InterOil in the S&A Digest

Another research report coming up….

BoJ’s printing press fired up… Badiali: “record natural gas flows”… Hedgies buy, moms & pops sell… Junk bonds junkier… Credit-card ‘inactivity’ fees?!… Zell: fear overblown… DailyWealth Premium

Note for Alliance members: If you had any problems listening to last night’s Off the Record conference call, you can still access the call here. The audio clip of the call and the full transcript should be up on our website tomorrow – we’ll send you a note as soon as they’re posted.

Bank of Japan is determined to do its part to keep the gold price high. The BoJ says it’ll pump 10 trillion yen of new money (US$115 billion) into the Japanese economy.

Ironically, Alan Greenspan told Japan many years ago it should write off uncollectible debts so a recovery could get underway in earnest. Japan didn’t do so, and now it’s saddled with the highest debt of any developed nation, approximately 170% of GDP.

Such debts are never paid off. They’re always inflated away. Of today’s action, BoJ Governor and Chief Inflator Masaaki Shirakawa says there’s more where that came from, “If there is a shortage of liquidity…” And let’s face it, folks. When you’ve borrowed more money than anyone on Earth and there’s no way it can ever be repaid, you’re pretty much in a perpetual liquidity shortage.

If you’re looking for inflation-fighting investments in the hard-asset sector, few people deliver like our resident geologist, Matt Badiali. Matt just sent us an update from his current research trip . We can’t divulge Matt’s location or the name of the company he’s visiting until his research is complete. However, if this company’s natural gas field is as large as Matt suspects, shares could easily return 10 times your money.

The well test was the most incredible thing I’ve ever seen – it nearly doubled the standing Guinness Book world record for a natural gas flow test. The well flowed over 700 million cubic feet of natural gas per day and 12,000 barrels of condensate per day.

That equals a flame easily 100 feet long and a roar like a jet engine. The heat was so intense, it set a couple hundred yards of jungle on fire.

To put it into perspective, they ran the well for 20 minutes, which burned about 9 million cubic feet of natural gas… about $35,000 worth at today’s prices.

The next milestone is on [this company’s major] well. It still has 1,000 feet left to drill to hit the gas/oil contact. If it gets oil, it’s a game changer. Priorities shift, development happens sooner, the company tacks a zero on to the end of its market cap…

To get to the well, we flew out early this morning on little puddle jumper planes then took helicopters to the well site. We chartered three planes to get us all out to the site. It was an event – press, local dignitaries, Morgan Stanley analysts…

Tomorrow, I’ll spend the day with technical staff looking over the seismic and cores. We’ll also tour the refinery and meet the downstream folks.

Matt’s putting together notes for next month’s S&A Resource Report. You can learn more about the Resource Report and sign up to receive Matt’s research here

2 thoughts on “InterOil in the S&A Digest”

  1. Love this quote:

    “If it gets oil, it’s a game changer. Priorities shift, development happens sooner, the company tacks a zero on to the end of its market cap…”

    Market cap as of end of day today is 2.68 billion. I like the idea of putting a zero on the end of that.

  2. Assume natural gas price is $3.5/Mcf, and flow test at 705 MMcf/d took 20 minutes, Matt Badiali’s calculation is 705,000 Mcf /(24×60 minute) x 20 minute x $3.5/Mcf =$35,000. Not took into account the condensate.

    I love the jet-engine-like roarrrrr.

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