,200 barrels of condensate per day in late 2009



This will occur as negotiations with the government and other parties continue over the Gulf LNG project, based on InterOil’s Elk and Antelope discoveries.

While the final shape of future development of the Elk-Antelope field is not yet determined, another big boost to project reserves could certainly impact valuations next year.

InterOil is since expecting first LNG exports from the project in late 2015 or early 2016.

Last year, the project was targeting 5 million tonnes per annum, with 3Mtpa from an Energy World Corporation-designed onshore modular LNG plant in Gulf province and the rest from a floating LNG facility.

There was also a proposed ramp-up aiming to hit up to 8Mtpa.

In 2009, the project was based on a 7.6-10.6Mtpa LNG plant near Port Moresby, back when it was known as the Liquid Niugini Gas project.

InterOil launched a formal process almost 12 months ago to bring in a suitable LNG operator for Gulf LNG to meet the conditions of the 2009 project agreement.

'Stavros' pid='10436' datel Wrote:LINK below: http://www.pngindustrynews.net/storyview.asp?storyid=9638425§ionsource=s0 This means only one thing: They have enough money in the coffers to fund this endeavor. From whence comes the CA$H?

Did the 100 M clear ???????? Stavros

'ValueSleuth' pid='10445' datel Wrote:A refinery loan can be completely independent of the LNG project. There is ZERO reason to believe that a relatively immaterial prespudding announcement would be made if/when a highly material event such as a sell down or NEC approval had been obtained is not made. Let's be real, here. VS

So the press news story is false or we are missing an announcement still to be made !!!!!!!

Ultimately, the viability of the refinery loan is the expected CF generation of the refinery and the market value of the refinery. Of course, there are other secondary items of interest to the lender, which includes the viability of the other parts of the firm. If the firm struggles, then funds for items such as preventative maintenance, upgrades, expansion, etc. maybe deferred temporarily or permanently. So, yes more than just the refinery itself can play a role in the lending process, but from my vantage point I can't say that it is playing more of a role, only that it can (again secondary). My view on the spudding is that yes, they have some other funds lined up, likely from the refinery. This alone is a positive, because Ant-3 is a low risk drill that will likely increase E/A p50 estimate. Now the board has likely had conversations about the firm’s optimal capital structure, but I find it very unlikely that they would do any sort of meaningful leverage until the firm generates an adequate amount of operating CF. Doing otherwise would increase bankruptcy risk / dilution risk.

Most recent 10-q (p. 7 of http://www.interoil.com/presentation/June_2012_IOC_Financial_Statements.pdf) says: The Company believes that it has sufficient funds for the Midstream Refinery and Downstream operations; however, existing cash balances and ongoing cash generated from these operations will not be sufficient to facilitate further necessary development of the Elk and Antelope fields, appraisal of Triceratops field, condensate stripping and liquefaction facilities. Therefore the Company must extend or secure sufficient funding through renewed or additional borrowings, equity raising and or asset sales to enable sufficient cash to be available to further its development plans. Management expects that the Company will be able to secure the necessary financing through one, or a combination of, the aforementioned alternatives.

This confirms what we already knew, they needed funding to drill. They are going to spud, so they must have some sort of funding. Currently, there is around 31 million remaining on the OPIC loan and it has restrictions on “limitations on the incurrence of additional indebtedness for the refining operations” so if 100 million is indeed the loan amount proceeds would be 69 million. Also, note the OPIC loan started at 85 million at Libor plus 4.4%. Much different interest rate environment then, but curious what the new terms would be. More cent Mitsui loan is Libor plus 6%.

Best,

Sam