What did the numbers say?

Raymond James:

• InterOil Corp. (IOC/$64.11/Market Perform) closes out 2009 in the green. InterOil posted 4Q09 operating earnings per diluted share of $0.11, well above our estimate of $0.01. Reported earnings of $0.43 per share included the recognition of $14.3 million in income tax benefits. Importantly, the company recorded its first-ever full-year profit. Companywide EBITDA totaled $9.1 million, exceeding our estimate of $8.3 million due to stronger-than-expected refining results, partially offset by weaker downstream earnings. Of note, InterOil restated its 3Q09 results (swinging to a loss of $0.60 per share) due to an accounting change related to the IPI exchange in September – but there is no cash impact. While the year-end filing did not provide any datapoints on the operational front, we would certainly expect the ongoing work at Antelope-2 to be addressed during this morning’s call.

Morgan Stanley:

• InterOil Corporation Positive 4Q09 Earnings;
• Focus on Asset DealsInterOil beats estimates, reporting 4Q EPS of $0.45, vs. the Street at $0.17 and MS at ($0.11). Annual 2009 net income of $6.1m ($0.15/sh) is the first annual profit in company history. Investor focus, and the core driver of our valuation, remains the next series of upcoming catalysts, in particular the successful negotiation of potential asset deals regarding both the condensate stripping facility and the E&P/LNG interest sell down.
• We remain positive on the core value of IOC’s resource and maintain our Overweight rating with a $120 price target. Upcoming catalysts, in any particular order: We see three primary catalysts in the near-term:
• 1) completion of horizontal drilling/testing at Antelope-2, which the company expects in the latter half of March,
• 2) final agreement with partner (likely Mitsui) financing the construction of the proposed condensate stripping facility, and
• 3) LNG Partnership/upstream sell down.
• We have generally expected the milestones in that order, although CEO Phil Mulacek stressed on today’s conference call that upcoming catalysts are relatively independent of each other, maintaining the possibility of an earlier commercial announcement.
• Other Operational highlights: Refining segment Q4 net income was $18.1m (vs. MS $1.0m), driven by hedging/derivative gains of $18.2m, improved gross margins, and a $14.3m deferred tax benefit from carried forward prior losses. Annual results included a non-cash, $31.7m loss on the extinguishment of IPI liability related to the company’s buyback of a portion of IPI’s interest. Annual EBITDA was $19.3m, or $51.0m excluding the above-mentioned non-cash charge. Cash position remains stable, no equity raise anticipated: End Q3 cash balance of $60.7m fell to $46.5m at YE. Although we expect some continued cash burn, we expect upcoming potential asset deals (stripping or LNG) will supply needed cash. CEO Mulacek reiterated no intent to raise equity.