New Flow Test Commences at Antelope-5

SINGAPORE and PORT MORESBY, Papua New Guinea, Jan. 21, 2016 /PRNewswire/ -- InterOil Corporation (NYSE: IOC; POMSoX: IOC) has been advised by Total E&P PNG Limited ("Total"), operator of Petroleum Retention License 15 ("PRL15") in the Gulf Province of Papua New Guinea, that the second planned extended well test has commenced at Antelope-5.

The extended well test will flow Antelope-5 at around 50 million standard cubic feet per day for approximately two weeks before being shut-in to record the subsequent pressure build-up. Pressure gauges have been placed in Antelope-1 as an observer well. The test is expected to take approximately one month to complete.

InterOil Chief Executive Dr Michael Hession said the initial flow test conducted in June 2015 provided a good indication of the minimum connected volume in Antelope; this second test aims to further support those findings.

"In order to improve the certainty of the minimum connected volume, we have added additional pressure gauges and we plan to flow five times more gas than we did in our initial test last year."

Drilling update

The Company has also been advised by Total that Antelope-6 appraisal well, located 2km east-south-east to the Antelope-3 well was preparing to drill ahead at 1,120 meters (3,674 feet) true vertical depth sub-sea. Antelope-6 spudded on December 23, 2015 and has a proposed total depth of around 2,464 meters (8,084 feet) true vertical depth sub-sea.

The PRL15 joint venturers are discussing an additional appraisal well to the west of Antelope-5. The decision whether to drill a further appraisal well will follow the evaluation of the Antelope-6 appraisal well and the results of the latest flow test at Antelope-5

The longer the test at high flow rates, the stronger the pressure wave that will travel in all directions and the further they can see away from the well. If after that, they do not see reservoir boundaries or much baffling, then that will mean this thing is much bigger. So if their objective is to nail a reservoir boundary location to better quantify the upside volume, then they will have to do more drilling and testing further away from existing wells to test their structural maps. In a lower product price world, there is much greater sensitivity to costs, and optimizing the design to achieve highest value requires more accurate design inputs (e.g., recovable volumes and flow capacity) with a lower range of uncertainty. If they drill well 7 after evaluating these results, then that's very good news with much more upside. Alternatively, they might extend the production test if they think that could likely eliminate the need for another well.

Interoil told us they were cutting back reducing expenses . To only look at the past expenses without knowing what the cuts will be from the outside view is very risky . Possibly the company has a plan knows how much can be cut and that's why they say what they say . Remember the CEO and CFO sign off on quarterly expenses and must try to project the future as best they can .

For anyone to say they know the size of the cuts and their estimates are on target is bit of seat of the pants . We don't know but Interoil does and that's shared with the analysts .