Equally positive..

InterOil Corp. (IOC/$48.39/Market Perform): Positive Datapoints Gleaned from
Antelope-2 Logs; Moving On to Liquids Zone

• InterOil announced that it has successfully run intermediate logs along the upper section of the reservoir at Antelope-2, encountering gas and gas liquids throughout the entire vertical interval (1,224 feet). There were three key conclusions from this latest test.
• First, the net to gross ratio was over 96%, surpassing the 90% observed in Antelope-1. This ratio measures the amount of rock that holds sufficient porosity to be considered “pay”.
• Second, porosity levels averaged over 14%, also better than the 8.8% encountered at Antelope-1.
• Third, the presence of dolomite throughout the entire section, particularly at the base of the log, bodes well for the porosity levels in the lower section (which is the condensate-rich zone).
• Looking ahead, the company is gearing up to do a full production test on the upper section at the beginning of December. This should be a rather brief test, with results expected within about a week. The company will then drill through the base of the gas column into the more condensate-rich zone, including the potential oil leg.
• Bottom line: Positive read on this interim well report. The log results at Antelope-2 have come in better than encountered during the testing of Antelope-1. We would expect the shares to react favorably today, but the flow test in three to four weeks should yield much more impactful datapoints relating to the field’s resource potential

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We add that the chances of producing oil have significantly increased, and the liquids stripping plant now seems a foregone conclusion.