In light of IOC shares’ recent weakness – down 13% since the LNG project received formal

cabinet approval on November 16 (and down 40% since early August) – today we take the

opportunity to debunk one apparently widespread misconception surrounding the

company’s ongoing resource selldown discussions. We are referring to the timeframe for

concluding and announcing a partnership/selldown deal.

♦ At the stroke of midnight on December 31, U.S. income taxes could spike up, federal

spending could plummet, volcanoes could explode, the seas could rise, and the world as we

know it could come to an end. In other words, the dreaded fiscal cliff – if politicians in

Washington don’t get their act together. But for InterOil, December 31 is just another day

on the calendar. Let us reiterate that previous statement one more time – contrary to

some of the hearsay on the online message boards, December 31 is not a deadline of any

kind for the long-awaited LNG project partnership / resource selldown. Recall, the only

person who has placed any significance on that specific date was Prime Minister Peter

O’Neill, who told parliament in September that it was his intention to make sure InterOil

secures government approval by year-end. The prime minister has delivered: last month,

the cabinet gave the formal go-ahead for the project. See our brief from November 16,

“Cabinet Formalizes Project Approval, Including Partial Gas Sale to Gov’t,” for details.

♦ After getting burned several times in the past by setting (and then missing) self-imposed

deadlines for business development milestones, this time around InterOil itself is wisely

staying away from promising any specific timeframe for getting a deal done.

Management’s guidance has been limited to comments from the November 16 press

release, noting that a partnership announcement will be made “in the coming weeks” – an

intentionally vague timetable. As the company has learned, detailed partnership

negotiations are complex – a multibillion-dollar LNG project is not like buying a car – and

setting artificial timelines do nothing to help the process. Similarly, we have withheld from

attempting to pin down the precise timing of a deal announcement in the past, and we

have no intention (or ability) to do so now. While we don’t rule out an announcement

before year-end, a deal in 2013 would not change InterOil’s value proposition to

shareholders.

♦ Ahead of an announcement, there is obviously plenty of market skepticism that the

company will deliver a deal. Given this skepticism, short interest has ramped up, and we

think the stock is setting up for a short squeeze once the partnership/selldown

announcement comes out. We continue to believe that the only thing which will ultimately

quell the skepticism will be that actual announcement – i.e., updates on Antelope appraisal

and the Triceratops collaboration with Pacific Rubiales over the past week are essentially

immaterial to how the market perceives the story.

'ltinvest' pid='13921' datel Wrote:

In light of IOC shares’ recent weakness – down 13% since the LNG project received formal

cabinet approval on November 16 (and down 40% since early August) – today we take the

opportunity to debunk one apparently widespread misconception surrounding the

company’s ongoing resource selldown discussions. We are referring to the timeframe for

concluding and announcing a partnership/selldown deal.

♦ At the stroke of midnight on December 31, U.S. income taxes could spike up, federal

spending could plummet, volcanoes could explode, the seas could rise, and the world as we

know it could come to an end. In other words, the dreaded fiscal cliff – if politicians in

Washington don’t get their act together. But for InterOil, December 31 is just another day

on the calendar. Let us reiterate that previous statement one more time – contrary to

some of the hearsay on the online message boards, December 31 is not a deadline of any

kind for the long-awaited LNG project partnership / resource selldown. Recall, the only

person who has placed any significance on that specific date was Prime Minister Peter

O’Neill, who told parliament in September that it was his intention to make sure InterOil

secures government approval by year-end. The prime minister has delivered: last month,

the cabinet gave the formal go-ahead for the project. See our brief from November 16,

“Cabinet Formalizes Project Approval, Including Partial Gas Sale to Gov’t,” for details.

♦ After getting burned several times in the past by setting (and then missing) self-imposed

deadlines for business development milestones, this time around InterOil itself is wisely

staying away from promising any specific timeframe for getting a deal done.

Management’s guidance has been limited to comments from the November 16 press

release, noting that a partnership announcement will be made “in the coming weeks” – an

intentionally vague timetable. As the company has learned, detailed partnership

negotiations are complex – a multibillion-dollar LNG project is not like buying a car – and

setting artificial timelines do nothing to help the process. Similarly, we have withheld from

attempting to pin down the precise timing of a deal announcement in the past, and we

have no intention (or ability) to do so now. While we don’t rule out an announcement

before year-end, a deal in 2013 would not change InterOil’s value proposition to

shareholders.

♦ Ahead of an announcement, there is obviously plenty of market skepticism that the

company will deliver a deal. Given this skepticism, short interest has ramped up, and we

think the stock is setting up for a short squeeze once the partnership/selldown

announcement comes out. We continue to believe that the only thing which will ultimately

quell the skepticism will be that actual announcement – i.e., updates on Antelope appraisal

and the Triceratops collaboration with Pacific Rubiales over the past week are essentially

immaterial to how the market perceives the story.

Thank you for the report. It's quite clear and simple clarification. And as many others on Mb, I'm waiting for the squeeze!

'ltinvest' pid='13926' datel Wrote:"Given this skepticism, short interest has ramped up, and we think the stock is setting up for a short squeeze once the partnership/selldown announcement comes out." I agree guys. From what I have read of Pavel in the past this seems the most confident tone I can recall from him. For him identify an impending short squeeze is a big step out from Pavel.