SupaSage

InterOil Offers Misleading Information About Questionable Employees to Investors

Let's think about this... I'll give Sam the benefit of the doubt here. Lets assume:

1. Carl Caserta was in fact barred by the Securities and Exchange Commission from “association with any broker, dealer, or investment advisor”
2. Carl stilll has an available, current, and active email address at InterOil (IOC)

What does having an email address have to do with his barring by the SEC? IOC is not a broker, dealer, or investment advisor. And even if IOC were a broker/dealer and Carl was associated with IOC, does that have anything to do with the assessments of IOC's potential resource?

Moreover, isn't it a bit hypocritical for Sam to be casting stones at Carl, when he too, was found guilty of wrongdoing in the past? If Sam expects us to believe that he is "reformed", why shouldn't we believe that Carl is "reformed" as well.

That said, I think its important to focus on the facts. IOC is apparently getting closer to signing a deal with a partner on its LNG project. If we look at the news article from Monday, we'll see that CNOOC or PetroChina could be paying $500mm for a 35% stake. That implicitly values the entire project at $1.4 billion. Add to that the value of IOCs other net assets (about $600 million) and you get a total value of about $2.0 billion. That equates to more than 80% upside from IOC's $1.1 billion market cap today.

Is InterOil Selling Investors Hope?

Actions speak louder than words to me. I'm sure Wayne Andrews was making a pretty good living at Raymond James as an analyst. Now, I don't know if he joined IOC directly from RJ or if he was unemployed at the time he joined IOC, but it's really not that relevant. For him to forgo his career as an equity analyst to become the investor relations person for IOC tells me that he truly believes that the company has significant upside. I'm sure his compensation package probably includes some stock options, which would make his stint at IOC more lucrative than if he stayed at Raymond James. But "hyping" the stock wouldn't help him if the company didn't really have any resources. If you think about it, the guy took the job at IOC for the big payday when they company's stock re-rates to reflect its current asset potential. I'm sure he wants the stock to go up, but I would think he's in it for the longer term. Bottom line is that I don't think there's any fraud going on at IOC. At the worst, maybe there's a bit of excessive optimism. And by the way... there are at least two analysts currently covering the stock with Buy and Strong Buy ratings so Wayne Andrews isn't alone in thinking IOC has potential. I'm long the stock. Given the facts, I'll make my bet on Wayne Andrews and the other two analysts that cover the stock.

Goodrich Petroleum: Gas in the Ground Doesn't Mean Cash in the Bank

I have to disagree with the author on this one as his analysis is seriously flawed. To properly evaluate GDP, you shouldn't be looking at next year's earnings. In investing in any asset, you should be looking at the present value of future cash flows. And future cash flows are tied to current and future reserves. The author states "Many naïve investors assume that the value of a company’s reserve position (i.e. the value of the estimated oil and gas under the land the company owns or leases) should translate into its market cap." Unfortunately, I think the author is the one who is naive here. To properly assess GDP, you should be looking at its potential NAV. Given the the Haynesville Shale drilling is still in the early innings, you will see analysts continue to de-risk their NAVs (which DO include gatural gas extraction cost assumptions) as additional drilling data is released by any of the 25-35 companies with stakes in the HS. That's what we've been seeing in recent days and what we'll continue to see as time passes. Initial production estimates are gettting bigger and bigger, which in turn, results in more and more reserves per well. More reserves per well results in more future cash flows and earnings. The key word is future here. And although next year is the future, GDP's cash flow from its HS acreage will extend well beyond 2009. So if you want to short GDP, I strongly suggest coming up with a more sound thesis than this author has. Especially when you consider that natural gas industry fundamentals are improving and should result in the tightest supply-demand balance we've seen in years. Short GDP at your own risk. After evaluating GDP's potential, I'd rather be long.