InterOil (IOC) Gets Blue Chip 'Stamp of Approval', But Talks Ongoing

May 24, 2013 8:28 AM EDT
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Price: $48.10 --0%

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    Up: 28 | Down: 28 | New: 23
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Raymond James Pavel Molchanov commented on InterOil (NYSE: IOC) following news this morning that the company and partner Pacific LNG Group have entered into exclusive negotiations with ExxonMobil Papua New Guinea Ltd., a subsidiary of ExxonMobil (NYSE: XOM), on the development of Petroleum Retention License 15 (PRL 15), which comprises the Elk and Antelope fields in the Gulf Province of Papua New Guinea.

Molchanov notes that amid the news talks are still ongoing, and said today's news is not a final deal announcement. That said, "the announcement of Exxon as a tentative partner gives the Elk/Antelope resource a blue chip "stamp of approval," so we view this news as a clear incremental positive. However, the market's enthusiasm will be tempered by the fact that a deal has yet to be finalized."

Molchanov said Here is what we know:

"InterOil plans to sell Exxon an interest in PRL 15 (the block which includes the Elk/Antelope field) to supply gas for an additional train at Exxon’s already under-construction LNG facility. Payments will be staged, and Exxon will fund additional delineation wells on the acreage. InterOil maintains the option to develop its own LNG project independently, but Exxon has not committed to take part in such a project."

Here is what we do not know (yet): "(1) how much of the resource will be monetized; (2) what the timing of a final deal will be; and, most importantly, (3) what the purchase price will be. As is stands, today’s announcement was limited to identifying Exxon."

The firm has a an Outperform rating and price target of $100.00 on IOC.

For an analyst ratings summary and ratings history on InterOil click here. For more ratings news on InterOil click here.

Shares of InterOil are up 11.2 percent in early action to $103.95 on the news.

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