Raymond James Equity Research

Raymond James Energy Daily Update

InterOil Corp. (IOC/$62.11/Outperform) closes resource selldown, receives $401 million. Yesterday evening, InterOil announced the closing of its resource selldown transaction with Total (TOT.PA/€47.26/Outperform). As originally promised by management, the deal closed by the end of March. The terms remain exactly what they were as of the original December 6 announcement, other than the expected adjustments in interest levels to accommodate the recent entry of Oil Search into the resource base. InterOil receives the upfront payment of $401 million (versus $613 million originally), but it no longer has the liability for the IPI buyout, which has been taken care of by Oil Search. Expected use of proceeds is funding the exploration program (two wells are already drilling - more to come), and possibly some debt reduction. It's worth noting that, with this (tax-free) cash injection, InterOil's balance sheet becomes net cash positive. Conference call is today at 8:30 a.m. Eastern; dial (612) 332-0345, no code. (This is in advance of the 4Q13 results call next Monday.)