InterOil (IOC) Finds Itself As The Target Of Another Negative Article

The battleground in shares of InterOil Corporation (NYSE: IOC) continues. Today's BusinessInsider.com had a negative piece on the stock.

The article is based on a new investigation into the company's Papua New Guinean operations.

Specifically, the investigation suggests (taken from BusinessInsider)

Far from being a "frontier" drilling site, InterOil's sites in Papua New Guinea were explored and abandoned years ago by other energy companies. These companies abandoned the site because they had concluded that, despite promising signs, there was not much there there. The investigation's author believes that InterOil may eventually conclude the same thing.

The type of rock and gas and oil resources at the InterOil sites have a peculiar characteristic that is a great help if one wants to make exciting announcements and pump up a stock price but of less help if one actually wants to produce energy. Specifically, the sites produce enormous initial pressure of gas and/or oil. Unfortunately, because of the type of rock, they do not actually prove to be promising development and production sites, because the initial pressure is not sustained.

Visiting the sites, as a bullish Morgan Stanley analyst recently did, will not help one determine the extent of the resources they contain, as nor will the "flare tests" that the company has aggressively advertised. So some of the renewed confidence investors have in InterOil may be misplaced.

Some of InterOil's descriptions of the promise of the new site, Antelope 2, don't add up, in the opinion of the investigation's author. Nothing particularly alarming, but taken together, enough to remain skeptical of the company's claims. Especially because critical flow tests have not yet been conducted.

This negative BusinessInsider.com piece follows an article last week from Barry Minkow's Fraud Discovery Institute on InterOil highlighting a lawsuit against the company's CEO Phil Mulacek filed by original investors, seeking up to $1.3 billion in damages.

Today's article is having little impact the shares. Likely because last week's piece dropped it 12.5%.

The hate on IOC has to be near an all-time high, yet the stock won't crack.

This is likely because there is a major bull in the stock, who has become the ax. That ax is Morgan Stanley analyst Evan Calio, who has been pounding the table on the stock for a long time. Any weakness in the stock he defends it. Any well news, he raises his price target. He now has an Overweight rating and $120 price target on IOC.

Momentum traders have been eating up the company's news and the bullish thesis, driving the stock to all-time highs before the recent pullback.

In the stock market "perception is reality", and right now that perception is that the momentum train in IOC is still headed north. Will it ever end? Yes, but "when" that happens is the open question.

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