Raymond James Comment on Wahoo PR

[Getitrt2]

 InterOil Corp. (IOC/$57.06/Outperform) finds gas at Wahoo-1 prospect, temporarily suspends drilling due to high pressure. At the annual shareholder meeting last month, InterOil disclosed that high pressure and other operational factors resulted in a longer-than-expected drilling process for all three of the current exploration wells: Wahoo-1, Raptor-1 and Bobcat-1. Today the company issued a more specific update on Wahoo-1. The well encountered gas – “significant concentrations” of methane, ethane, propane, and butane – apparently higher than the predicted reservoir. Drilling has also confirmed an effective seal in the Orubadi mudstone, as well as the presence of thermogenic hydrocarbons. The challenge is that the well pressure is extremely high: nearly 50% higher than at the Antelope discovery. (Recall, the Antelope field made it into the Guinness World Records in 2009 for its exceptionally high test flow rate.) Because of the high pressure, safety considerations have led management to temporary suspend drilling in order to allow a full technical review. Drilling will resume once it’s safe to do so. Our read: The well clearly found gas, and the high pressure suggests large quantities – though, to be sure, it’s too early to formally call this a discovery. We think the language in the press release is objectively encouraging, though the fly in the ointment is the deferral of getting final results on this one well. The two other wells are still drilling.

[jft310]

Sweet.