2012 Second Quarter Results Conference Call Presentation by jianghongl



2012 Second Quarter Results Conference Call Presentation - August 14, 2012
Phil Mulacek
Chief Executive Officer
         Cautionary & Forward-Looking Statements
         This presentation includes “forward-looking statements” as defined in United States federal and Canadian securities laws. All statements, other than statements of historical facts,
         included in this presentation that address activities, events or developments that the InterOil expects, believes or anticipates will or may occur in the future are forward-looking
         statements, including in particular designing a seismic and six well delineation plan in the Triceratops structure, further testing of the Triceratops-2 well, development activities
         including plans to deploy InterOil's rigs, drilling wells in PRL 15, drilling plans in PPLs 236 and 238, the development of the proposed LNG processing facility, the ability to attract a
         strategic LNG partner, timing and success of the LNG partnering process, satisfaction of the State of InterOil's development plans and satisfaction of the terms of the 2009 LNG
         Project Agreement with the State, benefits to stakeholders, the relationship with Pacific Rubiales, characteristics of our resources, InterOil's prospect inventory being able to
         support a multi-year, multi-well exploration program, completion of the farm-in transaction with PRE, satisfaction and timing of conditions to completion of the farm-in transaction
         with PRE, timing of FEED on the liquefaction facilities, the economic conditions and demand for InterOil's products in the LNG, growth opportunities, closing and timing such
         closing regarding a refinery asset backed financing transaction, near term corporate goals and the satisfaction of such goals, anticipated financial conditions and performance,
         business prospects, strategies, regulatory developments, the ability to obtain financing on acceptable terms, the ability to identify drilling locations and the ability to develop
         reserves and production through development and exploration activities.
         These statements are based on certain assumptions made by the Company based on its experience and perception of current conditions, expected future developments,
         agreements with third parties, bids received in respect of the LNG partnering process and other factors it believes are appropriate in the circumstances. No assurances can be
         given however, that these events will occur. Actual results will differ, and the difference may be material and adverse to the Company and its shareholders. Such statements are
         subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause our actual results to differ materially from
         those implied or expressed by the forward-looking statements. Some of these factors include the risk factors discussed in the Company’s filings with the Securities and Exchange
         Commission and on SEDAR, including but not limited to those in the Company’s Annual Report for the year ended December 31, 2011 on Form 40-F and its Annual Information
         Form for the year ended December 31, 2011. In particular, there is no established market for natural gas or gas condensate in Papua New Guinea and no guarantee that gas or
         gas condensate from the Elk, Antelope and Triceratops fields will ultimately be able to be extracted and sold commercially.
         Investors are urged to consider closely the disclosure in the Company’s Form 40-F, available from us at www.interoil.com or from the SEC at www.sec.gov and its Annual
         Information Form available on SEDAR at www.sedar.com.
         Oil and Gas Disclosure
         Resources in this presentation are based on the report prepared by GJL Petroleum Consultants (“GLJ”) dated March 7, 2011 with an effective date of December 31, 2011 setting
         forth certain information regarding contingent resources of InterOil’s interests in the Elk and Antelope fields in PNG.
         An evaluation of the resources of gas and condensate for the Elk and Antelope fields has been completed by GLJ Petroleum Consultants Ltd., an independent qualified reserves
         evaluator, as of December 31, 2011, and was prepared in accordance with the definitions and guidelines in the COGE Handbook and National Instrument 51-101 - . All resources
         estimated for the Elk and Antelope fields are classified as contingent resources – economic status undetermined.
         Contingent resources are those quantities of natural gas and condensate estimated, as of a given date, to be potentially recoverable from known accumulations using established
         technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. The economic status of
         the resources is undetermined and there is no certainty that it will be commercially viable to produce any portion of the resources. The following contingencies must be met before
         the resources can be classified as reserves: (i) Sanctioning of the facilities required to process and transport marketable natural gas to market; (ii) Confirmation of a market for the
         marketable natural gas and condensate; and (iii) Determination of economic viability. Although a final project has not yet been sanctioned, pre-FEED studies are ongoing for the
         LNG Project and FEED studies conducted for the CS Project as options for potential monetization of the gas and condensate.
         The “low” estimate is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed
         the low estimate. With the probabilistic methods used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low
         estimate. The “best” estimate is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered
         will be greater or less than the best estimate. With the probabilistic methods used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will
         equal or exceed the best estimate. The “high” estimate is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual
         remaining quantities recovered will exceed the high estimate. With the probabilistic methods used, there should be at least a 10 percent probability (P10) that the quantities
         actually recovered will equal or exceed the high estimate.
         The accuracy of resource estimates are in part a function of the quality and quantity of the available data and of engineering and geological interpretation and judgment. Other
         factors in the classification as a resource include a requirement for more delineation wells, detailed design estimates and near term development plans. The size of the resource
         estimate could be positively impacted, potentially in a material amount, if additional delineation wells determined that the aerial extent, reservoir quality and/or the thickness of the
         reservoir is larger than what is currently estimated based on the interpretation of the seismic and well data. The size of the resource estimate could be negatively impacted,
         potentially in a material amount, if additional delineation wells determined that the aerial extent, reservoir quality and/or the thickness of the reservoir are less than what is currently
         estimated based on the interpretation of the seismic and well data.

Page 2
         Opening Remarks
         Phil Mulacek - CEO

Page 3
         Group Activity and Results
           Second Quarter 2012 Results:
                Second quarter loss of $31.7 million reflects the oil and refined product price declines
                experienced during the quarter. Rising commodity pricing in the third quarter to date has had a
                positive impact on the refinery profitability.
                Excluding the $23.8 million inventory write-down, operating segments of Corporate, Midstream
                Refining and Downstream collectively derived a net profit for the quarter of $7.5 million, while the
                investments in the development segments of Upstream and Midstream Liquefaction resulted in a
                net loss of $15.4 million.
                Our strong balance sheet provides liquidity in excess of our current cash position through
                potential debt financing, in addition to over $102 million in un-drawn working capital and credit
                We believe that the well results indicate that Triceratops-2 is a significant discovery. Together with
                Pacific Rubialis Energy we plan a six well appraisal and development program to delineate this
                large structure.
                Our prospect inventory is maturing and we anticipate that it will support our goal of a multi-year,
                multi-well exploration program, with activities in PPL236, PPL237, PPL238 and PRL15.
           IOC LNG Activities:
                We are pleased with the outcome of the election in PNG and ready to move ahead with the LNG
                partnering and government approval process.
                We have received conforming and non-conforming indications for the LNG partnering and sell
                down of an interest in the Elk and Antelope fields that we believe will be accretive to shareholders
                from a short list of interested parties.
                The end result of the partnering process is envisioned to fully satisfy all the terms of the 2009
                LNG Project Agreement.

Page 4
         Second Quarter 2012 Financial Results
                Collin Visaggio - CFO

Page 5
          Group Quarterly Consolidated Results

                       Net Profit - Trend 3 years









                                                                      4Q: 10









    Key items for second quarter of 2012
                 Gross margin of negative $18.4 million from operations, which was impacted by large falls in crude
                 and product prices over the quarter, increase in premiums paid on purchases of crude, and a $23.8
                 million NRV write-down on the inventories balance on hand as of June 30, 2012.
                 Seismic costs expensed during the quarter of $5.2 million.
Page 6
         Financial Position

                               Summary Financial Position








                          June 30, 2012           December 31, 2011       June 30, 2011

                           Total Current Assets             Total Non-Current Assets

Page 7
                                              Change in Current Assets less Current Liabilities
                                                     Six Months Ended June 30, 2012

                          250.0      $227m

  US Dollars (Millions)

                          150.0                                                  $13m                                          $28m             $118m


                                  Opening CA - CL   Invest Gulf Project and Operating Cash Flow B/F Cash and WC Movement Partner funding and   Closing CA - CL
                                                          Exploration                 WC                                       Other

                                  The $20 million reduction in cash balace for the quarter is held in working capital accounts and
                                  development assets.

Page 8
                         Group Debt Optimization Capacity

                        Current 13% Geared     50% Geared       Open Debt
                         Borrowing Level     Borrowing Level   Capacity=37%

    Debt Quantum ($m)          110                700              590

Page 9
          Refinery and Distribution Business Segment Update
                        Bill Jasper - President

Page 10
          Refinery & Distribution Volumes

                     Throughput                    Capacity Util.                            Sales Volumes
                   26,000                          65%                                           200

                   25,000                          60%

                                                                                     MM Liters

                   24,000                          55%

                   23,000                          50%

                   22,000                          45%                                           100
                            2Q:12   2Q:11                 2Q:12   2Q:11                                2Q:12   2Q:11

             Total refinery throughput for the quarter ended June 30, 2012 was 23,900 barrels per operating day,
             compared with 23,496 barrels per operating day during the quarter ended June 30, 2011.
             Capacity utilization of the refinery for the quarter ended March 31, 2012, based on 36,500 barrels per
             day operating capacity, was 60% compared with 51% for the same quarter in 2011.

Page 11
          Refining and Distribution Operations
      PNG Economy Expanding
             The PNG economy remains strong with continued robust activity in the resource sector with the
             ExxonMobil LNG project now well advanced in their development stage. This project, in conjunction with
             other resource sector projects, has not only generated continued growth in demand for diesel, but also
             for aviation fuel which magnifies the impact to our retail businesses.
      Retail Distribution Investments
             Our retail business sector continues to grow with the opening of a new service station in Wewak during
             the quarter, and the continued development of our “Truck Stop” concept and the roll out of new electronic
             systems for retail pumps across locations. One existing site that was previously head leased was
             purchased during the quarter ended June 30, 2012.
      Safety Record
             Our continued safety focus has helped us achieve these great levels of performance and we now have
             achieved 8.2 million man hours without a lost time injury for our InterOil employees and over 6.5 million
             man hours for our contract staff.

Page 12
      Exploration Update
      David Holland

Page 13
          Triceratops-2 Well Update and Key Events
      The Triceratops-2 well was spudded on January 15, 2012
      The well reached total depth of 7,736 feet (2,236 meters) after a total of 98 days of drilling
      Completed wire line logging including vertical seismic profile and side wall coring in April, 2012
      Testing confirmed gas in the 397 feet (121 metre) thick upper limestone zone at rates of up to 28
      MMcf/d in May, 2012
             Well log and pressure data indicate two separate reservoir intervals separated by a vertical sealing section of
             marl rock between 4,869 feet (1,484 meters) and 5,069 feet (1,545 meters).
                       Upper limestone 4,471 feet to 4,869 feet (1,363 to 1,484 mMD) with a 397 feet (121 meters) gross
                       Lower limestone from 5,069 feet to 7,736 feet (1,545 to 2,236 meters) with a 2,667 feet (691 meters )
                       gross thickness
             Logging and testing established gas on rock (no water contact) in the upper limestone. The reservoir pressure
             lines up with the Bwata-1 well and the gas is of similar composition.
             In the lower limestone, openhole drill stem testing established a higher pressure aquifer than in the offset
             Bwata-1 well.
             As discussed with and at the direction of the PNG Department of Petroleum and Energy, in June/August of 2012
             the well was cased and cased hole logging and testing was completed.
             After setting a retainer at 5,336 feet (1,626.5 metres) and reacidising the well in DST#10A test confirmed gas in
             the lower limestone at rates up to 3 MMcfd. The gas had a higher field reported condensate yield between 45
             and 65 bbl/MMcf through a separator (2.6 to 3.8 times higher than the upper limestone).
             The DST#10A gas had a slightly higher CO2 content (< 1%) and H2S was recorded. Although the DST#10A gas
             appears compositionaly different, the reservoir pressure lies on the same depth pressure trend.
             A lower limestone gas/water contact was establsihed at 5,286 feet (1,611 meters measured depth (MD)). This is
             approximately 900 feet higher than contact in the offset Bwata-1 well.
             Triceratops-3 will be designed to delineate the condensate rich reservoir in a reefal setting.
             In summary, our current model is that we are working with two separate limestone reservoirs with Triceratops-2
             being the first well to penetrate the lower limestone.
Page 14
          Triceratops-2 Interpreted well log and DST Intervals

                                                            Upper zone tested in DST#7, #8 and #9

                                                            • Gas Rate: ~27 MMcfd DST#9
                                                            • CGR:       ~16-17 bbl/MMcfd (Bwata-1 Legacy ~6.7)
                                                            • Gas Gravity: SG 0.672 to 0.706
                                                            • CO2:       ~0.3 mol%
                                                            • H2S:       Not recorded
                                                            • Gas Contact: Gas on rock

                                                             Argillaceous Limestone, Marl likely
                                                             intraformational seal

                                                            Lower zone tested in open hole DST’s #1 through #6
                                                Hole Test   and cased hole testing DST#10 and #10A

                                                            •Gas Rate: ~3 MMcfd DST#10A
                                                            •CGR:      45 to 60 bbl/MMcfd
                                             Open Hole
                                             Test #1 to     •Gas Gravity: 0.7 (range 0.68 and 0.71)
                                                            •CO2:      range >0.3 mol% and
                                                                       < 1.0%mol%
                                                            •H2S:      Recorded but variable
                                                            •Gas Contact: Gas Water Contact at 1,611 mMD
                                                            •Water Gradient: Higher aquifer pressure than Bwata-1

Page 15
      Potential Tall Hydrocarbon Column Under Large Area Of Closure

                  Seismically defined structural closure of over 125 Km2.
                                                                                                          Triceratops-2 and Bwata-1 Depth Pressure plots
                                                                                                               Projected Highest Gas (see Map at left)
                                                                                    100                                                               TT-2 Data
                                                                                       0                                                              Bwata-1 Data
                                                                                    -100                                                              Bwata-1 Aquife (.0423 psi/ft)r
                                                                                    -200                                                              Triceratops 2 Top Carbonate
                                                                                    -300                                                              Projected Gas Gradient
                                                                               D -400                                                                 Triceratops-2 Data above marl
                                                                               e -500                                                                 Triceratops-2 MPLT Data
                                                                               p -600
                                                                                 -700                                     Approx. 5,500 ft (1700 m)
                                                                                 -800                                     Projected Gas Column
                                                                               V   -1000                                  Highest Known Gas TT-2
                                                                               D   -1100
                                                                               s   -1200
                                                                               s   -1300
                                                                                   -1600         Gas Water
                                                                                                                                              Lowest Known Gas Bwata-1
                                                                                   -1700         Contact

                                                               Triceratops-1       -2000
                                                                                      1,800.00      2,000.00   2,200.00     2,400.00   2,600.00       2,800.00        3,000.00         3,200.00

                                                                                   Potential Gas
                                                                                   Column Height                                                                      Bwata-1
                                                                                   Triceratops Field
          0      2         4                                                        >5,500ft
                                 Bwata                                             (>1,700m)

                                                                            Seismic strike line BW05IOL10 and Triceratops-2 showing up
                                                                            dip attic to the west

Page 16
          Triceratops Key Results

          The diagenetic features (presence of dolomite), biostratigraphy and FMI sedimentary facies
          interpretation support the interpretation that the Triceratops-2 well is on the flank of a shallow
          marine carbonate and reefal build up. Detailed petrophysical and petrographic studies are
          currently in progress.
          The reservoir development in Triceratops-2 is significantly better than the Triceratops-1 and
           Bwata-1 and the Elk-4 well (which is in a similar setting on the Antelope reef).

          Unlike at Antelope, there appears to be an intra-formational seal developed potentially dividing
           the carbonate into two stratigraphic units. An upper unit and a lower condensate rich unit.
               It is our view that the results of testing at Triceratops-2 have established gas on rock in the upper unit
               and established gas and a separate gas water contact in the lower unit.
               Importantly the gas pressures from both units lie on the same gradient as each other and the Bwata-1
          There is an enormous attic in terms of height and areal extent to the south, west and northwest
           of the Triceratops-2 well.
          We believe Triceratops-2 is a significant discovery well and the southern potential reefal attic
           and the western attic will be our focus during the forward seismic and well program.
Page 17
          Forward Plans

      Triceratops Delineation Plan
             InterOil has suspended Triceratops-2 as a future producing well, and with the consent of the PNG
             Department of Petroleum and Energy, released the rig from the Triceratops-2 location.
             InterOil, with our new partner Pacific Rubialis Energy, intends to analyze data from the Triceratops-2 well
             and samples undergoing laboratory analyses. New potential field data, once integrated into our
             structural model, should should improve our plans for additional seismic data acquisition.
             Additional seismic data acquisition will assist to:
                       identify the limits of the western and north western extent of the field
                       provide in-fill data to define the better shallow marine reef reservoir facies
                       map the vertical and lateral extent of the separate limestones.
             A Triceratops multiwell production development program will be finalized in the near term.
      Elk and Antelope Appraisal
             InterOil Rig#2 will be mobilised to Antelope-3 rig site and InterOil Rig#3 will be mobilised to the Elk-3 site
             currently under construction. These wells will be drilled to complete the work program obligations for
             PRL 15 and will provide valuable reservoir data for further production development planning.
      PPL236 and PPL 238
             The acquisition of the Seismic Strike KW08IOL12 and TU04IOL12 and processing of the data has been
             completed. Detailed mapping of InterOil’s recent seismic and available legacy seismic acquired by
             previous operators has been completed. The selection of potential exploratory well locations for future
             lease obligation wells has been completed.

Page 18
Planned Elk-3 and Antelope-3 Drilling Locations

                                         Hou Creek Camp – Northern access to PRL 15

                                                    Elk-3 Drilling location
           Closing Remarks
          Phil Mulacek - CEO

Page 20
          InterOil Has Created Value and Has Upside Potential
          InterOil is currently trading with a resource valuation of approximately $0.75per mcf
                  IOC enterprise value ~ $4.2 Billion, as of August 13, 2012 ($87 per share)
                  IOC ownership of Elk and Antelope = 58.6% of ~9.4 Tcfe* or ~5.6 Tcfe*
                  $4.2 B/5.6 Tcfe = $0.75/mcfe
                  Valuation excludes any consideration for Triceratops discovery, 40 additional exploration
                  prospects, refinery and downstream assets

          InterOil believes that recent transactions of economically advantaged assets imply
          significant upside potential

          Growth opportunities across the value chain
                  Distribution of refined product
                  Capacity utilization of refinery
                  Monetization of the Elk and Antelope resources
                  Condensate stripping plant development
                  LNG plant development
                  Exploration potential on 3.9 million acres

   The estimate of resources of 9.4 tcfe (“best estimate” of gross contingent resources) and
   5.6 tcfe (“best estimate” of net contingent resources) is based on the independent
   resources report prepared by GJL Petroleum Consultants dated March 7, 2011 with an
   effective date of December 31, 2011 setting forth certain information regarding contingent
   resources of InterOil’s interests in the Elk and Antelope fields in PNG. Please refer to the
   statement of resources in the company’s 2011 Annual Information Form filed on                  Triceratops-2 DST#8 May 14, 2012
   www.sedar.com for additional disclosure.

Page 21
          Closing remarks and Corporate Operating Goals

          Near term corporate goals:
               Generate positive EBITDA from our operating businesses and have a positive year end financial
               File an application for a PRL (Petroleum Retention License) for Triceratops Development
               Ramp up to two rig drilling program at Elk and Antelope.
               Continue LNG pre-investment to drive the development timeline and reduce EPC contractor and
               Strategic LNG Partner bid risks
               Enter into an agreement with an LNG partner
          IOC LNG Activities
               Our sell down and partnering process has now reached a stage where we expect to be able to
               demonstrate to the DPE, in the coming weeks, our ability to abide by all of the terms of the 2009
               LNG Project Agreement.
               This accords with our stated intention since the previously announced engagement of advisors for
               this process at the end of last year.
               InterOil, and the partner we select, intend to bring an LNG processing facility to Papua New
               Guinea of a nature and in a manner which will be satisfactory to the State.

                         Our overarching goal remains to continue driving value for our shareholders,
                         continue supporting safe and efficient operations for our employees, and
                         continue to be a good partner to those with whom we do business.

Page 22
“An Energy Development Company With
   Significant Exploration Potential”

                                        Thank You

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