InterOil’s third party assessment, some observations

People are getting impatient with regard to the third party assessment of InterOil’s resources. We say, there is no reason to worry.

Some observations:

  1. We know that a lot of gas is there. Two wells, using small pipes, flow at record rates already enough to supply 40% of the gas needed for an LNG facility. These DST results are executed by a third party, by the way. There were several third parties present during drilling and testing, amongst which Schlumberger and Weatherford INT.
  2. We know that several reports are being written right now. However, not all of these are likely to be publicized. This depends on who commissioned these independent assessments. We believe that at least two are commissioned by potential partners interested in making a deal with IOC. They would have no reason to publish the reports, as the results will only draw attention and increase the competition for InterOil’s resources.
  3. Resource assessments are complicated processes. Given guidelines (the “two months after completion of Elk4”) can only be indicative. We are of the opinion that it matters much more that independent assessments are done, compared to the precise date it appears
  4. We know of one analyst who confirmed that one report has already been finished. It’s an assessment of Elk only, assessing there is between 2 and 10Tcf at Elk. Any gas in Antelope will be additional to that.

That an indenpendent report hasn’t appeared yet, or that a deal with a strategic partner hasn’t been concluded yet isn’t proof they never will. Both make eminent sense, we think the economics of IOC’s planned LNG facility look very compelling.

It is one of the cheapest planned LNG sources supplying to a region which has the highest gas prices, and it has other goodies to offer for partners with deep pockets. There are multiple parties interested in doing a deal with InterOil. No doubt.

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