MS update:

[Gator]

InterOil Corporation

March 17, 2015

Disclosure Improves; Continues

Derisking the Resource

(Full report PDF attached)

[ArtM72]

"Antelope-5 has been successfully completed and is being prepared for an
extended well test in the next 1-2mos.Weview the wellbore's intersection of
thereservoir at 230m abovethe operator's model referencecase(7Tcfe
resource) as a positive,"

Do we know that "the operator's model reference case" is 7 TCFe? Was I just assuming, erroneously, IOC's reference case was the P50 9.9 TCFe?

[Putncalls]

Art,
There has been an ongoing discussion on this board (when getit allows) concerning that question. There is a strong case that MS believes that the reference case is the 7 T GCA view. I'm not absolutely sure but I'm pretty sure that it is, if you know what I mean.

If you want I'll dig through the past related posts.

[Getitrt2]

"Antelope-5 has been successfully completed and is being prepared for an extended well test in the next 1-2mos.Weview the wellbore's intersection of thereservoir at 230m abovethe operator's model referencecase(7Tcfe resource) as a positive," Do we know that "the operator's model reference case" is 7 TCFe? Was I just assuming, erroneously, IOC's reference case was the P50 9.9 TCFe?

Art, I would suggest you read Pet's posting and discussion of that, probably a week or two ago.

[Palm]

I think this has been pointed out a couple of times as far as that reference. When IOC booked the sale of the interest to Total their 1Q 2014 financials (and all since) laid out how they calculated their gains and receivables. They stated that this was all calculated using the GCA 7.1T estimate, as GCA is/was an accepted reservoir consultant. Since they based their financial estimations on this amount (which was proper) they also needed to use that in going forward on the appraisal drilling so that as things progressed in the field to Certification, the financials could be adjusted accordingly. Everything has to fit as neatly together as possible.

[ArtM72]

Getit, I reread Pet's 3/5/15 post on elevations but that didn't help much. Palm, while you make a logical case, I can't necessarily agree with the suggestion that there existed two different models, GCA and GLJ, whose difference was based substantially on projected top of reservoir elevations. There are just too many other key variables influencing the volume projections. GLJ is no rookie in the petrogeology business and its work to date for IOC seems to be panning out in terms of accuracy.

If I were a driller I would want to have the best available seismic projections before starting my hole, independent of what numbers the accountants chose to use. Insofar as we know GCA may have even lowballed the 7.1T figure as a special corporate policy consideration.

All of this is of course idle speculation, but we've had a pretty fun 28 hours, haven't we?

[Palm]

Art, under Note 2 to the FS (Exploration and Evaluation Assets), IOC states this:

"The conveyance accounting for the share sale agreement (“Total SSA”) with Total S.A. (“Total”) has been accounted
for in the year ended December 31, 2014. This recognized the interim resource certification payments expected in
addition to the completion payment that was received from Total during the year. The interim resource certifications
were estimated based on a certification provided by Gaffney Cline & Associates (“GCA”), which certified a best case
scenario of 7.1 trillion standard cubic feet equivalent (“Tcfe”) of natural gas in the Elk and Antelope fields. GCA is a
recognized certifier under the Total SSA. The interim resource certification under the Total SSA will vary post the
completion of up to three appraisal wells that will be drilled within Elk and Antelope fields prior to the certification."

GCA is a credible certifier but their estimates are not going to be accepted by potential partners and most importantly banks who finance projects. Doesn't matter much now anyways; by YE 2015 the official Certification should be done.

[ArtM72]

I found and reread Pet's post of 2/24 under the thread titled "Two Questions". It certainly makes a ton of sense that the "reference case" was GCA's given the dispute over whether the reservoir fell off to the west. Thanks to all for your help. Can't wait to see the results of that well test. If A2 flowed at 700+mmcfd and A5 is the best of the wells I have to imagine lighting A5 off would look something like the old Saturn C5 rocket going up.