Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Salt'n'Peppa who wrote (165752)	3/19/2012 12:32:40 PM
From: CommanderCricket	3 Recommendations Respond to of 206183

RJ: IOC - Uneventful 4Q11 Results; Upcoming Election Should Help Speed Up FID Recommendation: Our positive stance on InterOil is predicated on its long-term cash flow potential and the expectation of near-term catalysts; this is balanced by the operational, cost, and timing risks as the upstream assets, condensate plant, and LNG plants are developed. We see multiple near-term catalysts, including the final investment decision (FID), a resource selldown, and results from the Triceratops-2 well, though we would again caution investors from having overly rigid expectations as to timing. We reiterate our Outperform rating. ? Uneventful 4Q11: While we reiterate our standard caveat that quarterly earnings remain largely irrelevant at this stage, InterOil reported 4Q11 EPS of $0.27; this was well ahead of our $(0.14) estimate, driven by a foreign exchange gain. In keeping with tradition, InterOil did not make any major announcements on the call. The third-party reserve estimates are unchanged vs. a year ago, given that no new wells were drilled in 2011. ? Five to seven-well drilling program over the next two years. At Triceratops-2, mechanical work continues ahead of drilling into the reservoir. Once InterOil confirms permeability, it will prep for the first drill stem test, expected in the next 7-10 days. The newsflow should continue into the summer; however, with an additional two drill stem tests as the well approaches and reaches total depth. The company also outlined its expected drilling program through March 2014, which comprises five to seven wells beginning this fall. Antelope-3 and Antelope-4 are first on deck, potentially spudding by November 30. ? FID still on hold pending government approval. After December’s constitutional crisis, we noted that a delay in the final investment decision (FID) is to be expected. Let’s be candid: While FID may be the center of the universe for many InterOil investors, it is not seen that way by PNG’s politicians. InterOil and its partners are “FID ready”, but red tape remains a hurdle. Prime Minister O’Neill remains supportive of the project, though ultimately approval takes a cabinet decision. Writs for the June election are set to be issued in April; citing past precedent, management indicated that this may be a catalyst for approval. With regard to finding a project operator and doing a resource selldown, management confirmed that prospective partners continue to meet with government officials, including the Korean-Japanese consortium (Kogas/Mitsui/Japex) widely reported in the media over the past six weeks. Triceratops-2 results may also provide an impetus for a deal. Valuation: IOC is currently trading at 57% of our “de facto” proved NAV per share estimate of $103.10. While recognizing that valuation is not very meaningful until FID and/or a resource selldown, the 57% figure can be loosely compared to a median of 160% for mid and small-cap production-stage E&P companies. Our $80 target price is based on a ~20% discount to our NAV estimate, which comprises a sum-of-the-parts valuation of the business segments.