InterOil: Oil and gas

The Company

InterOil is an independent oil and gas business that is primarily focused on Papua New Guinea. InterOil has exploration licences covering almost 16,000 sq km, with this divided into four petroleum prospecting licences (PPLs) and two petroleum retention licences. Each PPL is currently held for six years, from March 2014. Most of the licences spread over the Eastern Papuan Basin. In the last several years, InterOil has focused on improving its exploration programmes in the hopes of developing a robust oil and energy business. It has made five consecutive discoveries, which include Elk, Antelope, Triceratops, Raptor and Bobcat.

InterOil posted a profit of $289.8m in 2014, a significant turnaround compared to a loss of $40.4m in 2013. The company features a strong balance sheet with over $390m in cash and cash equivalents at the end of December 31, 2014 and a total debt of $70m. The debt comprises of an issue of $70m unsecured 2.75% convertible notes with a maturity of five years in 2010.

In 2014 InterOil sold its mid-stream and downstream assets to Puma Energy for $525m. The company also formed a joint venture (JV) with Total and Oil Search to develop the Elk-Antelope discovery following the closing of the transaction under which Total acquired, through the purchase of all shares in a wholly owned subsidiary of InterOil, a gross 40.1275% interest in Petroleum Retention License (PRL) 15, which contains the Elk and Antelope gas fields.

InterOil received $401.3m for closing the transaction, and became entitled to receive $73.3m upon a final investment decision for an Elk and Antelope liquefied natural gas (LNG) project and $65.5m upon the first LNG cargo from such a project. In addition to these fixed amounts, Total is obliged to make variable payments for gas amounts that are in excess of 3.5trn cu feet (tcf), based on certification by two independent certifiers following the drilling of up to three appraisal wells to be drilled in PRL 15.

PRL 15 contains the Elk-Antelope gas fields; this is a world-class resource capable of supplying more than 6m tonnes of LNG a year. In line with InterOil’s focus of identifying hydrocarbons and developing them to a commercial stage, the board in 2013 approved a major exploration and appraisal drilling and seismic work programme and budget for 2014-15.

InterOil applied to the PNG Department of Petroleum and Energy in 2013 for new licences for PPL 236, PPL 237 and PPL 238, which were due to expire on March 6, 2014 (PPL 238) and March 27, 2014 (PPLs 236 and 237). The company proposed new work programmes and commitments for each new licence. On March 6, 2014, applications for the new licences were approved with PPL 474 replacing PPL 236, PPL 475 replacing PPL 237, and PPL 476 and PPL 477 replacing PPL 238. Ongoing seismic acquisition continued across a number of leads targeting Bobcat-1 (PPL 476) and across the Antelope field. InterOil also commenced a geophysical survey over the Antelope field as seismic acquisition commenced for Raptor-1 (PPL 475). Further seismic acquisition is expected for Bobcat-1 following the Raptor programme. Drilling at the Wahoo-1 (PPL 474) exploration well was suspended after intersecting gas and higher than expected pressures. InterOil has since been in the process of re-evaluating the drilling plan prior to resuming drilling in 2015.

Company Strategy

InterOil’s strategy is to unlock significant value to shareholders by finding oil and gas safely and competitively; enable its development through the right partnerships, funding and project development capability; and to repeat this process. Running an effective and efficient business is the core component of this strategy. This business model is founded on exploration and drilling discipline and success’ strong commercial and project development acumen; and being a “partner of choice”. The focus area for future company strategy continues to be further development as a prudent and responsible business operator, enabling InterOil to discover resources with strategic JV partners, maximise the value of exploration assets and position the company for long-term success. (Provigil)