Well, what we suspected all along, the negotiations with Merrill Lynch didn’t go smoothly, in fact, they didn’t go at all. It’s not a big surprise, therefore, but it’s not terribly positive either.
Merrill has been supportive for a long time, and is 1/3 owner (together with InterOil and Clarion Finanz) of Liquid Niugini, the company that is planning to build the LNG facility that has to process the natural gas from Elk/Antelope.
Merrill is also supposed to play a big role in marketing that gas and attracting finance for the facility. We have no reason to assume that it’s not going to perform these duties, but relations must be quite strained at the moment.
On the other hand, it’s positive that InterOil has been able to attract ample finance at pretty good conditions, at what probably was short notice. Even if Merrill didn’t have confidence, or, more likely got greedy because it itself is not in prime financial condition, other investors apparently are. First Clarion, now a private placement.
Also, on Wednesday after closing, quarterly figures will come out which we expect to show further improvement, as this is the first whole quarter that the pricing restrictions that hampered refinery margins up to now are no longer operative.
We also hope we will hear more about Elk4. Don’t forget, that’s way more important than the financing and dilution. All the signs are there that in Antelope we have a second gas reservoir, one that is probably even considerably bigger than Elk.
We have no way of knowing whether the well has been tested, but we hope to hear more in the conference call Thursday morning.
What can we expect? Perhaps some profit taking tomorrow, and losing Merrill Lynch is not positive, but we keep our eyes firmly on the far bigger price: Elk4.