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  • InterOil's Increasing Value Proposition [View article]
    Oh the memories.
    Jul 9 12:43 PM | 1 Like Like |Link to Comment
  • Why Royal Dutch Shell Is Likely To Bid For InterOil Imminently [View article]
    What ever happened to "ResourceArb"?
    Jul 9 12:34 PM | Likes Like |Link to Comment
  • Post-Deal, What Is The Value Of InterOil? [View article]
    My oh my Mr Stavros.

    It seems you would have been wise to pay attention to my comments rather than wheel out the insults.
    Jan 6 09:21 PM | Likes Like |Link to Comment
  • Post-Deal, What Is The Value Of InterOil? [View article]
    Looks like I was bang on.
    Jan 6 09:19 PM | Likes Like |Link to Comment
  • InterOil: The Stars Are Aligned For A Takeover Battle To Ensue In The Coming Weeks [View article]
    I'm just wondering when "the coming weeks" period ends this time around? We're coming up on week 7 now.
    Sep 23 11:51 AM | 1 Like Like |Link to Comment
  • InterOil's Elk/Antelope Resource Revisited [View article]
    "Apart from that, I think many resource companies are given to put a little lipstick on their resources."

    I agree 100%. On a scale of 1-10 most resource companies are a solid 9.5. IOC was a solid 17 IMHO.

    Everyone should agree that nobody is entitled to his or her own facts, long or short.
    Jul 12 10:23 AM | 1 Like Like |Link to Comment
  • InterOil's Elk/Antelope Resource Revisited [View article]
    Anything is possible but I think if the CEO's departure were in any way related to that Belesis clown being charged they wouldn't have left him on the board of directors.

    To me it seems more likely that for whatever reason some combination of the PNG gov't, the board, or prospective partners made it painfully obvious that it was long overdue to upgrade the C-suite.

    I think they have done so and the new hire seems like a fantastic choice.

    Having said that I still wouldn't touch the stock with a barge pole :)
    Jul 12 10:21 AM | 2 Likes Like |Link to Comment
  • InterOil's Elk/Antelope Resource Revisited [View article]
    I think it's perfectly fair to call out short sellers who are speaking out publicly to back up their claims (in a perfect world they would lay it out in a 200-page 3 hour presentation like Bill Ackman did on Herbalife).

    I agree that Antelope is an "encouraging" resource (Exxon wouldn't be wasting its time, nor would have Mitsui).

    However I do have to point out that this article seems imply that IOC is an innocent bystander and hasn't contributed to its woes.

    For example:

    "And it's quite unlikely that any party would have committed billions of dollars for an LNG plant on the basis of a single well. So it's simply a bit of a semantic trick (the likes of which we have seen so often) to argue that InterOil has been drilling and promising deals for years and years....Realistically, one could only have expected serious interest after a couple of Antelope wells were drilled and evaluated by a third party. That's only a couple of years. "

    I believe that, it seems the author now believes that. But the fact of the matter is the company has been stating otherwise for many years. Interoil hired BNP Paribas and ABN Amro in early 2009 to do exactly that:

    Here is a presentation they gave exactly 4 years ago, several months after they hired the investment bankers:

    "In March, 2009 InterOil Corporation announced it had retained
    BNP Paribas Capital (Singapore) Ltd. (BNP) and ABN AMRO
    Corporate Finance Australia Ltd. (ABN AMRO) as joint financial
    advisors for the sale of interests in the Elk/Antelope field, the
    Liquid Niugini Gas Ltd LNG Project and associated liquid natural
    gas off-take agreements with potential strategic partners

    InterOil is currently qualifying bidders"

    This is a minor example. One of many many others dating back to at least 2007. Another small example:

    "We are in discussions, a vast number of companies on at least three continents have expressed interest joining our acreage following the Elk-1 discovery and flow test."

    That quote is from 6 years ago in April 2007.

    I think the author's point is that based on the available data about Antelope in particular, and the fact that high quality shops like GLJ and Gaffney have assigned a large contingent resource estimate, the vocal shorts are unwilling to accept the fact that Antelope may actually have value. I think that is fair based on the data and the fact that there is some legitimate interest from Exxon (terms unknown....).

    However I think it's also fair to say "why should we believe them now?". In this regard I think the company has done severe damage to itself by over-promising and under-delivering for years. After years of vicious defense of the company and the CEO it seems vocal longs were pretty quick to throw him under the bus and put it all at his feet. I dearly miss him, but the jury is out as to whether or not this time will be truly different - remember the "binding bid deadline" was February 28, and they are just now in non-binding discussions and considerations with Exxon (again, terms unknown).

    Fun to watch.
    Jul 12 09:52 AM | 1 Like Like |Link to Comment
  • The P'nyang Paradox And Why Exxon Needs InterOil's Gas [View article]
    I think this is a pretty weak IOC bull argument, but not surprising given the dearth of actual news (except for the founder and CEO leaving suddenly with only a week's notice - cleaning out his desk today as a matter of fact).

    "If Exxon and Oil Search consider the expansion of PNG LNG's capacity a top priority and if they were truly confident of P'nyang's multi-Tcf size and economic viability in supplying an additional train based on the drilling results and seismic interpretation from the data acquired in 2011, why have they decided to refrain from drilling additional wells in the field pending further analysis?"

    I have several comments:

    - the top priority for Exxon and OSH is bringing the $19 Billion PNG LNG project on production. Full stop. Everything else is a sideshow for them right now as they try to get the plant commissioned by year end.

    - According to UBS ExxonMobil (who drives the timetable) is guiding for a Train 3 FID at the end of 2014 AT THE EARLIEST

    - There is no need to rush additional (expensive) wells - they are being methodical and OSH announced during Q1 that it has started working on other aspects of P'nyang including "scoping and planning, commercial aspects, environmental studies, and stakeholder engagements".

    - A huge thing you are missing here is that not only is P'nyang a source of gas to underpin T3, but Hides itself is very likely to have it's reserve based increased - they've almost completed the B1 well and will immediately drill B2.

    "Evidence suggests, however, that P'nyang may not be an economically viable solution for the project's expansion, implying a need for Exxon to acquire a stake in InterOil's PRL 15 in order to ensure an adequate concentration of gas to supply PNG LNG's additional trains."

    Really? evidence suggests????

    Your basic argument is that because a) train 3 is a priority, and b) they are going to shoot 2D seismic and advance other required activites on P'nyang rather than go on a rabid Mulacek-style drilling binge, that this is somehow evidence that it's not "economically viable??"

    Isn't this the same as arguing that IOC's top priority was monetizing Antelope, so by spending cash and drilling out Triceratops rather than A-3 and E-3 (that they are only drilling now - even though the acknowledged "lingering questions about the resource" on Antelope), then this is defacto "evidence" that Antelope isn't economically viable?

    I'd also point out that there are other non-IOC options to expand into train 3, 4, and 5, including OSH/Total's other gulf activities (including Flinders (1.5tcf) which is being drilled now), Hagana (1.3 tcf), and Talisman's assembled 3-4 TCF of gas), and of course drilling on the parties' massive acreage.

    This is a pretty sad piece and reeks of desperation. The reality is the industry and analysts view train 3 as "in the bag" (to use Bernstein's term and are turning their attention to trains 4 and 5 already. To imply that Exxon and OSH are somehow desperate for IOC's gas is ridiculous.

    Of course it might make some sense to use Antelope as potential feedstock also if the price is low enough, but I don't see IOC having the leverage that the author seems to be arguing here.

    The definition of paradox is:

    "A paradox is an argument that produces an inconsistency, typically within logic or common sense"

    I think that safely applies to this puff piece.

    All IMHO.
    Apr 30 04:10 PM | 1 Like Like |Link to Comment
  • Pacific Rubiales, Other Indicators Confirm Majors Embroiled In Bidding War For InterOil's Assets [View article]
    Let's recap:

    Sep 2011 IOC hires the 3 ibanks

    Sep 2011 to Jan 2013 - lots of talk of imminent deals, a PNG election, blah blah blah"

    Jan 2013 IOC's stock starts to crater - company scrambles to state:

    "Separately, InterOil announced that it has advised bidders with which the Company has been in discussions that the final binding bid solicitation period for the partnering process currently being undertaken will close on February 28, 2013. The InterOil Board of Directors intends to meet the Company’s advisors during the first week of March 2013 for the purpose of evaluating bids received and selecting our partner(s) for the development of the Gulf LNG Project utilising gas from the Elk and Antelope fields in Papua New Guinea."

    Feb 28, 2013 - rather than the usual mid-March timing, the company moves it's conference call to Feb 28, the very morning that the "binding" bids are due. Timing slips from "first week of March" to "during March"

    March/April - "several bids to partner have been received...the BOD met advisors during March to evaluate bids" Now refers to the partner process as now both "complex" but "on track" despite blowing the March timeline guidance"

    April 23 2013 - Out of the blue the CEO and founder gets sacked, errr "retired", with a week's notice to clear out his desk. Clearly a dishonorable discharge or they wouldn't have humiliated him right before the supposed big "news".

    Those seem to be the facts as we have them.

    To me this seems a bit like the Apollo 13 mission. IOC went around the dark side of the moon. Out of sight with no communications. All that's popped out the other side so far is one of the astronaut's bodies floating in space.

    What else will pop out, and when? I'm concerned about their oxygen (cash) supply. Surely they just threw the guy that was sucking it all up out the airlock.

    Ironic that the AGM has just been moved from Grand Rapids to Houston.

    "Houston, we have a problem"
    - Commander James Lovell, Apollo 13
    Apr 25 01:18 PM | 1 Like Like |Link to Comment
  • Pacific Rubiales, Other Indicators Confirm Majors Embroiled In Bidding War For InterOil's Assets [View article]
    "my analyses indicate that most of the energy group remains slightly overvalued as FCF estimates for the companies over the next several years are too high if their reserve growth trajectory were to accelerate to positive low to mid single digits."

    You don't need to invest in "most of the energy group" - just need to find a handful of more attractive risk/reward tradeoffs.

    I'll give you one, for the sake of brevity and because it is a recent (and current) long position for me: Suncor

    Suncor is almost all (90%+) oil. it owns its own upgraders, refineries, and downstream assets so 96% gets world (Brent) pricing with only 4% WTI exposure.

    Cash operating costs per oil sands barrel are ~$35 so cash flow is enormous at $90-$100 Brent.

    Production is growing at 8-10% per year.

    Based just on 2P reservers the company has 34 years of production at current rates (6.9 Billion barrels), but another 115 years (23.5 Billion barrels) of contingent resource.

    The company has a $42B market cap.

    Operating cash flow is approximatley $10 Billion. Sustaining capex is about $4 Billion, making free cash flow approximatley $6 Billion (a 14% free cash flow yield). The company has a disciplined and shareholder friendly approach (particularly under the new leadership) and will spend about $3.3B of that FCF on growth, leaving $2.7B available for dividends and buybacks which they are doing aggressively. Including buybacks the yield is over 4%. The 2% dividend only costs $750M so they are about to raise the dividend again. They could easily double it or more.

    So I am getting a nice yield, a cheap multiple, over 100 years of production in the ground, very high netbacks, and shareholder friendly management. I'm paying about 4x cash flow, or 7x free cash flow (talk about a "free cash flow machine).

    On just the proven and probable reserves I'm paying (on a total EV basis) at $1.17 per mcf equivalent. Including the contingent resource I'm paying about 26 cents per mcfe.

    Or I could invest in "Interoil", a company stumbling aroung the jungles of corrupt train-wreck PNG, burning gobs of cash, a history of fumbling and bumbling, trying to get a multi-$Billion project started with money that it doesn't have, etc etc.

    Sure IOC could pay off. But IMHO you have to hit the bong pretty darn hard to view it as a better risk/reward than SU or a dozen other companies I could show you.

    All IMHO. Do your own work of course.
    Apr 22 05:22 PM | 1 Like Like |Link to Comment
  • Pacific Rubiales, Other Indicators Confirm Majors Embroiled In Bidding War For InterOil's Assets [View article]
    "Cannot understand where your 'silence' comment comes from...When there are multiple bidders the process usually takes months and the market is NOT advised about level of bids etc..."

    If you were referring to companies in general I might agree with you. But we are referring to Interoil here. Do I really need to post the long list of quotes from management specifically on the terms and timing of the process? This is a company that puts out a press release titled "Interoil Confirms Indications Of Oil At Antelope-2" which GLJ deemed worthless and non-commercial.

    Same company that said Elk would underpin an LNG project, when if fact we know now that Elk isn't worth much (it's all about Antelope as we know now).

    Same company that put this in it's slide deck at the 2012 AGM coming up on a year ago:

    "Sell Down Process Nearing Completion
     Working with a short list of qualified bidders
     Advancing binding agreements on conforming bids
     All Bids accretive to shareholders, top bids at a multiple to share value"

    When I talk of silence I mean in the relative sense. This is Interoil. In my experience when they clam up on details and are relatively silent, it's because there is an egg they are about to lay and they want to counter it with some offsetting "good news".

    When IOC kicks the conference call to the morning of the bids, and Phil Mulacek states:

    "I mean, as we need to disclose under law, we'll complete and comply with proper disclosure."

    That is a pretty big departure from both the recent and long term past practice.

    The optimist (apologist?) might argue that IOC has learned it's lesson. The skeptic (realist?) might find information value in the sudden concern for tight lips and confidentiality, etc.

    Do you really think it's the former, when the CFO is blabbing to "PNG Industry News" on a near-constant basis?

    I've never argued they should disclose the negotiation blow-by-blow. I am judging them by what they actually say and what they actually do.

    Finally I am not a "short". I just don't wipe the slate clean every week when looking at a company. You yourself said that management has a huge credibility problem - to me that is enough to stay away from any long position.
    Apr 22 04:53 PM | Likes Like |Link to Comment
  • Pacific Rubiales, Other Indicators Confirm Majors Embroiled In Bidding War For InterOil's Assets [View article]
    Given the author views PNG Industry News as a highly credible source of information, perhaps he can comment on today's article:

    A few snippets:

    "THE status of the Papua New Guinean government’s previously announced plans to lift its stake to half of InterOil’s Elk-Antelope field remains unclear."

    "In recent weeks sources have confirmed to that the government has gone quiet on the matter."

    "There are various rumours coming out of Port Moresby over past weeks, including that InterOil chief executive officer Phil Mulacek and key InterOil shareholder Carlo Civelli had their own meeting with O’Neill last month."

    Didn't the IOC touts argue that Byker was really driving the bus now?

    "While another rumour suggests that at least one InterOil executive wants the company to remain as an upstream operator of Elk-Antelope once the strategic partner is selected, the CFO did not wish to speculate." can just smell the "bidding war" that started in September 2011.

    "As stated before, we are now set to engage with a short list of significant industry participants in a view of concluding these discussions and entering into agreement this quarter." - Phil Mulacek, May 14, 2012"

    Why was 6 weeks plenty of time to "engage" a short list, conclude discussions, and enter an agreement last year, where as now we are 7 weeks in supposedly after receiving final "binding bids"?

    It's clear to me (IMHO) the company doesn't want you to know what is really going on - otherwise they wouldn't have moved the latest conference call to the morning that the bids were do (the year-end CC's always took place in March prior to this year where they crammed it into the morning of Feb 28 with "bids" due that afternoon). The CEO's comment that they are only going to disclose the minimum required by law was pretty interesting given their history of aggressive (IMHO) PR.

    What I don't get is there are many many energy companies out there that have been clobbered and are trading at massive discounts to their asset base, but are much lower risk, so why be a bull on IOC at a $3.9 BIllion enterprise value when there is a) huge cash burn, b) a weak balance sheet, c) is years away from any production, d) has a history of fumbling the ball at the 5 yard line (IMHO), and e) there is risk that a "deal" doesn't occur at all for whatever reason and f) if there is a "deal" the terms may be mediocre or poor - the longer the silence drags on the more likely it is that someone isn't happy IMHO.

    Disclosure: Not short but will never go long.
    Apr 22 11:21 AM | 1 Like Like |Link to Comment
  • Pacific Rubiales, Other Indicators Confirm Majors Embroiled In Bidding War For InterOil's Assets [View article]
    This is the second best example I've ever read on the power of deduction and extrapolation. The logic is airtight. The only better demonstration of this clear thinking is:

    V: There are ways of telling whether she is a witch.
    P1: Are there? Well then tell us! (tell us)
    V: Tell me... what do you do with witches?
    P3: Burn'em! Burn them up! (burn burn burn)
    V: What do you burn apart from witches?
    P1: More witches! (P2 nudge P1)
    P3: Wood!
    V: So, why do witches burn?
    (long pause)
    P2: Cuz they're made of... wood?
    V: Gooood.
    (crowd congratulates P2)
    V: So, how do we tell if she is made of wood?
    P1: Build a bridge out of her!
    V: Ahh, but can you not also make bridges out of stone?
    P1: Oh yeah...
    V: Does wood sink in water?
    P1: No
    P3: No. It floats!
    P1: Let's throw her into the bog! (yeah yeah ya!)
    V: What also floats in water?
    P1: Bread
    P3: Apples
    P2: Very small rocks
    (V looks annoyed)
    P1: Cider
    P3: Grape gravy
    P1: Cherries
    P3: Mud
    King: A Duck!
    (all look and stare at king)
    V: Exactly! So, logically...
    P1(thinking): If she weighs the same as a duck... she's made of wood!
    V: And therefore,
    (pause & think)
    P3: A witch!
    Apr 22 08:49 AM | 1 Like Like |Link to Comment
  • InterOil: A Free Cash Flow Machine With An Unparalleled Reserve Growth Profile [View article]
    "The "Shelf Offering" available to cover IOC's portion of the project costs stands at $1 Billion."

    I see. Just like the $300M shelf that they tapped for $280M in 2010 covered IOC's share of the condensate stripping plant that will be operational by 2013. Oh wait.

    I thought the "sell down cash" was going to cover IOC's portion and the shelf was just a prudent non-even because the last one expired?

    I think it's a tad early to be talking about "flowing BOEs" and "free cash flow" at this stage.....

    Disclosure: No position
    Apr 17 08:53 AM | 4 Likes Like |Link to Comment
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