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InterOil, from the conference call

May 13th, 2009 · 12 Comments

What was said and some quite significant implications…

There are some noteworthy items:

  • Export: IOC has leased a shipping vessel, starts deliveries today, It also wants a second vessel for more exports, several S/E Asia countries want to import IOC fuels.
  • There are still $16 million in hedging profits
  • Inspecting a second rig now, as prices have gone down considerably because of the recession and the fall in energy prices, this is well within reach for the company
  • Stripping plant, minimum 10,000 barrrels a day in expected production.
  • Drilling the second side track: the well is fully cased down to 2347 meters (7925ft). Cemeting the liner is complete, off we go..
  • Plan on drilling below where oil was found in the first side-track but 100 feet away from the main shaft, going to test the richer condensates and the oil, will drill under-balanced.
  • Testing will require another 2-3 weeks, key driver here is to enhance shareholder value
  • All high condensate project discovered around the world have been monetized,and quickly
  • The financing for the LNG is paid for from the condensate recovery
  • Many interested person as the Reuters story said. The level of interest is much higher due to the high condensates levels. The LNG is good but volatile in pricing. Long term LNG pricing not an issue.

Let us recapitulate:

  1. There is an oil leg, parameters of recoverability will be revealed in 2-3 weeks, but even in case that doesn’t deliver a commercial oil find, the alternative is almost as good, as:
  2. The condensates have increased with depth, and are now a main driver of value, both in the upcoming deals and in financing the LNG facility. This alone is quite monumental and greatly reduces InterOil’s need to outside financing for the project, which cost are coming down as well (now $4.5B instead of $5-7B due to the recession)
  3. Further revenue and profit growth comes from opening export possibilities with the vessels planning, which has the potential to significantly increase capacity utilisation of the refinery, which at present is only operating at 2/3 or lower.
  4. And on top of that, refining it’s own condensates and/or oil would further greatly enhance profitability
  5. A second rig, which is now actively pursued, will double exploration speed.

Tags: IOC

12 responses so far ↓

  • 1 Darcy Patten // May 13, 2009 at 6:50 pm

    They have been speaking about a second rig since Sept of 08. I will believe they have the additional rig when they finally announce simultaneous drilling, until these comments are empty promises.

    The news is fantastic, but the length of time it is taking to get a second rig is killing me. The majority of the value of this company is in exploration. Why this step isn’t already complete is beyond me.

    I believe the farm out agreements will get us simultaneous drilling before IOC actually owns a second rig.

  • 2 rory mcgowan // May 13, 2009 at 7:07 pm

    Is IOC looking to own the rig or lease?

  • 3 Jim Tate // May 13, 2009 at 9:15 pm

    IOC would buy a rig. If they sign an aliance with an oil major they would get a rig and crews.through the farmout agreement.

  • 4 Roger // May 14, 2009 at 12:02 am

    Darcy,
    I’ve been just as frustrated as you regarding company comments of acquiring a secondary rig. However with the recessed economy we now have a unique opportunity to now acquire a rig at cheaper costs similar to earlier dozer acquisitions. As Stp has mentioned before we are truly at the begining of something here, and yet we’ve made great strides this year. The seismics are playing out as projected which leaves immense potential in the other fields. What I find particulary fascinating is that our friend Janine’s insight has proved much more accurate than those bashers on the yahoo board.

  • 5 Darcy Patten // May 14, 2009 at 1:16 am

    Don’t get me wrong, today’s news was fantastic in my opinion and I am really happy with how management has progressed. I am hugely bullish on IOC and I am in for the long haul. I am thinking to sell some around 100 to recoup my initial investment, then let things ride to 1000 pps.

    I know 1000 pps sounds absolutely crazy, but given the proven credibility of their seismic and all the identified locations, this company is going to find waaaaaaay more than 30Ts of NG, IMHO, and who can say about oil or condensates. I might have to wait until 2014 and LNG production, but it will happen, sooner if they get a few more rigs 😉

    And on a side note, before today’s puzzling pps drop I was at a 98.7% return for total amount of 182K, so things are moving along nicely. I want to wish everyone good luck, but after Antelope 1, we dont’ need it.

  • 6 Janine // May 14, 2009 at 1:29 am

    Update: I hear that oil has been found with the 2nd side track… company will have to announce a material event before all the data is in… Condensate levels/LNG are 5-10 times what was reported in March, maybe more.. Cash cow coming. Also,Elk 4 might become a oil production well on it’s own. Monster!

  • 7 bob mcnichol // May 14, 2009 at 2:11 am

    no negatives on the conference call, but he $2 pps pullback today meant that we had come too far too fast. not to worry however!!
    the final analysis of antelope testing is due in 2-3 weeks and I would be surprised if the farm out deal was much past 10 days thereafter. I am sue that mgmt is going through a “finalist” competitivion right now .
    While it is natural to be skeptical of any information received on a message board, the threesome of kencooksma, stp, and janine have been spot on for a long time with their expectations.
    good luck to all.
    bob

  • 8 Roger // May 14, 2009 at 3:43 am

    Thx again Janine for your ever present input. Good times are certainly ahead!

  • 9 shamrockoil // May 14, 2009 at 5:00 am

    Thanks to Stp for providing a place for valuable information to be displayed. Thanks to Janine for the latest and greatest!

  • 10 Jim Tate // May 14, 2009 at 11:45 am

    Was reported someone heard before the call was recorded something about 60 T’s of NG.Thats all I know.

  • 11 timjcyr // May 14, 2009 at 4:09 pm

    To compare us to Arun is huge news!

  • 12 Roger // May 14, 2009 at 5:04 pm

    I’m confused on this 60 t rumor, Jim can you clarify?