Morgan Stanley on InterOil August 4, 2010

And their tactical idea as well..

Some noteworthy points (which seem to be misunderstood by some..)

  • Mitsui has the right to convert its estimated $550MM investment in the facility and its 50% interest into a 2.5% interest in the Elk/Antelope fields and the LNG facility. IOC is not required to re-pay 50% of the costs for the facility, so the implied price paid by Mitsui will be the full cost of the facility (not 50%, which would only imply $1.20/mcfe in the conversion).
  • Mitsui’s option to convert its investment in the proposed stripping facility into equity in the resource and LNG project implies a value of $2.41/mcfe for the gas/liquids, above the average $1.75/mcfe in recent regional transactions and at a significant premium to the $0.50/mcfe implied by IOC’s current share price.
  • The JVOA has a contractual term that requires an FID decision by March 2011. We believe the parties still expect an FID by year-end, which would allow IOC to book the condensate in the 12/31/10 reserve report.

Morgan Stanley August 4 2010

Morgan Stanley IOC Aug 4 2010 tactical idea

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