Pavel

[TxPm]

I just heard that Pavel has released a new report. Has anyone been able to get their hands on that yet? I don't use RJ

[ltinvest]

InterOil Corp. February 28, 2013
(IOC:NYSE) Company Comment
Exploration and Production ____________________________________________

4Q12: Bidding Process Officially Ends; NAV Rises With Resource Estimate
Recommendation. Our positive stance on InterOil is predicated on its long-term cash flow
potential and the expectation of impactful catalysts. This is balanced by the operational, cost,
timing, and political/regulatory risks as the upstream assets and processing infrastructure (LNG
and condensate) are developed. We see multiple near-term catalysts, including an LNG
partnership (incorporating a resource selldown) with an international company that could be
announced as early as March, followed by the final investment decision, although as usual we
would caution against having rigid timing expectations. We reiterate our Outperform rating.
♦ 4Q12 recap. InterOil has never used its earnings releases to announce major operational
updates, and today was no different. Solid refining and downstream results led to 4Q12
revenue of $356 million and EPS of $0.38 – well ahead of our $279 million and $(0.20)
estimates – but, of course, the market’s focus is elsewhere.
♦ Selldown: When and what to expect. Let’s get to what really matters. The LNG bidding
process officially ends today, and management confirmed that the board will meet in
March to select a partner. To be clear, this does not mean that the decision must be made
in March, and management is (wisely) not promising any firm timetable. To review: the
company has previously disclosed receiving at least four preliminary bids: two from major
oil companies, one from a national oil company, and one from a utility (known to be
Kogas). What we do not know at this point is which of these four companies have
proceeded to make final bids, and whether any other players are entering the mix. When
pressed on the decision timeline on the earnings call, management noted that they will
know more in the next “thirty to sixty days.” Once the board makes a decision, the winning
bid will be converted into a formal contract, and only then would a public announcement
be made. In other words, don’t expect any “play by play” updates in the meantime.
♦ Resource estimate rises. The biggest incremental datapoint in the earnings release was
the updated year-end 2012 resource estimate from GLJ Petroleum Consultants. Following
the drilling of Antelope-3 and Triceratops-2, the mid-case (2P) estimate rose by 10% (0.9
Tcfe) to 10.3 Tcfe gross, with roughly half the increase coming from a boost in the
Elk/Antelope estimate, and the rest from an initial assessment of the Triceratops field. We
think there is ample room for the Triceratops estimate to increase in 2013.
Valuation. Our “de facto” proved NAV estimate of $101.57 per share (increased based on the
new resource figures) comprises a sum-of-the-parts valuation, as detailed on page 2, and our
target price of $100 is in line with the NAV. Put another way, shares are currently trading at
$0.62/Mcf on a 1P basis. To restate an important point: the resource value embedded within
our NAV ($1.00/Mcf) is a hypothetical “guesstimate” that compares to a five-year South Pacific
transaction average that we estimate at around $1.20/Mcf. Once the partnership and resource
selldown are announced, we will be able to “mark to market” our NAV accordingly.

[TxPm]

Much thanks!

[Getitrt2]

Not new. Was out by mid-day yesterday, and was misleading on partner selection time frame.