http://seekingalpha.com/article/1182891-...urce=yahoo
Much of the current debate regarding InterOil (IOC) centers on whether or not the Company will consummate a deal resulting in the partial sell-down of IOC's Elk/Antelope resource. I previously presented my case detailing why it is extremely likely a sell-down deal will be announced in March 2013. This analysis assumes the deal is announced and explores what the value of InterOil will be immediately upon the announcement of the sell-down transaction.
Three variables need to be considered in order to properly value InterOil post-transaction. Assumptions need to be made for (1) total number of trillion of cubic feet equivalent (Tcfe) contained across ALL of InterOil's resources and its 40 prospects (2) the average price per million of cubic feet ($/Mcf) the gas will be sold at (3) the time horizon used for discounting to arrive at a net present value. Let's examine each of these in turn.
InterOil's Resource Portfolio
Elk/Antelope - The most recent GLJ report's "best" estimate of Elk/Antelope is 9.4 Tcfe. This report reflects data through December 31, 2011. Since the last report date, Antelope 3 was drilled. The results from Antelope 3 clearly show the E/A reservoir is contiguous. Antelope 3's hydrocarbon column height is humongous at 2,301 feet, which is 530 feet thicker than Antelope 2 and 81 feet thicker than Antelope 1. The feet of net pay, net-to-gross ratios and average porosity all compared favorably to GLJ's 2011 year-end E/A reservoir model. To be conservative, let's assume A3's strong results will cause GLJ's 2012 year-end reservoir analysis to grow only slightly and estimates E/A to contain 10.0 Tcfe.
Triceratops - A preliminary assessment performed in 2011 indicated Triceratops contains 4.9 Tcfe. For comparison, recall the first certified contingent estimate of E/A at year-end 2009 was only 3.8 Tcfe. It jumped to 9.1 Tcfe year-end 2010 and then to 9.4 Tcfe year-end 2011. Further seismic analysis and drilling results on Triceratops during 2012 led Morgan Stanley's analyst Evan Calio to conclude Triceratops's area under closure could be 2x Elk/Antelope's (Morgan Stanley's June 18, 2012 research note on InterOil). Although in the early stages of appraisal, an initial resource estimate of the Triceratops field will be included in GLJ's 2012 year-end resource estimate. My conversations with Dave Holland (head IOC geologist) lead me to conclude that Triceratops will ultimately have at least an equal amount of gas and liquids as E/A....and possibly quite a bit more. Let's assume another 10.0 Tcfe for Triceratops. [Read on here]