png lng project progress, page-9

Hi PalmTree,

below please find two comments by financial analysts (Morgan Stanley and R. James) re: delay in FID. As far as market reaction is concerned, Interoil's share price has, at this time of the morning, risen about 1.5% (albeit from a very low base, due, most likely, to the FID delay well and truly having been priced in weeks ago). As you say, patience is certainly required, and, given all information availaible at present, should be handsomly rewarded.

All the very best to all EWC shareholders and forum members for 2012.


InterOil Corporation: Table Set for Early 2012 Evan Calio – Morgan Stanley
InterOil Corporation: Table Set for Early 2012
Evan Calio – Morgan Stanley
December 22, 2011 5:51 PM GMT
We see major milestones for IOC in early 2012.

Recent PNG political event resolved. Last week, former Prime Minister Sir Michael Somare attempted to return to power based on a PNG Supreme Court decision that nullified a Parliamentary vote over the summer installing Peter O’Neill as PM. The dispute was ultimately settled by the Governor-General (per Commonwealth protocol), and Mr. O’Neill was named prime minister. We believe the recent political climate is responsible for the modest shift in expected timing.

IOC “ready” to reach Final Investment Decision (FID) on its proposed LNG project. Today, IOC announced that it is extending by one quarter (to 1Q12) the FID deadline for both the condensate stripping plant JV with Mitsui and the EWC land-based 3mmtpa LNG joint venture. Yesterday, FLEX LNG also extended to 1Q12 its FID date on the FLNG plant. While today’s announcement is a deadline extension, IOC is “ready” to FID its LNG project.

Exploration to recommence shortly. We expect Triceratops-2 will spud before year-end. Triceratops-2 is the company’s next high impact target in the Bwata field where independent resource estimate is 4.2 Tcfe and the structure appears to be a similar reefal build-up to Antelope. If the two lobes of Triceratops are connected, the initial resource assessment will prove conservative. T-2 is the first exploration well drilled by IOC since the successful Antelope-2 well in late 2010.

Sell-down and new partners expected in early 2012. Today, IOC announced it has received “bids for major components and narrowed the range of estimated capital costs of the project” and CEO Phil Mulacek was quoted (12/7/11) in the PNG press as having received “vast interest on expansion capacity of the 3.4-4mmtpa to bring accelerated LNG capacity to 7.6MM-tpa-plus.

Raymond James "Delay not a suprise with PNG crisis (now over)....we fully expect management to announce both a strategic partner and FID in early 2012."
Raymond James Equity Research

InterOil Corp. - Outperform
Companies Mentioned - IOC
IOC: No Tebow Time this Fourth Quarter as FID (Unsurprisingly) Pushed to 1Q12
Analyst(s): Pavel Molchanov & Cory J. Garcia
[Industry Classification: Energy/Exploration and Production]

* Not many InterOil investors are going to be surprised by today's announcement, but this morning the company officially pushed back the deadline to reach the final investment decision (FID) on its integrated gas resource development (onshore LNG, floating LNG, and condensate stripping) to 1Q12. We've noted this possibility for weeks - including in our brief from Tuesday, "Papua New Guinea's Constitutional Crisis is Over; Now, on to Real Issues" - and we reiterate that, in the grand scheme of things, an additional delay of a few months has minimal substantive impact. Thus, while investors are (understandably) frustrated with yet another delay, shares are down only modestly this morning, indicating just how unsurprised the market is by the announcement this late in December. (Yes, we realize that some investors owned the stock in anticipation of a quick "pop" ahead of December 31, though this is not a tactic we've ever recommended ourselves.) As we observed on Tuesday, InterOil is certainly not the first LNG developer to experience project delays, and it surely won't be the last. Just this week, in fact, Australia's Woodside Petroleum, a much larger company and with more LNG project experience, delayed FID on its Browse LNG project by six to 12 months.

* Yesterday, InterOil's floating LNG partner FLEX LNG stated that it expects to announce FID in 1Q12 (rather than by the previous December 31 target). FLEX noted that project-specific engineering and design work has been completed, and both it and the vessel provider (Samsung Heavy Industries) are ready to move to FID "as soon as the project's major sponsors and the PNG government are ready". InterOil echoed those statements in its own release this morning as well as noted that it has amended the agreements with its remaining partners Mitsui and Energy World to target a March 31 deadline.

* As we pointed out on Tuesday, timing risks are systemic for LNG and other large-scale energy infrastructure projects, and InterOil is no exception. PNG's recent constitutional crisis, which was resolved earlier this week, certainly didn't help facilitate the government approval process ahead of the holidays. While we are disappointed with another FID pushout, it does not change the project's underlying economics, and we fully expect management to announce both a strategic partner and FID in early 2012.