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PORT MORESBY, Papua New Guinea and HOUSTON, March 19, 2012 /PRNewswire/ -- InterOil Corporation (NYSE: IOC - News) (POMSoX: IOC - News) today announced financial and operating results for the fourth quarter and full year ended December 31, 2011.
Fourth Quarter 2011 Highlights and Recent Developments
During the fourth quarter, InterOil completed two Heads of Agreements (HOA) on long-term LNG supply for its proposed LNG project in Papua New Guinea, bringing the total of its three HOAs to 3.3 to 3.8 million tonnes per annum (mtpa). While not binding, these HOAs set out the basis upon which the parties intend to negotiate and document terms for the purchase and sale of LNG.Exploration activities continued across our three Petroleum Prospecting Licenses (PPLs) in PNG during the quarter. Seven dip lines were acquired to further delineate the Wahoo and Mako prospects and identify potential drilling locations. Processing and interpretation of the data is ongoing. A third phase of seismic data acquisition, which consists of two dip orientated lines totaling 21 kilometers in length over the Tuna prospect and Wahoo/Mako prospects, commenced on December 22, 2011. Line preparation is currently in progress.Net profit for the year ended December 31, 2011 was $17.7 million compared with a net loss of $44.5 million for the same period in 2010, an improvement of $62.2 million. The operating segments of Corporate, Midstream Refining and Downstream collectively returned a net profit for the year of $82.3 million. The development segments of Upstream and Midstream Liquefaction yielded a net loss of $64.6 million.Subsequent to the quarter end, on January 17th, 2012, InterOil announced that the Triceratops-2 delineation well had been spudded. The Triceratops-2 well is an appraisal well to test the presence of hydrocarbons and determine whether a potential reefal carbonate reservoir exists in the Triceratops field.
InterOil's Chief Executive Officer Phil Mulacek commented, "We continue to work with our existing LNG development partners and the PNG government to advance our LNG project towards first production. Simultaneously, our advisors are managing the process of soliciting and evaluating proposals from potential strategic LNG partners. If a strategic partner is selected, we expect that such a partner would assist with accelerating the LNG project's capacity growth. Our delineation drilling at Triceratops has the potential to add to our substantial resource estimate at Elk and Antelope, and provide back-up supply for increasing LNG capacity. Our prospect inventory is maturing and we anticipate that it will support our goal of a multi-year, multi-well exploration program. We believe that these achievements, combined with our strong balance sheet, support our continued growth and operational success."
Corporate Financial Results
InterOil recorded a net profit for the year ended December 31, 2011 of $17.7 million, compared with a net loss of $44.5 million for the same period in 2010, an improvement of $62.2 million. The operating segments of Corporate, Midstream Refining and Downstream collectively returned a net profit for the year of $82.3 million. The development segments of Upstream and Midstream Liquefaction yielded a net loss of $64.6 million for an aggregate net profit of $17.7 million.
EBITDA for the year ended December 31, 2011 was $50.4 million, an increase of $66.9 million over negative EBITDA of $16.5 million for the same period in 2010, the improvement was mainly due to unusual, one time charges in 2010 and an improvement in our net foreign exchange gains as a result of rising Papua New Guinea Kina ("PGK") against USD.
Total revenues for the year ended December 31, 2011 were $1,118.9 million compared with $807.0 million and $693.1 million respectively for the same periods in 2010 and 2009. This increase in the year ended 2011 compared to the same period in 2010 was due to the higher crude price environment in the 2011 year and an increase in domestic volumes of product sold for higher margin products. The total volume of all products sold by us was 7.5 million barrels for fiscal year 2011, compared with 7.2 million barrels in 2010.
Business Segment Results
Upstream - Work commenced on the seven dip lines, 56 kilometer, Kwalaha seismic data acquisition program on September 16, 2011 and was completed on December 20, 2011. The objective of the survey was to further delineate the Wahoo and Mako prospects and identify potential drilling locations. Processing and interpretation of the data is ongoing. A third phase of seismic data acquisition, which consists of two dip orientated lines totaling 21 kilometers in length over the Tuna prospect, commenced on December 22, 2011. Line preparation is currently in progress.
During 2011, we contracted for airborne magnetic, gravity and gamma ray prospecting over PPL 236, PPL 237 and PPL 238. Five acquisition blocks were acquired for a total of 14,288 line kilometers of airborne data. Data processing over this airborne data is currently undergoing final quality control assessment.
The preparation of the Triceratops-2 well site was completed at the end of 2011 and the Triceratops-2 well was spudded on January 17, 2012. The Triceratops-2 well is an appraisal well to test the presence of hydrocarbons and determine whether a potential reefal carbonate reservoir exists in the Triceratops field.
During 2011, the FEED work was completed on the Condensate Stripping Project. The FEED phase generated deliverables to technically and commercially define the project and prepare it for execution and proposals were solicited from potential Engineering, Procurement and Construction ("EPC") contractors. We are continuing the planning and preparation efforts for Condensate Stripping Project execution which includes preparing a combined LNG project execution plan, execution schedule and risk assessment work.
InterOil's Upstream business realized a net loss of $49.1 million in 2011 compared to a loss of $78.6 million in the comparable period a year ago. The decrease in the loss in 2011 was mainly due to a $30.6 loss on extinguishment of IPI liability in 2010.
Midstream Refining – Total refinery throughput for the year ended December 31, 2011 was 24,856 barrels per operating day, compared with 24,682 barrels per operating day during 2010. Capacity utilization for 2011, based on 36,500 barrels per day operating capacity, was 54% compared with 53% in 2010.
The Company's Midstream Refining operations generated a net profit of $46.7 million in 2011 versus a profit of $33.5 million in the prior year. The $13.2 million positive variance is largely due to an increase in foreign exchange gain which was partially offset by a decrease in the gross margin.
Midstream Liquefaction – During 2011, site-specific engineering for the land based modular LNG and fixed-floating LNG facilities were undertaken along with other pre-investment in the LNG Project to lower risks to potential strategic partners and to secure our LNG Project timeline and costs.
On November 25, 2011, a Heads of Agreement was signed with Gunvor Singapore Pte. Ltd. for the supply of one mtpa of LNG from the LNG Project in Papua New Guinea. On December 2, 2011, a further Heads of Agreement was signed with ENN Energy Trading Company Ltd. of China, for the supply of one to one and one half mtpa of LNG from the LNG Project. The Heads of Agreements, while not binding, provide exclusivity on the LNG volumes, during negotiation of the definitive agreement, and set out the basis upon which the parties intend to negotiate and document terms for the purchase and sale of LNG commencing in 2015.
The Company's Midstream Liquefaction business generated a loss of $15.5 million in 2011 compared with a loss of $8.4 million a year ago. The negative variance is largely due to an increase in office, administration and other expenses for the year resulting from increased activities undertaken to negotiate long term LNG offtake agreements, pre-FEED work being undertaken for the LNG Project's proposed land based liquefaction and fixed-floating liquefaction facilities, and also further the discussions with the PNG State to achieve requisite approvals to complete the LNG project.
Downstream - Total Downstream sales volumes for 2011 were 678.0 million liters, compared with 626.5 million liters in 2010. In 2011, InterOil signed supply agreements with several key contractors and sub-contractors associated with the Exxon Mobil LNG project, Papua New Guinea's largest resource project to date. In addition, the Company re-signed all existing major customers in the agricultural, commercial and aviation sectors to further three year term supply agreements.
InterOil's Downstream operations generated a net profit of $11.6 million in 2011, an improvement of $4.9 million versus a profit of $6.7 million in the previous year. Gross margins increased in 2011 as compared to the prior year mainly due to an increase in domestic sales volumes, the impact of the revised pricing formula that came into effect in late 2010, and the increasing price environment during the period leading to higher margins on inventories sold.
Corporate – The shipping business, which operates two vessels transporting petroleum products for us and external customers both within PNG and for export in the South Pacific region, was transferred from our Downstream segment to our Corporate segment during the year.
The Corporate segment generated a net profit of $21.9 million in 2011, compared to a net profit of $3.3 million in 2010. The positive variance is the result of reduced interest expenses due to higher interest charges to other business segments on increased loan balances, and a litigation expense which was included in the prior year period. |
