Status of Licenses and Commitments

[johnwgrant]

After market seems to like it up $1.57 - At least it was 3 minutes ago...

Too funny how someone painted the tape with a $75/share transaction right at the close.

Then the Wall St. Cheat Sheet immediately after earnings release posts a link titled "InterOil Earnings: Here's why shares are down now".   Then, if you open their article, it says that InterOil beat the street - so the substance of the report is exactly opposite to the Title !!!

PS: I do NOT recommend clicking on this link since when I did, Norton A/V warned me that it blocked 2 attempted virus attacks...  Figures that the guys running Wall St. "CHEAT" Sheet would have viruses on their web site!!!

[petrengr1]

Press release today says, "On March 28, 2013 , the Minister for Petroleum & Energy approved and the DPE registered the deferral of the well commitments for PPL 236 and PPL 238." That helps. Best, Sam

Thanks Sam. In the MD&A for the 4th Qtr 2012 dated March 7th they said they had applied for these variances. Today they said the Minister approved it on March 28th.

I don't know why they didn't announce this earlier. I guess they do not consider it to be Material Information and, therefore, not Legally Required. Anyway we should see both Wahoo-1 and Tuna-1 drilled before the end of next March.

[petrengr1]

Press release today says, "On March 28, 2013 , the Minister for Petroleum & Energy approved and the DPE registered the deferral of the well commitments for PPL 236 and PPL 238." That helps. Best, Sam

Here is the present situation of the IOC Licenses and my opinion of how things will play out in the future.

PRL 15 expires November 29, 2015. I expect that a PDL will be granted after reaching an agreement and FID with our new partner. At present that appears to be Exxon.

PRL? for Triceratops. I believe IOC has applied for a PRL for the Triceratops Field. I expect the Government to grant that PRL in the near future and that will give us another 5 year PRL license. We should be able to get a PDL license during that five year period. A PDL has an initial term of 25 years and an extension period of 20 additional years.

PPL 236 and PPL 237 expire March 27, 2014 and PPL 238 expires March 6, 2014. I think IOC will drill Tuna -1 in PPL 238 and Whaoo-1in PPL 236 before the current license expires. The Government has approved our request for a variance as indicated in the 1st Quarter MD&A: “On March 28, 2013, the DPE

approved the deferral of the well commitments for PPL 236 and PPL 238.”  After drilling these two wells IOC will have completed the agreed work program for the term of the licenses. Since IOC is one of PNG’s most active and successful exploration companies I think the Government will grant NEW licenses to IOC to “effectively” extend the licenses. I think the way this is likely to happen is that either before or upon license expiration, the Government will issue NEW licenses to IOC with NEW PPL Number designations for these same areas. So the old licenses will expire or be replaced before they expire with new licenses. The new PPL licenses will be just like any other new license. The new licenses will have an initial term of 6 years and will be renewable for 5 additional years. IOC may have to relinquish half of the area after the first 6 years unless they submit a work program that shows they intended to develop or actively explore all of the area.

If we could get the Government Approval for new licenses before the old licenses expire that would no doubt expedite the bringing in of new farm out partners in all of the PPL’s as any new prospective partners would like to be assured of having more than a few months. I would like to see IOC get a significant (if not Major) farm out partner that would have the money and expertise to aggressively explore and develop the new license areas early in the first term.

[sageo]

Pet-- Thanks for your update to your original post. I too like the farm out partner idea as this would certainly move things forward at a quicker pace.

[petrengr1]

Press release today says, "On March 28, 2013 , the Minister for Petroleum & Energy approved and the DPE registered the deferral of the well commitments for PPL 236 and PPL 238." That helps. Best, Sam

Here is the present situation of the IOC Licenses and my opinion of how things will play out in the future.

PRL 15 expires November 29, 2015. I expect that a PDL will be granted after reaching an agreement and FID with our new partner. At present that appears to be Exxon.

PRL? for Triceratops. I believe IOC has applied for a PRL for the Triceratops Field. I expect the Government to grant that PRL in the near future and that will give us another 5 year PRL license. We should be able to get a PDL license during that five year period. A PDL has an initial term of 25 years and an extension period of 20 additional years.

PPL 236 and PPL 237 expire March 27, 2014 and PPL 238 expires March 6, 2014. I think IOC will drill Tuna -1 in PPL 238 and Whaoo-1in PPL 236 before the current license expires. The Government has approved our request for a variance as indicated in the 1st Quarter MD&A: “On March 28, 2013, the DPE

approved the deferral of the well commitments for PPL 236 and PPL 238.”  After drilling these two wells IOC will have completed the agreed work program for the term of the licenses. Since IOC is one of PNG’s most active and successful exploration companies I think the Government will grant NEW licenses to IOC to “effectively” extend the licenses. I think the way this is likely to happen is that either before or upon license expiration, the Government will issue NEW licenses to IOC with NEW PPL Number designations for these same areas. So the old licenses will expire or be replaced before they expire with new licenses. The new PPL licenses will be just like any other new license. The new licenses will have an initial term of 6 years and will be renewable for 5 additional years. IOC may have to relinquish half of the area after the first 6 years unless they submit a work program that shows they intended to develop or actively explore all of the area.

If we could get the Government Approval for new licenses before the old licenses expire that would no doubt expedite the bringing in of new farm out partners in all of the PPL’s as any new prospective partners would like to be assured of having more than a few months. I would like to see IOC get a significant (if not Major) farm out partner that would have the money and expertise to aggressively explore and develop the new license areas early in the first term.

Some people seem to think it would not be possible for IOC to continue to hold their license areas beyond the March 2014 expiration dates. It seems that there is a precedent for such a thing happening.

There is such a thing as obtaining a “top lease”  on an existing lease. In PNG this may be known as “top filing”. In any case if you search Google for “New oil system discovered in eastern Papua New Guinea” you will find an article dated 03/11/2002. You will note that the IOC license areas are called PPL 199, PPL 200, PPL 210, PPL 220, and PPL 230.

If you read the article you will find: “InterOil in January 2002 was awarded PPL 230, which supersedes or "topfiles" PPL 208. PPL 230 covers 4 million acres and contains all the Pale sandstone prospects identified by InterOil and other play types including the carbonate reservoirs demonstrated by the Puri oil discovery. InterOil has become the largest net onshore acreage holder in PNG and operator with 100% of PPL 230, PPL 220, and 210, which together extend from Port Moresby to the existing oil export pipeline.”

So the Area of PPL 230 was previously know as PPL 208. The Government approved IOC’s application for a top lease and granted a new lease, PPL 230, that superseded  the old PPL 208 lease.

Best of luck to all.

[Palm]

That's right Pet. The purpose of the lease expirations is that they give the government leverage if/when a licensee is just sitting on the licensed land. A license is a right to explore/develop etc. That right has an expiration, but that doesn't mean a new license can't be granted. The risk of course is that a new one isn't granted. But in cases where the licensee is putting the money and efforts into the development plan governments are likely to grant a new license if necessary. In these cases IOC is working with DPE in the development plan and receiving permission to alter/delay in the best interests of everyone. It's like we have said many times; IOC is doing development and making discoveries. If people want to use these expiration dates as a reason to worry or short the stock, then they have the right to do that. But if someone is in the "worry" camp, they might remember the "worrying is like a rocking chair" saying.

Thanks for pointing this out.