InterOil Corporation Q2 2014 Conference Call Presentation

Q2 UPDATE
For the three months to June 30, 2014
August 13, 2014
NEW TEAM
NEW BOARD
FOCUS ON UPSTREAM
FINANCIAL STABILITY
Antelope-4 Landing Preparation
Antelope HERD
4, RAPTOR-1
July
2014
2014
BASE
CAMP
Today’s presentation
Disclaimer: Contents and 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 announcement that address activities, events or developments that InterOil
expects, believes or anticipates will or may occur in the future are forward-looking statements, including in particular, the presence of
shallow marine carbonate reservoir, hydrocarbon volumes, and the estimated drilling times of the Bobcat, Wahoo and Raptor wells.
These statements are based on our current beliefs as well as assumptions made by, and information currently available to us. No assurances
can be given however, that these events will occur. Actual results could 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 31 December 2013 on Form 40-F and its Annual
Information Form for the year ended 31 December 2013. 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 and 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.
Finances are reported in US$ unless otherwise stated.
Page 2
Today’s presentation
Disclaimer: Resources
Reference is made in this Presentation to Resources.
It should be noted that we have no production or reserves or future net revenue as defined in NI 51-101 or under definitions established by
the United States Securities and Exchange Commission. GLJ, an independent qualified reserves evaluator, effective as of December 31, 2013,
evaluated our gas and condensate resources for the Elk, Antelope and Triceratops fields, all of which are in onshore Papua New Guinea. The
GLJ 2013 Report, with a preparation date of March 11, 2014 was prepared in accordance with definitions and guidelines in the COGE
Handbook and NI 51-101.
This Presentation outlines GLJ's estimates contained in the GLJ 2013 Report effective December 31, 2013 of total and net contingent
resources for gas and condensate at the Elk and Antelope field and the Triceratops field. This Report is included in the Company’s Annual
Information Form which is filed at SEDAR and is available on our web-site.
All resources estimated for the Elk and Antelope fields are classified as contingent resources – economic status undetermined. At this early
stage of appraisal, the resources estimates for the Triceratops field are classified separately in the GLJ 2013 Report as either contingent
resources – economic status undetermined or prospective resources.
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.
Accuracy of Resource Estimates
The accuracy of resource estimates is in part a function of the quality and quantity of available data and of engineering and geological
interpretation and judgment. Other factors in the classification as a resource include a requirement for more appraisal 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 appraisal 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 appraisal 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.
ENERGY FOR THE ASIAN MARKET
Page 3
Q2 UPDATE: Focused and funded
The new InterOil is ready for the next chapter of growth
1. STABILIZE
2. MONETIZE
3. SECURE
Now Optimize
Our resources
Our future
 Streamline cost structure –
only offices in Port Moresby
and Singapore
 Refocus on higher margin
exploration and LNG
development
 40.1% of PRL15 sold to Total
to develop PNG’s next LNG
project
 Refinery and distribution
assets sold to Puma Energy
 36.5% interest in multi-billiondollar LNG project
 Exploration acreage
surrounding Elk-Antelope
awarded in Mar 2014 for up to
11 years (6 + 5 year option)
 New $300m credit facility
 Secure a world-class
management team of
geologists, drillers, LNG
developers, operators and
financiers
 Fully funded as at June 30
+ $585m cash
+ $300m undrawn facility
= $885m in available funds
with only $70m in debt
 Majority interest across
exploration acreage
 Started PNG’s largest drilling
campaign with up to 8 wells in
2014-15
Page 4
Q2 UPDATE: Appointment of Chairman-designate
Chris Finlayson, ex-CEO of FTSE100 company BG Group joins InterOil
CHAIRMAN DESIGNATE
CHAIRMAN
DEPUTY-CHAIRMAN
CEO, DIRECTOR
CHRIS FINLAYSON
GAYLEN BYKER
FORD NICHOLSON
MICHAEL HESSION
DIRECTOR
DIRECTOR
DIRECTOR
DIRECTOR
ROGER LEWIS
SIR RABBIE NAMALIU
SIR WILSON KAMIT
SAMUEL L. DELCAMP
Page 5
Q2 UPDATE: Key Events
Significant developments in past two months
New Chairman-designate
 Ex-CEO of BG Group
Chris Finlayson
named Chairman
designate
 Nearly 40 years of
energy and LNG
experience
 Three more board
renewals planned
 August 10, 2014
Downstream sold for $525.6m
 Refinery and
downstream
distribution assets
sold to Puma
Energy for $525.6
million
 Focus now on
exploration and
development
 June 30, 2014
$300m credit facility
$50m buyback
 New $300m credit
facility with 10
international banks
 Board authorizes
$50m buyback
scheme
 Annual rate of
LIBOR + 5%
 Minimizes cost or
equity dilution effect
from convertible
note liability upon
redemption
 Matures
December 2015
 June 17, 2014
Wahoo temporarily suspended
 Wahoo-1
temporarily
suspended due to
high pressures and
safety concerns
 Encouraging signs
proving source rock
and seal exists
 Led by Macquarie
bank
 Review of drilling
plan under way
 July 21, 2014
 July 14, 2014
Page 6
Page 6
Q2 UPDATE: PRL15 – Development
Antelope-4
June 2014
Antelope-4
July 2014
Appraisal well locations illustrative
Page 7
Q2 UPDATE: PRL15 – Development
Antelope-5
June 2014
July 2014
Antelope-5
Appraisal well locations illustrative
Page 8
EXPLORATION
Cracking the code in the Eastern Papuan Basin
Laurie Brown
David Holland
32 years as exploration
geoscientist
29 years as exploration
geoscientist mainly in PNG
17 years with BP
11 years with InterOil
Former Shell global
consultant
3 years with Geological
Survey of PNG
Focused on proving up
emerging basins around
the world
Experience with Chevron,
BP and Exxon across
Papuan Basin
Raptor-1
EXPLORATION: Overview
Cracking the code to the Eastern Papuan Basin
GEOLOGY
The Eastern Papuan Basin
EXPLORATION
HISTORY
STRATEGY
Proving up the acreage
What we know about our acreage
 Two major petroleum basins in
PNG – the Eastern and
Western Papuan Basins
 InterOil has gravity imaging
over > 95% of its acreage and
>1500km of seismic
 ‘Antelope may not be alone’
 InterOil controls the relatively
unexplored Eastern basin
 Analysis of all data indicate
the widespread presence of
the 3 components critical for
success, reservoir, source rock
and seal
 Tenure secured for up to 11
years with majority ownership
(6 years + 5 year option)
 Sweet spots identified
throughout the acreage - up to
40 potential targets
 Three exploration wells
spudded in March 2014
 All key components critical for
success present in this basin
 Our basin offers less
challenging surface cover and
topography allowing seismic
imaging
 Cracking the code
 Long-term exploration strategy
Page 10
GEOLOGY: Eastern Papuan Basin
Eastern and Western Papuan basins on trend but with different geology and petroleum systems
Fields
The WPB has been
relatively heavily
explored (~280
wells) with
discoveries
including Hides,
Juha, P’Nyang,
Kutubu
The EPB is
underexplored (~65
wells) with
discoveries at Elk,
Antelope,
Triceratops
Coral Sea
Page 11
GEOLOGY: EPB evolution and key components
Three key geological components critical for success
3 KEY COMPONENTS
SCHEMATIC CROSS-SECTION OF EASTERN PAPUAN BASIN
What gravity sees
What gravity sees
S
ORUBADI SEAL
R
KAPAU LIMESTONE
R
C
S
S
Source Rock :
Generates the
hydrocarbons
R
Reservoir:
Stores the hydrocarbons
C
S
MOOGLI MUDSTONE
Seal or Cap rock:
Keeps the hydrocarbons
contained
Page 12
HISTORY: InterOil’s acreage
InterOil exploring PNG since 2003 – acreage position dominates onshore EPB
2003: IOC CONTROLLED ENTIRE ONSHORE EPB. 2014: HIGH-GRADED 50% SECURED FOR UP TO 11 YEARS
Licence
Acreage
(Acres)
IOC Stake
% (Gross)
EXPLORATION ACREAGE
PRL 15
188,675
36.5%
4m acres
InterOil has the largest holdings in basin
PRL 39
188,877
69.1%
PPL 474
1,232,462
78.1%
PPL 475
524,315
65.2%
PPL 476
1,215,243
78.1%
PPL 477
629,254
78.1%
TOTAL
3,978,828
SEEPAGE
SEEPAGE
AIRBORNE GRAVITY
95% OF ACREAGE
Coverage highlights key anomalies
SEISMIC
1562 km
Eastern
Papuan
Basin
Most seismic coverage of any PNG operator
HISTORIC WELLS
12 WELLS
Over $600m spent over past 11 years
NEW CAMPAIGN
40 POTENTIAL TARGETS
Across acreage, at least 11 around ElkAntelope
Note: IOC can continue and commit to continue or exit the licence after each
two-year period. Licences can be extended after six years for a further five
years with 50% relinquishment.
Page 13
HISTORY: Airborne Gravity
Early regional reconnaissance exploration
LOW COST NON-INVASIVE INITIAL EXPLORATION TOOL – 20+ ANOMAILIES IDENTIFIED
EXPLORATION ACREAGE
Elk-Antelope anomaly
4m acres
InterOil has the largest holdings in basin
AIRBORNE GRAVITY
95% OF ACREAGE
Bobcat anomaly
Triceratops anomaly
Puri-Raptor-Duck Bill
anomaly
Coverage highlights key anomalies
SEISMIC
1562 km
Eastern
Papuan
Basin
Most seismic coverage of any PNG operator
HISTORIC WELLS
Wahoo-Mako
anomaly
12 WELLS
Over $600m spent over past 11 years
NEW CAMPAIGN
40 POTENTIAL TARGETS
Across acreage, at least 11 around ElkAntelope
Page 14
HISTORY: $153m invested in seismic
The key pre-drill risk reduction tool in EPB – firms up targets to drill-ready
SEISMIC CONFIRMS GRAVITY ANOMALIES, IDENTIFIES DRILLING LOCATIONS, AND MAPS POTENTIAL VOLUME
EXPLORATION ACREAGE
4m acres
IOC acquired seismic surveys pre-2013
InterOil has the largest holdings in basin
AIRBORNE GRAVITY
95% OF ACREAGE
Coverage highlights key anomalies
SEISMIC
1562 KM
Eastern
Papuan
Basin
Most seismic coverage of any PNG operator
HISTORIC WELLS
12 WELLS
Over $600m spent over past 11 years
NEW CAMPAIGN
40 POTENTIAL TARGETS
Across acreage, at least 11 around ElkAntelope
Page 15
HISTORY: Seismic reduces pre-drill risk
Defines scale of prospects, can allow wells to be optimally located on reservoir sweet spots
NEW SEISMIC DATA HAS IDENTIFIED THREE MAJOR TRENDS
A02IOL09
EXPLORATION ACREAGE
Choice 2013
2013 reprocessing – now used for Elk-Antelope appraisal
4m acres
Antelope Trend
InterOil has the largest holdings in basin
AIRBORNE GRAVITY
95% OF ACREAGE
Whitetail Trend
Top reservoir
Coverage highlights key anomalies
SEISMIC
Raptor Trend
A02IOL09
3 Mappable Trends
New modern processing shows 3 trends
Original 2009
Antelope Field
2007 analysis – used at time of Elk-Antelope discoveries
HISTORIC WELLS
12 WELLS
Over $600m spent over past 11 years
NEW CAMPAIGN
40 POTENTIAL TARGETS
Across acreage, at least 11 around ElkAntelope
Page 16
16
Page
HISTORY: 3 discoveries
Track record of success – cracking the code in the carbonate fairway
AFTER INITIAL CHASE FOR SANDSTONES, 3 DISCOVERIES IN KAPAU LIMESTONE
EXPLORATION ACREAGE
4m acres
Triceratops
Gas Field
2005
Elk-Antelope
Gas Field
2006, 2008
InterOil has the largest holdings in basin
AIRBORNE GRAVITY
95% OF ACREAGE
Coverage highlights key anomalies
SEISMIC
1562 km
Eastern
Papuan
Basin
Most seismic coverage of any PNG operator
HISTORIC WELLS
12 WELLS
Over $600m spent over past 11 years
NEW CAMPAIGN
40 POTENTIAL TARGETS
Sandstone well – early exploration
Limestone/Carbonate well – primary target
Across acreage, at least 11 around ElkAntelope
Page 17
HISTORY: Potential around Elk-Antelope
Significant tie-back potential to Elk-Antelope
AT LEAST 11 STRUCTURES, ONLY 3 DRILLED TO DATE, ~10% OF OUR TOTAL ACREAGE
EXPLORATION ACREAGE
ANTELOPE TREND
Triceratops
4m acres
InterOil has the largest holdings in basin
AIRBORNE GRAVITY
Jaguar
Mule
Deer
RAPTOR TREND
Elk
Antelope
Puri Deep
SEISMIC
Raptor
1562 km
Whitetail
Antelope
Deep
Most seismic coverage of any PNG operator
HISTORIC WELLS
Duck
Bill
PPL475
12 WELLS
Significant investment over past 14 years
PPL476
WHITE TAIL TREND
95% OF ACREAGE
Coverage highlights key anomalies
Bob Cat
20 km
PRL15
NEW CAMPAIGN
40 POTENTIAL TARGETS
Raptor and Bobcat (red text) currently drilling
Across acreage, at least 11 around ElkAntelope
Cold colors depict increasing depth
Page 18
STRATEGY: Current work program
3 exploration wells spudded March 2014 – one temporarily suspended, other two ongoing
SIGNIFICANT STEP-UP IN DRILLING ACTIVITY – PNG’S MOST ACTIVE DRILLING CAMPAIGN
EXPLORATION ACREAGE
BOBCAT-1
4m acres
InterOil has the largest holdings in basin
AIRBORNE GRAVITY
95% OF ACREAGE
Coverage highlights key anomalies
SEISMIC
RAPTOR-1
1562 km
Eastern
Papuan
Basin
WAHOO-1
Most seismic coverage of any PNG operator
HISTORIC WELLS
Gulf of
Papua
12 WELLS
Significant investment over past 14 years
NEW CAMPAIGN
3 wells spudded
Bobcat and Raptor continue to drill
Wahoo temporarily suspended
Page 19
CURRENT EXPLORATION PROGRAM: Wells update
Bobcat and Raptor drilling ahead in the Orubadi
BOBCAT-1, PPL 476
RAPTOR-1, PPL475
•
Test of Antelope trend between Elk and Triceratops
•
First test of new trend – Raptor Trend
•
Managed pressure drilling in Orubadi seal
•
Deepest of the three exploration wells
•
Challenging drilling
•
Challenging drilling in Orubadi Seal
•
Nearing prognosed target depth
•
Slow progress under managed pressure drilling
Page 20
CURRENT EXPLORATION PROGRAM: Wahoo-1
The impact of Orubadi absence: Kapuri-1 reef vs Wahoo-1 exploration wells
WAHOO-1 – InterOil, 2014, Onshore
KAPURI-1 – Phillips Australia, 1968, Offshore
Possible gas ‘chimney’
Well suspended in
Orubadi Seal
Classic reef
expression
✔ Effective source – note gas chimney
✔ Reservoir present – proven reef
✔ classic seismic signature
✔ excellent reservoir quality
✔ porosity up to 26%
✔ up to 4800bpd on test
✖ Orubadi seal absent – not contained
25 km
✔ Orubadi seal proven
✔ Effective source rock – thermogenic
charge established
Well suspended before reservoir BUT:
✔ Potential reefal seismic expression
✔ Known to be above target level in
younger sediments
✔ Need to test for reservoir
REVIEW SUMMARY
Cracking the code of the Eastern Papuan Basin to find the next Antelope
12 WELLS BASIN
NEW EMERGING
WELLS BASIN
INTEROIL 12
DOMINATES
Elk-Antelope, PNG’s largest discovery, has put the Eastern Papuan
Basin on the map as an exciting emerging province
InterOil dominates the Eastern Papuan Basin and holds material
equity – a privileged position
3 DISCOVERIES
ALREADY
12 WELLS
InterOil has best knowledge of basin and record of success with three
discoveries – and understanding how to crack the code for more
CRACKING THE CODE
12 WELLS
All three components critical for success – source, reservoir and seal –
can be mapped to varying degrees across InterOil acreage; key to
cracking the code
40 POTENTIAL
TARGETS
12 WELLS
InterOil prospect inventory deep and wide with ~40 potential targets
so far, with more than 10 years of high-growth running room; likely
Antelope is not alone
EXPLORATION SUCCESS
12 WELLS
Further exploration success expected but so too is failure – that is
exploration. An evolving exploration strategy is focused on sequencing
delivery of further risk-mitigated commercial successes
FUNDED, FOCUSED, RIGHT TEAM
InterOil has a world-class asset; with a focus as a pure exploration and
production company. It now has the funding and skills to deliver on
this strategy
Page 22
Q2 2014 - FINANCIAL UPDATE
Don Spector – Chief Financial Officer
Antelope-4 well pad
preparation
Bobcat-1
HERD
BASE
CAMP
Q2 UPDATE: Gain of $49.5 million on sale
Gross proceeds of $525.6 million on sale of refinery and downstream distribution operations
Quarter ended
June 30,
$52.3m profit
Includes $49.5m from
Puma deal
 Profit of $52.3 million
in Q2 2014
 Q2 results now
reflect refinery and
downstream
businesses as
discontinued
operations
Six m onths ended
June 30,
2014
$
Revenue
Administrative and general expenses
Derivative gains/(losses)
2013
$ (revised)*
13,688,587
(10,470,087)
-
June 30,
2014
$
831,073
(8,868,145)
(191,100)
June 30,
2013
$ (revised)*
15,592,036
1,433,880
(20,455,246)
(12,781,866)
-
(191,100)
Legal and professional fees
(3,396,784)
(1,263,080)
(5,741,789)
(2,609,172)
Exploration costs, excluding exploration impairment
(5,850,598)
(521,672)
(14,546,887)
(971,177)
(12,136,853)
(2,081,817)
(22,321,279)
(3,682,133)
(907,823)
(1,406,809)
(2,349,511)
(2,835,052)
Finance costs
Depreciation and amortization
Gain on conveyance of oil and gas properties
-
Loss on available-for-sale investment
-
Foreign exchange gains/(losses)
Share of net loss of joint venture partnership accounted
for using the equity method
(Loss)/profit from continuing operations before incom e taxes
3,511,572
(687,045)
(377,683)
340,540,011
5,069,915
(18,488)
500,071
(1,027,090)
(471,971)
(7,673)
(216,619)
(312,670)
(29,258,246)
(15,613,970)
280,176,726
(24,382,160)
(15,569,659)
(14,782,897)
295,768,762
(22,948,280)
Income taxes
Current tax benefit/(expense)
Deferred tax expense
(Loss)/profit for the period from continuing operations
Profit for the period from discontinued operations, net of tax (attibutable
to ow ners of InterOil Corporation)
Profit/(loss) for the period
69,450
(131,003)
(495,328)
(352,970)
(264,131)
(326,562)
(212,866)
(35,029)
(194,681)
(457,565)
(708,194)
(387,999)
(15,764,340)
(15,240,462)
295,060,568
(23,336,279)
68,030,156
2,010,318
75,841,711
14,108,853
52,265,816
(13,230,144)
370,902,279
(9,227,426)
52,265,816
(13,230,144)
370,902,279
(9,227,426)
52,265,816
(13,230,144)
370,902,279
(9,227,426)
Profit/(loss) is attributable to:
Ow ners of InterOil Corporation
Details of Discontinued operations can be found in Note 4 of financial statements on website
Page 24
Q2 UPDATE: Strongest ever balance sheet
Fully funded for 2014-15
Funding and forecasted commitments as at June 30, 2014 to end of 2015
Funding Available
$885m
$585m* + $300m
FUNDING AS OF JUNE 30, 2014
COMMITMENTS (NEXT 18 MONTHS)
REMAINING FUNDS
1000
$m
885
900
50
800
Expenditure next 18 months
700
~$300m
expected
commitments
~300
600
585
70
500
400
300
~465**
200
300
Expected Remaining Funds
100
~$465m
remaining funds**
0
Exploration Facility
Cash
Total Funding
Available
Buyback
Forecasted
Expenditure
Convertible Note
Remaining funds
* $585 million cash Includes $17.5 million of non-current restricted cash that is expected to be released soon due to improving credit profile
** $465m remaining before repayment of $300m credit facility due December 2015 and excludes potential PRL15 certification payment
Page 25
QUESTIONS
For more information, please contact:
[email protected]
Vice President, Investor Relations