InterOil (IOC) Up 9% as Investors Position for Partnership Deal

May 14, 2013 10:45 AM EDT
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Shares of InterOil Corporation (NYSE: IOC) are up 9 percent as investors focus on comments from the company's first quarter call about the ongoing LNG partnership selection. The company said they are in the final stages of a selection after receiving several bids. The comapny said there is no June 30 deadline.

Below are comments taken from the call directly addressing the partnership.

1. "Directly addressing our partner selection process, we are well aware that our shareholders are eager for us to conclude the long running sell-down and LNG partnering process. I assure you that we too are eager to complete this process as our potential partners and the PNG government. And all parties remain hard at work and moving the process forward."

2. The company and its investment banking advisers are in final discussions with multiple partners, including major oil companies and a national oil company, each of whom we believe if chosen would satisfy the PNG Government's objectives. This is an advantageous position for us to be in and we believe that it is best to allow our advisers and our board the time they need to finalize the most beneficial transaction for our stakeholders. The PNG government has been kept apprised of our discussions and [indiscernible] to support our plans to partner with a qualified operator. This will be a multi-billion dollar transaction and we are fortunate to be on a competitive process. We appreciate your patience and support and are confident of a successful outcome."

3. From Q&A
Q - Pavel Molchanov>: Thanks very much. First, just on the timing for partnership announcement. Correct me if I'm wrong, is there a June 30 deadline under the existing project agreement to reach a partnership deal or is that not the case?

A - Gaylen Byker>: No, there is not. There's a number of parts to your question there that or least implications of your questions. The 2009 project was entered into the different projects in mind and pre-dates the current partnering process. It's our expectation that when the partnering process is completed, we, together with our partners, will negotiate a gas agreement with the state. And by the way, the state has already started drafting and that will replace the project agreement. The gas agreement is the way that PNG state under the Oil & Gas Act usually controls the development of an LNG project. There may be some changes but we expect that most of the provisions in the project agreement will be incorporated into the gas agreement and it is not a deadline for the partnering process. Now the partnering process is a multiple negotiations and a major multi-billion dollar project and it has long-term significance for all of the InterOil stakeholders. And so that isn't going to be rushed, but those two are not in the same category in terms of timing.

Q - Pavel Molchanov>: Okay, understood. Another question on kind of the regulatory front. Last November when the cabinet approved the revised project, there was a cabinet committee forum that was supposed to negotiate a gas purchase from the Antelope field for the purpose of domestic gas projects, power plants and so on. Has that committee been in discussions with the company and what is the status of that?

A - Gaylen Byker>: Yes. State negotiating team has met with the company on a number of occasions and has basically suspended the process other than the drafting of the gas agreement until the partner agreement is confirmed.

Q - Pavel Molchanov>: Okay. And then just last one from me, have you disclosed the names of the final bidders to the government and has the government explicitly told you that all of them qualify under the government's criteria?

A - Gaylen Byker>: The government is aware of all of the people that we are negotiating with and they are in the category that the government has said they would approve.

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