tombo

Instant Gratification with InterOil Corporation?

I agree that Wayne Andrews is a smart guy, but even smart guys make mistakes. And he seems a little too cozy with management on the conference calls. Lofting softball questions and congratulating management as they miss targets time after time. And I believe RJ has a banking relationship with IOC. His earnings estimates on their refinery are certainly rosy, and I believe time will prove him wrong yet again.

T. Boone Pickens has a decent position in this stock, and that carries more weight with me, since I KNOW he's no fool, and he's putting his money where his mouth is. But frankly, I don't care if Jesus Christ has put a $200 target on the stock. If he can't explain why it should be worth that much and make me believe it, I won't be investing.

If I wanted to play PNG oil and gas, I'd buy Oil Search which trades at just 3x Wayne's target for IOC. They actually have proven NG reserves (more than double the best case speculation number for IOC), they're producing oil right now, and their LNG project is going to get done.

Their LNG project will come online late 2013 best case. IOC's project will come online after that if it ever gets done. I realize that LNG prices are sky high right now, but I don't think they are sustainable, and 5 years is a long time.

Instant Gratification with InterOil Corporation?

I don't know. Much of it is still true today. The refinery is still worth much less than advertised. Basically it's break even. They still need to get constant cash inflows from investors to keep drilling.

They still put out wildly optimistic press releases. Did you read over those press releases from the last 10 years? Seems like every well they drill is a "huge find" and then they cap it and move on. They still have no proven oil or gas reserves.

They only major "plus side" difference I see is they managed to swap out a good chunk of their bank debt in a hugely dilutive stock deal. Which means the short term credit crunch is over. I guess as long as they can keep finding suckers to invest, they can stay afloat. But even in the best case scenario, they are many years away from producing revenue off the Gas "find". What will Natural gas prices be then? How many old and new investors will be taking their cut before shareholders? Extremely overvalued IMO.

Instant Gratification with InterOil Corporation?

This article gives a good summary of the long case. Here's a link to the short case.

www.valueinvestorsclub...