EARNINGS / INTEROIL CORPORATION
TORONTO, May 19 /CNW/ -
Financial Results
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InterOil Corporation released its audited financial statements today for
the period from January 30, 1997 to December 31, 1997.
InterOil's revenue for this period, in the amount of US$321,000, reflects
InterOil's proportionate ownership of S.P. InterOil, LDC (''SPI''). InterOil's
expenses were US$447,000 for the period, resulting in a loss of US$126,000.
InterOil's assets, consisting of cash and its investment in SPI, totalled
US$61 million and its liabilities were US$746,000, resulting in shareholders'
equity of US$60 million.
InterOil also released details of the audited consolidated financial
statements of SPI for the year ended December 31, 1997. InterOil currently
owns approximately 40% of the outstanding shares of SPI. SPI has the right to
earn a 60% interest in an oil refinery project in Papua New Guinea, which is
currently under development (the ''Project'').
SPI earned revenue of US$2.5 million during 1997, which reflects the
income it earned on cash and short-term investments of approximately US$47
million. SPI's expenses during 1997 were US$900,000, producing net income for
the year of US$1.6 million.
SPI's assets increased from US$46 million in 1996 to US$96 million in
1997 while shareholders' equity increased from US$44 million in 1996 to US$94
million in 1997. SPI raised US$49 million (net of financing costs) during 1997
through a private placement of common shares. Approximately US$8 million has
been invested in capital assets relating to the Project in PNG and the balance
has been invested in short-term instruments.
Upstream and Downstream Activities
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In addition to its involvement in the oil refinery Project, SPI is also
working to develop upstream oil and gas exploration interests in Papua New
Guinea through a wholly-owned subsidiary. InterOil is pleased to announce the
signing of a farm-in agreement between SPI, International Petroleum
Corporation and Oil Search Limited to acquire an interest in a petroleum
prospecting licence (PPL 200). SPI has a 15% interest in PPL 200, an offshore
concession area in the Gulf of Papua, Papua New Guinea, covering approximately
6,000 square kilometres (1,480,000 acres). The primary target within this
concession area is the Flinders prospect covering 156 square kilometres. The
prospect is located in an area between The Pasca and Pandora discoveries of
Papua New Guinea.
The primary target has a simple four-way dip-closure and a strong seismic
AVO signature for a possible hydrocarbon charged sand reservoir. Possible
resources have been estimated by International Petroleum Corporation, the
operator of the licence, to be 2 to 3 trillion cubic feet of gas and 129 to
195 million barrels of associated liquids. SPI and its partners have agreed to
a work program on the acreage for 1998, which includes 850 kilometres of new
seismic (now completed) reprocessing approximately 3,100 kilometres of
existing data, and AVO modelling for hydrocarbon charged reservoirs.
SPI intends to acquire additional oil and gas exploration interests in
Papua New Guinea and is actively pursuing other opportunities in this area.
SPI is also investigating downstream business activities, including the
possible acquisition or construction of storage terminals for refined products
in Australia and marketing opportunities.
Project Update
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The Project Company, EP InterOil Ltd (EPI), has achieved some significant
milestones recently. On the marketing side, approximately 45% of the
refinery's products are expected to be available for sale to the export market
in the region around Papua New Guinea. EPI has received letters of intent from
potential export customers, which indicate that demand for the refinery's
products in the export market is likely to exceed supply. Formal offtake
contracts with both domestic and export customers will be signed when the
refinery is closer to commercial production. On the engineering side, bid
packages were sent out to interested parties in March for the engineering and
construction work to modify and refurbish the Project's crude unit and
reformer (currently located in a refurbishment yard near Houston, Texas) and
to construct the necessary site works for the Project in Papua New Guinea
(including the tank farm, marine facilities and offsite systems). Bids
proposals will be accepted in May, 1998, with negotiations and contract awards
to follow.
EPI completed its Environmental Impact Assessment relating to the
refinery and submitted it to the Papua New Guinea Government for approval in
December 1997. Approval in principle has been obtained from the Government and
formal approval is expected soon.
The remaining significant milestones to be completed before commercial
production of the refinery can commence are: completion of the debt and equity
financing for the Project, refurbishing and barge mounting the crude unit and
reformer on the Texas Gulf Coast, transporting the equipment to Papua New
Guinea, constructing the infrastructure for the Project in Papua New Guinea,
and commissioning the refinery. The time frames for each of these stages will
be largely determined by the terms of the engineering and construction
contracts, which are expected to be finalized shortly. SPI will provide a
detailed timetable for these milestones following execution of those
contracts. SPI is targeting the debt and equity financing for the Project to
be completed before the end of 1998, and the refinery to commence commercial
production during 1999.
SPI previously estimated that the capital budget for the completion of
the Project, including the cost of the equipment refurbishment, construction
of the PNG infrastructure, financing and development costs, and contingencies,
would be approximately US$100 million. This estimate did not include the cost
of the crude unit, reformer and initial development work, which had been
previously contributed to EPI by SPI. The capital budget costs may change as a
result of design scope changes and enhancements to the refinery which are
currently under consideration, and as a result of the final terms of the
engineering and construction contracts. SPI will announce any changes to the
budget once they are known. SPI has sufficient liquid assets to finance its
portion of any increase in the budget as a result of the potential scope
changes and final contract terms.
InterOil is pleased to announce two key additions to the staffing of its
related companies:
Hans Schuster was hired by SPI to work with the company's refinery joint
venture as SPI's Project Director. Mr. Schuster's primary focus will be
co-directing all construction efforts including the refinery equipment
refurbishment and barge mounting and the site construction in Papua New
Guinea. Mr. Schuster has some 32 years of experience in various industrial
management capacities, including a substantial project management background.
He was most recently employed as Vice President, Technical Services with NGC
Corporation in Houston.
SPI Pty Ltd, Papua New Guinea, a wholly-owned subsidiary of SPI, signed
an agreement with Mr. Andrew Carroll earlier this year. Mr. Carroll's duties
focus on developing upstream opportunities for SPI Pty Ltd. Mr. Carroll, an
honours graduate of Cambridge University, has 18 years of experience in oil
and gas exploration. Former employers include BP Petroleum Development, Dome
Petroleum Canada and Ampolex. Mr. Carroll owns Australasian Energy Pty Ltd.,
an energy consultancy firm in Papua New Guinea.
InterOil's common shares are quoted for trading on the system maintained
by the Canadian Dealing Network under the symbol INOL.U. InterOil currently
has 8,069,437 common shares outstanding. InterOil owns approximately 40% of
the outstanding shares of SPI and has granted to the other shareholders of SPI
the right to exchange their common shares of SPI for an equal number of common
shares of InterOil. Those shareholders have agreed to complete this exchange
over time. InterOil will be obligated to issue an additional 12 million common
shares upon exercise of these exchange rights in full.
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For further information: Mr. P. Andy Martin, Vice President & Chief
Financial Officer, InterOil Corporation, The Woodlands, Texas, Telephone:
(281) 292-1800, Facsimile: (281) 292-0888
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