Fresh from the press, very bullish after a talk with management..

raymond-james-ioc-10-26-09

Some highligts

• So how impactful are these condensate volumes? In short, the value of the liquids stream (excluding a commercial oil discovery) has the potential of overshadowing the proposed LNG project. Taking a look at the initial condensate stripping project feasibility study from earlier this year, according to estimated economics, the proposed project (under a $90/Bbl oil price) could generate a net present value (discounted at 10%) of over $700 million and a payout of two years from the start of production utilizing a condensate yield of 22.4 Bbls per MMcf of gas (comparable to yields already tested at the top of the reservoir).
• Importantly, an uptick in the condensate yield has strong implications on the value of the liquids stripping project – for example, increasing the yield by only 5 Bbls per MMcf of gas would bring the project NPV close to $1 billion (something that would no doubt change the negotiating stance of the company). As we have stated before, we believe it is in the best interest of InterOil to hold off on pulling the trigger on any strategic partnership until it gets its arms more fully around the size and value of the reservoir (including the condensate levels). And as has been the case in a number of analogous LNG projects across the globe, the near-term cash flow stream from a liquids stripping facility could very well underpin the development of the LNG project itself.