The best evidence yet the deal with Exxon is basically done and about to be announced
It has been a long and frustrating road for InterOil shareholders over the last 45 days, but it finally seems to be coming to a very happy end. InterOil's CFO and head of IR met with at least two of the company's biggest shareholders on their way to Asia this week. I was told they made an offer for the funds to sign NDA's and be temporarily restricted from trading in return for learning the terms of the SPA with XOM, implying the deal must basically be done and there's nothing left to negotiate. So it wouldn't surprise me if the big announcement is days or maybe a week or two away at most. At least one fund walked away from its meeting confident that the deal is as good or even better than the most bullish optimists have hoped for and that the cash and upfront staged payments will be more than adequate to fund all drilling and infrastructure costs for the Gulf and PNG LNG projects (as was reported at InterOil's AGM). Also, there is tremendous optimism in the company that the PRL 15 sell-down to Exxon will ultimately incorporate a smaller stake than anyone thinks, as there is very low hanging fruit to expand the resource size, especially with the Antelope 4 well, which may be drilled even before Elk 3. This process, however, will have no impact on the timing of cash flows to InterOil, so it just creates optionality for InterOil down the road. There was also a sense that the interest in investing in InterOil's fields by supermajors, NOC's, etc.. has been off the charts, and there could be another sell-down/partnership at a stepped up value soon after the first one. The final chapter is about to be written, and it seems that it will be everything the long-time bulls have hoped for and more. One couldn't hope for a better backdrop: pervasive skepticism and frustration, oil and LNG on fire, a new CEO in place to articulate the story and deal attributes, elevated short interest, and a valuation that easily leaves room for a double or more.
