IOC & Me

Discussion in 'Stocks' started by stonedinvestor, May 22, 2008.

  1. This press release caught my eye today-
    May 22 (Bloomberg) -- Exxon Mobil Corp. and its partners in an $11 billion liquefied natural gas project in Papua New Guinea decided to start initial engineering work, increasing the likelihood the plant will get built.

    The decision follows the signing of an agreement on fiscal terms with the government, Exxon said today in an e-mailed statement. The engineering and design work, known as FEED, will take about 16 months and the venture aims to commit to building the plant in late 2009, said Oil Search Ltd., a project partner.

    I racked my mind for two seconds who was that other company mucking around in PNG? Ay yes Boon Picken's investment in Interoil and that supposedly huge find that drove this stock to the moon and right back. What happened. Well there are a ton of shorts against this name and there is some good reason. There are some shady types who supply financing and a confusing ownership structure with lots of limited partners and such. Our very own high flying brokerage houses are in on this one and it remains to be seen weather bankers are good oil men!

    Still the news today and the knowledge that IOC has been in talks with the gov down there all just kind of made me buy today. Could Exxon buy Interoil? Possibly could Interoil start finally making some money off their darn refinery down there? Will exports from Australia ruin all of this?- lots of questions.

    Now can PNG handle two new refineries? It sounds crazy but Trindad has shown that if you build the right infrastructure you can save the whole country.
    This I pulled as well- Liquid Niugini is not a hot new rock band! It's our Interoil in one of it's sub divisions.

    Liquid Niugini Gas CEO Dr Jack Hamilton told that discussions had picked up considerably between his company and the PNG Government over the last week.

    He said he looked forward to a gas agreement for Liquid Niugini Gas in the near future.

    The PNG LNG project ownership consists of ExxonMobil at 41.6%, Oil Search at 34.1%, Santos 17.7%, AGL Energy 3.6% and Nippon Oil 1.8%. Landowner interests hold the remaining 1.2%, with Oil Search expecting sales to go to Asian markets in late 2013 or early 2014.

    Liquid Niugini aims to build an LNG plant next to InterOil’s refinery in Port Moresby and is backed by InterOil, Merrill Lynch and Clarion Finanz AG affiliate Pacific LNG Operations.

    Once Liquid Niugini obtains government approval, production is expected to start in 2012 using gas sourced from the Elk-Antelope structure.

    Well you can see we don't have quite the gusto finacing of the others but nor are we without cash. In fact the last earnings report showed a lot of good financing activity.

    The biggest bull all along has been raymond James.

    The company's big find in 2006 was called Elk 1 and it created a lot of hoopla and just as many disbelievers I always thought the bear argument was weak that they drilled near a fault line and got better results due to pressure but one cannot deny there has been no massive well doing anything at this point. Still a recent announcement of a new and perhaps even larger find just adds more logs to the fire and shorts on the case. Now we have " Antelope "

    According to Wayne Andrews, an analyst from Raymond James.

    Elk is a sliver of limestone thrust upon the much larger Antelope structure.

    So it's entirely possible that there is a whole lot more gas at Antelope then at Elk itself.

    However promising this looks, no DST test has been performed yet; this might provide an extremely good entry point, before they do.....

    here's some drilling notes from an article I found on Seekingalpha-
    InterOil’s Elk prospect is currently estimated to contain between 3.5 and 18.8 Tcf of natural gas. They’ve drilled two wells so far; Elk1 was the discovery well and Elk2 the first appraisal well.

    While the first (Elk1) was a runaway success (measuring pressures of 100MMcf+ through a 5 inch tube), the second well (Elk2) was, somewhat unfairly, seen as a failure by the markets.

    That failure becomes relative if you consider that the resource estimate actually went up, and T. Boone Pickens (who happens to hold a masters degree in geology), both privately and through his fund, took a 10% stake. Wayne Andrews, analyst at Raymond James, argued that the positives outweighed the negatives and upped his target to $65..

    A DST test showed that the well flowed 40.000 barrels of (highly gas saturated) water (the limestone is a lot deeper at Elk2 compared to Elk1, so it was below the water contact). Hardly the dry hole the shorts claimed it was. More importantly, that flow indicated the all important good porosity and permeability, hence the increase in the resource estimation (the limestone containing the gas is also thicker than previously estimated) and Boone’s buying.

    As a side note, we have to say that InterOil’s CEO Mulacek argued that Elk2 showed that there is enough gas for a two train LNG facility, which they are currently in the advanced state of planning (together with Merrill Lynch and Clarion Finanz) through a vehicle called Liquid Niugini.


    Now, in a brief PR on Thursday, the company announced the following:

    The Elk-4 well has successfully penetrated the Antelope structure, a new discovery which will significantly augment the gas found at the Elk-1 discovery well. Drilling operations experienced a gas kick and a flow of gas and gas liquids to surface which was circulated and flared. The well is now being prepared to drill deeper under pressure followed by comprehensive evaluation.

    "This well confirms the presence of hydrocarbons in the Antelope structure," said Mr. Phil Mulacek, CEO and Chairman of InterOil. "We are very excited about this early result and we look forward to drilling ahead to establish the commerciality of this discovery."

    It might be somewhat confusing that they are talking about Antelope while the well is called Elk4, but one has to realize that it’s a connecting field. No DST test was performed yet, but having to flare gas against heavy mud pressure sure looks promising.

    At their initial big discovery well, Elk1, a similar event took place (in fact, the gas pressure was so high that they almost blew the well, and CEO Mulacek likened the fight to control it to “stemming the tide of the Mississippi”). The DST test to prove Elk1 was performed considerably later.

    Performing the DST test at Elk4 will take some time (although not as much as at Elk1, where they had to fight to stabilize the well), giving investors a unique opportunity as the price reaction to the news is still somewhat muted.

    If a DST test proves what InterOil announced Friday, then resource estimates will go up, as Antelope now turns out to be a second (but connected) field containing natural gas.

    And it doesn’t even have to stop there. There could also be oil. There have been indications of oil before, and every oilfield in PNG has natural gas, so they seem to come as a package deal. Both Elk1 and now Elk4 contain liquids (which, if in sufficient quantities, can also be used in InterOil’s refinery, providing almost immediate cashflow).

    A popular argument used by the shorts is that 'no matter how much gas, it’s stranded', strikes us as particularly nonsensical. The demand (and price) for LNG is exploding, especially in Asia, where it trades at a very significant premium, and big producer Indonesia is diverting gas away from export towards domestic use.

    The odds have improved that there is more than enough gas at Elk/Antelope to supply such an LNG facility. There are plenty of Asian parties interested in financing it. And InterOil is in talks with quite a few already.

    As promising as it looks today, we need a DST test to nail it.

    >>> What's also interesting (and scary) is that Merryl Lynch who certainly needs money is 1/3 owner of Liquid Niugini, and they have had a loan out at 4% and extended it a few times and looks to me like they want to stay involved even if Merryl no longer exists!.... And of course the shorts there are a lot of them almost half the float. this is the sort of investment you are asking a lot from either total 100% double or look out below. Who's right here?

    It may seem crazy to be long DUG (short oil) and turn around and buy IOC today. Or it may be a very interesting hedge. You decide. ~ stoney
  2. here is the recent financing taken from their earnings.

    - Increased earnings before interest, tax, depreciation and amortization ('EBITDA').

    - Increased sales and operating revenue.

    - Gas discovery at Elk-4 well (announced May 1, 2008).

    - $130 million loan facility successfully repaid (occurred May 12, 2008).

    - On May 9, InterOil finalized a conversion of $60 million of debt in exchange for an issue of 2.7 million common shares at a price of $22.65.

    - On May 12, 2008 closed on gross proceeds of US$95 million from the sale to institutional investors of 8% Subordinated Convertible Debentures due 2013.

    - These combined transactions have resulted in a significant reduction in InterOil's debt, strengthening its balance sheet whilst also providing additional funding for exploration and corporate activities.

    >> So repayed $130M I am ASSUMING Merryl got their loan $'s back here still digging on that front, May 12th was the extended target date for the Merryl loan I know $60 mln plus $95 mln I grant you that to build a LNG refinery takes more like $4 BILLION but these investments are large enough to take notice. Especially when you consider the the co has been in talks with the far east for more $'s. ~ stoney
  3. InterOil Corp. 28.76 1.11


    In at $27.50 :) Sweet!
  4. 50% of the float is short
  5. Folks I'm really proud of myself. As an individual investor you have to take what each day brings. That's why after a wake & bake I sublimely surf the news and other tidbits links on this and that I'll delve from biotech to the oil patch to copper mines in Ecuador.... and today I had one of those epiphany days. It's been such a long day I forgot how I initially thought of IOC but then I got another whiff again I can't remember how for the life of me I was scanning for oil plays with sexy leverage that had not taken off already and I was in Tanzania on some research and then bam that Exxon article I ripped off a link from a message board on yahoo off another oil co... the usual nimble minds over there saw it as a bad thing for IOC... I saw it differently... I contacted the hedge fund and I should print here there response... to call it dry is not right something along the lines of this is total spec and without going down to Papua New Guinea, we'll never know... granted but stonedinvesting knows the types of $ behind this name and ontop of that this mountain of gas it would seem to me is a gusher and with results to be released and a 50% noted short position are we setting up for and am I sitting in the mother of all short squeezes? Plus I saw that daily turn up which meant others were beginning to think like me...... we'll get to trigger points and panic short sellers later when the news flow dictates but for now what is most fascinating about this story for me is the the way this story began many years ago was born in 1994, when Mulacek, a Texas oilman, bought a small Alaskan oil refinery and decided to relocate it halfway around the world.

    Mulacek, founded his first energy company in 1981 while he was still an undergraduate at Texas Tech University. In 1990, according to an interview with The Australian, the newspaper, he was processing oil waste in war-torn Kuwait when he met a group of Chevron executives. Four years later, they invited him to Alaska on a fishing trip that also included a tour of a small refinery that Chevron was trying to sell. At the time, oil refineries were not in high demand. Global petroleum development had slowed to a relative standstill as energy companies faced record low oil prices. But Mulacek saw in the Alaskan refinery a unique opportunity: although the rugged terrain of Papua New Guinea, 6,000 miles away, was known to house oil and gas reserves — in some places, visitors could squeeze rocks until their hands were coated with an oily residue — the country had no domestic refining capacity. Mulacek, who is described by acquaintances as a uniquely intense and driven businessman, bought the refinery and started the move....

    Folks I think he floated it over! He bought a freakin refinery for $10 MIL !& floated away to PNG... is this not amazing? Ok here's all the shady past stuff--

    To find investors to finance the purchase, he enlisted the aid of Gaylen Byker, an oil executive who he had met through mutual acquaintances. Byker was about to become president of Calvin College, an educational affiliate of the Christian Reformed Church that is based in Grand Rapids, Michigan ( Byker still holds that position.) But before taking the reins at Calvin College, Byker incorporated a small company to invest in Mulacek's refinery. A few months later, in mid-1995, Byker sold a portion of that company to his previous employer, the Offshore Energy Development Corporation.

    When Offshore Energy went public a few months after that, Byker sold his shares for $1.6 million, according to securities filings. Five months later, Offshore Energy's stock had declined by more than 73 percent, and Offshore Energy announced that it was for sale. In 1997, Titan Exploration, controlled by the deal maker Richard Rainwater, and an Enron subsidiary named JEDI (an entity later implicated in Enron's bankruptcy) bought the company and its stake in Mulacek's refinery.

    Now where in the ENRON story folks!

    By the time Titan entered the scene, Mulacek and Byker were scrambling to find cash to finance the refinery's relocation, according to Byker. Foremost among potential financiers was the Overseas Private Investment Corporation, a U.S. agency also known as OPIC that offers American companies loans and insurance for foreign projects with strategic value to the United States.

    By 1999, when InterOil's talks with OPIC were announced, Papua New Guinea was struggling to maintain a fragile peace achieved only a year earlier when a treaty ended a popular revolt that had claimed 20,000 lives. The United States had promised more than $1 million in direct aid to help quell unrest. In 2001, OPIC agreed to lend InterOil $85 million to finance the refinery's rebuilding.

    By then, the project was almost 10 years old and reconstruction was almost complete. But the refinery failed to meet expectations: although it began in 2004 to process crude bought from other oil companies, and has produced millions of barrels of gasoline and other products, it has quite likely never sold any of it at a profit.

    "When crude was $30 a barrel, this refinery made a lot of sense," said Byker, who still serves as an InterOil director. But the market for nontransportation fuels produced in the refining process, like naphtha, became less profitable as the price of crude rose, said Byker, causing InterOil's earnings to suffer. The company has spent millions of dollars making the refinery more efficient, but thus far "it hasn't worked out as we hoped," he said.

    A dearth of profits, however, did not stop InterOil from raising wads of money from investors. InterOil raised more than $125 million from shareholders and $318 million from debt holders between 2003 and 2005, according to securities filings. It did so based on assets that consist primarily of the refinery, which Byker said InterOil bought for less than $10 million, about 60 Papua New Guinean gas stations and a handful of oil and gas exploration projects.

    The company's executives and analysts say investors are willing to overlook InterOil's losses because they believe that its oil and gas exploration activities will eventually pay off.

    "While there hasn't been any real success in the company's history, I think they're on the brink of something huge," said Andrews at Raymond James, one of the few Wall Street analysts who has consistently followed the company. "I know it's controversial, and when people bash the company, I can't really say they're wrong, but I think it's going to be a great investment. It's happened with other energy explorers before."

    >> Is this shit not fascinating folks. Is it only me that digs up these companies? investing can be so much drama. Finally a way ENRON can pay me back for $50K it took from me.... Anyway Yea I stood up for myself I said I don't care if oil is going down this news is good foi IOC the gov is friendly now we just need to trust Boon Pickin's knows how to read a survey sheet which I'm sure he does.... We have the gas in the ground we need a LNG plant or perhaps we could just strike a deal with EXXON to use theirs?

    Anyway guess who pulled off the best trade at the fund today?- More On IOC
    Last Trade: 29.41
    Trade Time: 4:00PM ET
    Change: 1.76 (6.37%)
    Prev Close: 27.65
    Open: 27.67

    1y Target Est: 52.00
    Day's Range: 27.00 - 29.41
    52wk Range: 15.45 - 44.25
    Volume: 1,134,091
    Avg Vol (3m): 804,392

    Yes the old reversal up on volume! ~stoney
  6. stoney while you're here, what should I do with gsi? I'm still holding the bag on a hundred shares of it and it's down almost 30% since I bought it. :(

    In every single case except IPI, I've always sold shares too soon since I've started "trading" and I don't want to let this go, only to see it ride up to $30 in two months. Thoughts?
  7. Therm I offered to sell it yesterday. My hedge fund held it. I'm going to ride it out through early June. All Chinese stocks are getting murdered we are not alone. ~ stoney
  8. Folks you will have to excuse me if I lack my usual pep today, I had a very difficult Sunday. (don't ask- but pray for me I had a little fender bender with a NYC Taxi in my bro's car and rather than stop and talk about it in the 107 degree heat after driving two hours with no air conditioning and a sick dog... I skidattled probably not the best move...)

    Anyway we have the results in from the well and they are HUGE. If you have not already bought this stock what the heck are you waiting for... with price targets at $50 and two smallish private oil companies bought today, I feel the beginning of a whole lot of M&A is happening and as stated with the above research it's just IOC and EXXON down their in PNG.... draw the lines....

    > InterOil Corp-IOC announces gas flow results at Elk-4
    InterOil Corporation announced that it has concluded Drill Stem Test No.2 at the Elk-4 well in the Antelope structure and is pleased with the extremely positive results. "New data from the wellbore continues to surpass our initial pre-drill expectations and we will be looking to target additional gas column," stated Mr. Phil Mulacek. Key highlights from DST #2: Gas column height from the highest known gas at Elk-1 is 1,948 feet, an increase of 184 feet since DST #1 at Elk-4; Reservoir pressure at 7,507 feet (gauge depth) was 3,692 psia; Formation flow capacity was 48,375 millidarcy feet; Gas flowrate was 14.1 million cubic feet per day; Condensate production rate was 175 barrels per day; Calculated stabilized gas flow rate exceeded 160 million cubic feet per day.

    Stk is climbing over $30 and could get a short squeeze if we continue to climb. ~ stoney
  9. Well there I was in Fire island away from my laptop, recovering from an boozy night before when I saw on the screen IOC down $8! WHAT! I called my mother and then my broker and then my portfolio manager and then my cousin and i was about to call more people when I realized WAIT A MINUTE DOWN $8 from a ridiculously high one day spike! What the hell happened. I know a lot of you are in this with me and we are ALL VERY HAPPY IN AT $27.50 and the stk is cruising far above that but was the stk ever really at those nosebleed levels a look at a chart will have you believe it was a computer glitch but after reading this piece from Forbes I'm a thinking had I been at my desk I might of been able to punch the tickets of tickets....

    Anyway here's the piece-
    InterOil Tango
    Ruthie Ackerman, 06.20.08, 7:00 PM ET

    Somebody knew something about InterOil's business, or at least they thought they did. As trading drew to a close on Thursday, the Australian energy company's shares listed on the American Stock Exchange jumped 30.1%. Its Toronto-listed stock showed no such reaction.

    On Friday, InterOil (amex: IOC - news - people ) announced what sounded like a moderately positive development, the sale of a couple of energy properties in Papua New Guinea for $6.5 million.

    Investors in Canada took a moderately positive view, bidding the shares up 8.1%, or 2.64 Canadian dollars ($2.60), to 35.39 Canadian dollars ($34.80) on the Toronto Stock Exchange. The U.S. shares, perched at $41.62 when trading ended on Thursday, tumbled 19.9%, or $8.29, to $33.33, more or less in line with the Canadian close -- the Toronto shares actually had a late-day spike, though not quite as dramatic as that in New York on Thursday.

    The American Stock Exchange trading was active for the stock on both days: 2.3 million shares on Friday; 2.0 million on Thursday, significantly above the three-month average of 985,100. The less-active Canadian listing traded 172,600 shares on Friday but just 50,500 on Thursday, compared with a daily average of 77,600.

    There might be a perfectly good explanation for the Thursday spike in U.S. trading, but the American Stock Exchange did not respond to a request to provide it.

    >> Hummmmmm. Could of sold at $40 THAT hurts. I don't think I've ever seen a duel exchange stk act this way up HUGE here in the states and not budging in Canada. As I have been told by others that this thread is the best on the net on this name, I must admit a certain amount of frustration at not being able to inform you all better. Perhaps someone out in ET land has a handle on this crazy story.
  10. One more thing the Co presented at AGM up North and some info has been posted on Yahoo's message boards. Relying on yahoo's boards can be akin as relying on our intelligence to invade Iraq but here it is nevertheless....~si

    I’m very glad I attended the AGM. All the directors attended, plus most senior management. All were very approachable and eager to answer all questions from attendees.

    I got there early and spent 45 minutes with the CFO. Very good guy. Smart, quick, solid industry knowledge – he gave me a very good impression of being on top of things and as an important contributor to the management team.

    Same with the directors – these guys are all real- all are serious businessmen with deep industry knowledge and the skills and contacts to move IOC forward. It was clear they had confidence in the CEO.

    The actual AGM agenda was the usual legal items; receive financials, appoint auditors and elect the board. It was over in 15 minutes.

    The best part of the morning came when Phil Mulacek took out the recent seismics and walked us through the all the data and history of drilling. We had a free flowingand intimate discussion for about an hour. Phil is clearly VERY excited with the recent developments and was able to lead us through the Elk and Antelope fields, how they are connected, the evident depth, porosity etc, etc.

    Phil could not say anything more than what has already been made public – and he was obviously being careful with what he could and could not say. But he is clearly upbeat, smiling, excited and can’t wait to get on with all that will come next. “The dominos will soon start to tumble” was one quote from him.

    Other tidbits
    - Elk4 is a success and will soon be wrapped up
    - DST#3 – very soon. There may be more DST’s if the strategic wants additional information.
    - Third party confirmation – VERY soon
    - Strategic partner investment – IOC and that company (whoever they are) are working very intensely together to get a deal done. The strategic partner is at the well site 24/7 with their own group of industry experts and consultants. Phil would not comment on what they need to trigger their investment since he is under strict confidentiality constraints.
    - Since the Antelope announcements they are getting quite a bit more enquiries and interest from several other of the big industry players.
    - We saw samples of the ELK4 fluids. They are very clear, and Phil advises they are remarkably clean and will need minimal refining. He was also talking about what these fluids mean to the overall value of the discovery and what they point to in terms of the enormous magnitude of the Elk/Antelope fields.
    - Phil was meeting with the PNG Prime Minister last Friday; they are able to move faster given the other recent LNG agreement. No issue whatsoever on having more than 1 LNG plant on PNG. I asked if Exxon could use IOC’s plant instead of building their own – he said “Sure”.

    My conclusion - I'm staying long and feel very confident in the $65+++ Raymond James estimates. My impression is we will easily hit that target soon and certainly before the end of August.
    #10     Jun 25, 2008