Things exceed expectations..

November 13, 2009
InterOil Corporation Great Rocks: Antelope-2 Results Continue to Impress

Impact on our views:

• Today’s release supports our views that IOC’s transformation from a frontier exploration company to a producing and global LNG player will occur. Today’s results have positive implications for IOC’s gas resource estimate (6.7Tcfe); de-risk the next, open-hole production test of Antelope-2; and increase the probability of higher condensate volumes or oil.
• The average porosity in Antelope-2 at 14% compares favorably to total porosity on Antelope-1 of 8.8%. While the comparison is not entirely apples-to-apples, as Antelope-1’s average porosity was over a 2,300 feet interval vs.Antelope-2 over a 1,224 foot interval; 14% porosity in 1,178 feet of productive reservoir is very encouraging.
• The high porosity de-risks the next flow test, in our view (12/1/09) and also, likely raises the total resource estimate, as IOC’s resource estimates likely risk the 8.8% porosity in Antelope-1 rather than assume an improvement.
• The high quality of rock at the bottom of the interval has positive implications for drilling into the liquids or oil window. We assume no value for oil in our base case.
• Finally, we believe all of these factors improve the geologic picture and continue to increase the probability IOC is able to monetize its stranded gas resource in a sell-down and unlock value.
• What’s new: IOC released logging results on Antelope-2 this morning. The logs covered 1,224 foot column, confirmed a reefal structure, and reported average porosity of over 14% with a net-to-gross pay ratio of 96% (1,178 feet of productive reservoir) with another 1,000 feet to drill.
• This appears to be a world class reservoir and the high rock quality extends to the top of the liquids window.
• The full flow test for the well is scheduled for December 1st. The test into the liquids window is likely in mid-December as they drill out of the bottom of the casing and DST each 100-200 foot section of the reservoir. Horizontal drilling may extend into January 2010.