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A healthy correction

October 26th, 2009 · 6 Comments

InterOil down 10%+, what’s going on?

You could consider the following:

  1. The shares had a big run-up and technically they were (rather heavily) overbought. We always find it difficult what to advice when shares are technically overbought but a substantial amount of potentially very good news is still likely to come. With today’s sell-off, that problem has been solved.
  2. Comparable energy stocks like ATPG and SGY are also down rather a lot, so it does not seem to be IOC specific. The excess fall in IOC is probably related to the strong recent run-up and the technical picture.
  3. The trigger seems to be related to bullish dollar comments out of China, with ramifications for the oil price (which had been rising on the back of the weakening dollar)
  4. The company is still very cheap. Raymond James NAV of $48.5 is based on very low resource figures (2.3Tcf) which are essentially pre-Antelope1 (and proven, rather than the more current proven + probable P2 figure of 3.43Tcf)
  5. We cannot exclude some further weakness in coming days, but picking some shares up seems a good idea to us as there is a lot of potential news possible in the coming weeks and months.

Possible catalysts:

  • the size of the vertical payzone
  • DST and open hole test
  • new significant analyst covering (I’m pretty sure of that)
  • liquids info (read this mornings RJ report on how sensitive the economics are to the liquids/gas ratio and how they use the ratio from the top of Antelope2, we all know that can only improve downwards)
  • Possible oil flow
  • Yes, it can happen: PNG official agreement. Why not..
  • Other deals (take-off, farm-out, resource sale, etc.).

Tags: IOC

6 responses so far ↓

  • 1 Harold Chamberlin // Oct 26, 2009 at 10:28 pm

    Appreciate once again your timely input STP. It all makes sense, but it does sting a little. My source indicated that things were going extremely well last Thursday, so this is a bit of a surprise…

  • 2 Darcy Patten // Oct 26, 2009 at 11:22 pm

    If you put today’s IOC chart next to the today’s Energy chart they map each other almost identically until approx 2:15. So up until that point I believe point 3 above by STP nails it.

    Now this is all my speculation, but I believe from that point forward some stop losses came into play. At 2:15 IOC was down 6% or 3.50 and I think institutions that wanted to accumulate felt they could drive things down further and trigger the stop losses.

    If you look at the blocks that traded in the last 90 minutes, it is big dollar trades that are most likely out of the league of an individual investor such as myself.

    With the bullish report from RJ today I find it very very unlikely they would release that if there was bad news. This is just a blip on the radar during my 3-5 year hold of this company.

    I guess we will see what tomorrow brings. Peace from the great white north.

  • 3 admin // Oct 26, 2009 at 11:28 pm

    It also seems someone also bought 8000 Jan75’s today..

  • 4 Darcy Patten // Oct 27, 2009 at 1:14 am

    This is a post from another company I am starting to do some DD on. They are very similar to IOC in that they are in oil, not yet at total depth on their first well, although they have had a massive find and have also had a big run up in the past two months. I find it has relevance to our situation with Interoil.

    “I’ll be honest – I’m too nervous to be ‘out’ of GKP than I am to be ‘in’ GKP.

    I just feel safer holding the stock and accept that it can;t go up all the time – some investors forget that.

    I’m pretty certain it will fall again tomorrow and could test 92p ranges. The trouble is – I’m also certain that ‘news’ is coming as I feel TK is keen to get the momentum back with GKP.

    So there you have it – sell out and you stand the chance of missing the big news release. Stay in and whilst you see your profits ‘temporarily’ dip, you always have the opportunity to top up. Alternatively – if you hold at higher prices and are seeing losses – then you need to think about what is coming over the next 2 to 6 weeks. TD is coming – that’s what. and that’s well worth waiting for.

    Anyone know the winning lottery numbers for wednesday’s draw?”

  • 5 Darcy Patten // Oct 27, 2009 at 1:20 am

    The link if anyone is interested. Click on the post by “Hub”, it is the one with all the 27+ positive votes.

  • 6 Harold Chamberlin // Oct 27, 2009 at 5:07 am

    Oh Darcy, you are good…