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InterOil, Pacific LNG sign supply deal with Noble Clean Fuels

InterOil Corp and Pacific LNG Operations have signed a heads of agreement with Noble Clean Fuels for the supply of one million tonnes per annum (mtpa) of liquefied natural gas (LNG) from the Gulf LNG project in Papua New Guinea (PNG).

The purchase and sale of one mtpa of LNG will be carried out over a period of ten years starting in 2014.

The Gulf LNG project includes Elk and Antelope gas fields and Liquid Niugini Gas, the InterOil and Pacific LNG joint-venture project firm, with modular LNG plants contracted with Energy World.
It also consists of a fixed floating LNG facility being developed with Flex LNG and Samsung Heavy Industries.
InterOil and Pacific LNG intend to complete negotiations and execute binding agreements with Noble later this year.

Noble is a subsidiary of Noble Group, that manages the global supply chain of agricultural and energy products, metals and minerals.

Original Article

Japan Urges Papua New Guinea to Improve Policing Around LNG Projects


Japan has urged Papua New Guinea to improve internal security to allow the smooth implementation of the liquefied natural gas projects.

The Post Courier reports that Japan’s Foreign Minister, Takeaki Matsumoto, put the request to his PNG counterpart Don Polye in Tokyo.

Mr Polye has been in Japan for the signing of the investment agreement for the protection and promotion of Japanese investments in PNG. Japanese companies are participating in both the ExxonMobil-led project and the second LNG project operated by InterOil Corporation.

A number of disgruntled landowner groups have already disrupted the construction of the major gas pipeline being constructed for the first LNG project.

In recent months, killings and attacks have been reported in Southern Highlands, raising security concerns about the safety of developers and contractors.

The government has stationed police units in the oil and gas rich region.

Original Article

InterOil Executes Agreement With Samsung Heavy Industries and FLEX LNG to Construct a 2 mtpa Floating LNG Vessel

SINGAPORE and HOUSTON, April 11, 2011 /PRNewswire/ — InterOil Corporation (NYSE: IOC) (POMSoX: IOC) today announced that InterOil and Pacific LNG Operations Ltd., have executed agreements, conditional upon Flex shareholder approval and final FID, with Samsung Heavy Industries and FLEX LNG Ltd. (Oslo:FLNG) related to the construction and operation of a 2 million tonne per annum (mtpa) floating liquefied natural gas (LNG) processing vessel (FLNG).  The FLNG project is intended to integrate with and augment proposed infrastructure to liquefy natural gas from the onshore Elk and Antelope gas fields in the Gulf Province of Papua New Guinea pursuant to preliminary arrangements with Energy World Corporation and to link with InterOil’s proposed condensate stripping plant (CSP) being pursued in joint venture with the Mitsui Group and to accelerate the intended monetization of the Elk and Antelope fields. Commencement of the FLNG vessel’s operations is targeted for mid 2014.

FLEX LNG has informed InterOil that it has already completed the generic Front-End Engineering and Design (FEED) in 2009.  The project specific FEED is targeted to start in May 2011, with all parties working towards reaching a final investment decision (FID) before the end of 2011.  The agreements represent a continuation of the over 12 month collaboration between Samsung Heavy Industries, FLEX LNG, InterOil, Pacific LNG and Liquid Niugini Gas Ltd. (LNGL), InterOil’s joint venture LNG project company with Pacific LNG, to work together to develop the first floating facility to produce LNG.

FLEX LNG and Samsung Heavy Industries will be responsible for the design, engineering, construction and commissioning of the FLNG vessel. FLEX LNG will also be joint operator of the FLNG vessel together with LNGL.  Construction of the FLNG unit will be fully financed by FLEX LNG and Samsung Heavy Industries.

The FLNG vessel is expected to be moored alongside the proposed jetty located in the Gulf Province, which will be shared with InterOil’s proposed land-based LNG facilities, and have a production capacity of up to 2 million tons of LNG per annum and to process an estimated 2.25 trillion cubic feet of gas over a firm 25-year period.  FLEX LNG will receive 14.5% of the revenue, less agreed deductions and premiums, from the sale of LNG from the FLNG vessel for an initial 15-year period.  Thereafter, for the next 5 years FLEX LNG will receive 12.5% of the revenue and 10% of the revenue for the last 5-year period.  During the 25 year term of the contract, LNGL will become a part owner of the FLNG vessel.

As a part of the arrangements, InterOil and Pacific LNG will receive options, exercisable no later than 15 days after Flex LNG shareholder approval of this equity transaction, to acquire 11,315,080 common shares of FLEX LNG at an average strike price of 4.5909 NOK.  This is approximately a 12% premium to the average FLEX LNG share price during October 2010 when an initial non-binding agreement was executed between FLEX LNG, InterOil and Pacific LNG.

Additionally, upon the project reaching FID, InterOil and Pacific LNG will receive FLEX LNG shares at par value equivalent to 5% of FLEX LNG.  An additional amount of shares equalling up to 15% ownership in FLEX LNG may be issued to InterOil and Pacific LNG for $0.01 per share in three 5% tranches during the period from FID until 9 months after FID.

The agreements signed with InterOil, Pacific LNG, LNGL and Samsung Heavy Industries are all conditional upon FLEX LNG’s shareholders approving the proposed equity transaction with InterOil and Pacific LNG and achieving a positive project FID.  Such approval is targeted for April/May 2011 and FID by the end of 2011.

Commenting on the agreements, the Chairman of InterOil, Phil Mulacek stated: “InterOil is proud to be partners with Samsung Heavy Industries, FLEX LNG, and Pacific LNG in a proposed project utilizing a FLNG vessel to accelerate the commercialization of our natural gas resources in PNG.  The confidence of Samsung, the largest Korean conglomerate, to be the undisputed leader in FLNG, with a full completion guarantee, solidified our participation.  All stakeholders benefit from higher utilization of the core infrastructure and high quality gas assets required for the project.  The additional time required to increase upstream capacity and integrate the proposed marine facility to accommodate the FLNG vessel is warranted by the increased scale of the entire project and the incorporation of additional respected industry partners.  In less than one year, we have negotiated agreements, contingent on FID, to construct facilities for the processing and sale of 5 mtpa of LNG (4.5 Tcf of natural gas) in addition to our expanded CSP project.”

( Original Article )

A Bear Fights Soros and a Bullish Tide on InterOil


Whitney Tilson

Jonathan Fickies/Bloomberg News
Whitney Tilson, InterOil bear.

George Soros

Joshua Roberts/Bloomberg News
George Soros, InterOil bull.

Is InterOil a great way to play Asia’s commodity boom or a overhyped company worth a fraction of its $3.4 billion market value?

In recent weeks, the debate has escalated over InterOil, a publicly traded exploration outfit drilling for natural gas in Papua New Guinea.

George Soros loves InterOil. The billionaire hedge fund king’s Soros Fund Management, which manages more than $20 billion, disclosed in a securities filing this month that it had nearly doubled its stake in InterOil. He owns about 5.3 million shares, or about 12 percent of the company. At $300 million, his InterOil stake is the third-largest stock holding in his fund, according to the filing with the Securities and Exchange Commission.

A spokesman for Soros Fund Management declined to comment on the position. According to securities filings, he began buying the stock in early 2009 at around $33 a share. On Wednesday, InterOil’s shares were trading above $76.

Whitney Tilson hates InterOil. And unlike the Soros fund, Mr. Tilson, who runs the hedge fund firm T2 Partners, isn’t shy about sharing his views. On Nov. 6, in a blast e-mail sent to 2,000 recipients, Mr. Tilson lambasted the company, which he has done periodically — and publicly — over the past year:

“This is a company that has NO RESERVES — not proven, probable or even possible; just a ‘contingent resource estimate’ from a firm that InterOil paid, after shopping among firms — and has NEVER delivered on its countless promises of huge natural resource finds in over 200 press releases over more than 10 years. Sure, there’s gas there — this isn’t Bre-X — but we think there’s only a tiny fraction of what IOC claims.”

Mr. Tilson’s recent tirade came just after InterOil raised $266 million in its first publicly underwritten offering, a deal backed by, among others, Morgan Stanley. He acknowledges that with the capital increase, the short case on Interoil becomes less compelling. InterOil, which has been burning through cash, now has money to finance its capital-intensive exploration business.

Although his hedge funds run only $155 million, Mr.Tilson has carved out a prominent place in the world of stock pickers. A Warren E. Buffett acolyte, Mr. Tilson writes for publications including The Financial Times and runs the Value Investing Congress, a well-attended event where big investors including William A. Ackman of Pershing Square Capital Management and David Einhorn of Greenlight Capital Management show up to discuss their best ideas.

Mr. Tilson isn’t concerned that Mr. Soros’s fund is on the other side of his bearish bet. “George Soros is one of the greatest investors of all time, but he’s made his fortune on big macro calls, not stock picks,” Mr. Tilson told DealBook. “And you need to do in-depth research on this company to understand why InterOil’s not all that its promoters crack it up to be.”

InterOil reported a third-quarter loss this week of $14.4 million on sales of $208.5 million, generated largely through an oil refinery business. “Our efforts to monetize our discovered resources have advanced significantly over the past several months,” said Phil Mulacek, the company’s chief executive, in a statement.

A Morgan Stanley analyst raised its earnings estimates on InterOil on Tuesday, saying it was bullish on the stock with an overweight rating and a $135 a share price target.

Mr. Tilson, who first shorted InterOil around $30 a share in April 2009, is licking his wounds but remains resolute. “We think this stock will ultimately go down in history as one of the greatest promotions ever,” Mr. Tilson said. “Yes, there’s natural gas there, but we think only a small fraction of what the company claims and certainly not enough to justify the company’s market cap.”

Original Article

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