InterOil Announces Financial Results for the Third Quarter 2004
TORONTO, Nov. 16 /PRNewswire-FirstCall/ -- InterOil Corporation (TSX-V: IOL)
(AMEX:IOC) (ASX: IOC; POMSoX), a Canadian company with operations in Papua New
Guinea today reported financial results for the three months ended September
30, 2004.
Key Financial Highlights include: -- Assets increased to US$376.8 million at September 30, 2004 compared to
$260.3 million at December 31, 2003;
-- Cash and equivalents of approximately US$37.8 million at September 30,
2004 compared to US$34.0 million at December 31, 2003; and
-- Generated operating revenue of US$47.7 million for a total of US$60.5
million for the year to date.
"The third quarter of 2004 was a major challenge for InterOil as our company
transformed from a construction project to an operational industrial facility
with full commissioning activities underway." said Mr. Phil Mulacek, Chief
Executive Officer of InterOil. "This first step towards sustained production
began with the arrival of crude into our Port Moresby refinery followed by
progressively placing various components of the refinery into service, and then
production and sale of refined product to client specifications. While this
commissioning process is not perfect, we have not yet encountered any major
obstacles that would prevent the refinery to reach full production in 2005.
The start-up of the catalytic reformer unit will provide us the platform to
begin freight and product optimization and proceed to target sales from the
refinery." InterOil's Management Discussion and Analysis and the Consolidated Financial
Statements are available on our web site at http://www.interoil.com/. An update
of InterOil's recent business activities by segment follows: Corporate
-- On July 14, 2004 InterOil graduated to the Toronto Stock Exchange
trading under the symbol IOL. -- On September 8, 2004 InterOil shares began trading on the American
Stock Exchange under the symbol IOC. -- On November 11, 2004, InterOil filed a preliminary shelf prospectus
related to the registration of certain common shares underlying the
US$45 million convertible debentures and warrants issued by InterOil on
August 27, 2004 and September 3, 2004. -- As a result of higher crude prices, InterOil has successfully increased
its working capital facility with BNP Paribas Singapore for refinery
operations from US$60.0 million to US$100.0 million. -- InterOil continues to expect a full-year target net income (annualized)
of US$40.0 million for its combined Midstream and Downstream business
segments to be achieved by mid-year 2005. This target is based on a
historical average for InterOil's anticipated product slate from the
refinery and full-year operations from both its operated and leased
Downstream assets.
Upstream
-- During the 3rd quarter InterOil suspended drilling operations pending
the identification and acquisition of additional drilling equipment. Seismic activity has started on the Moose and Elk structures to confirm
targets and locations. Recording of seismic data on the Elk and Moose
structures was completed in October 2004 and intermediate processing
results have been obtained and are being interpreted with final results
expected mid-December. -- InterOil is currently reviewing and finalizing the following 3 pronged
strategy for its 2005 exploration program:
1. Company owned equipment - InterOil has advanced a work order with a
US engineering firm to provide a quotation to build a new heli-
portable rig. This rig is a "double", i.e. capable of lifting two
lengths of oilfield drill pipe at once, with a hook load capacity
of 150 tons and is designed to drill to 4,000 meters. The majority
of the equipment for this rig will come from the US. InterOil has
already purchased long lead support equipments, including pumps and
power units, which will be a part of this rig package. Delivery of
the new rig is expected to take place in the second quarter 2005. 2. Modify existing contractor contracts - InterOil is working with
existing contractors to utilize in-country equipment on shallow
target structures. 3. Engage new contractors for the deepest structures and targets -
InterOil is evaluating options for direct contracting with
operators with rigs capable of reaching our deepest structures and
targets. -- InterOil is actively engaged in funding opportunities to accelerate the
exploration activity to early 2005. Final exploration plans will be
driven by available funding from either internal cash resources or
external resources. Funding from external sources could be through the
sale of a limited, indirect percentage in our planned drilling program. Additional details will be provided as they are finalized and may be
different than described above.
Midstream
-- Commissioning activities are well advanced and are expected to be
completed by the end of the fourth quarter 2004 or early first quarter
2005. The catalytic reformer was placed into service in mid-November. Blendstock for production of finished gasoline will be produced as the
unit reaches normal operating conditions. -- InterOil's first sales of refined product to the local PNG market
occurred on August 10, 2004 and the first export sales on September 4,
2004. Refined product to contract specifications continues to be
produced and sold into both the local and export markets during
commissioning. Incoming crude supply and refined products are
independently certified on site to contractual specifications. -- Refined product quality of rundown streams from the refinery crude
distillation unit are of a high standard and refined product sales have
been certified to contractual specifications by the on-site,
independent laboratory. There has been an increase in production to a
current daily average of 32,000 barrels and InterOil anticipates these
levels to increase when the refinery is in full operation. -- Refined product sales in the quarter, both domestic and export, have
been irregular due to production fluctuations encountered during the
commissioning phase. This has resulted in non-optimized freight and
logistics, which resulted in delays, prompt export sales, crude cargo
advances or trade outs and associated demurrage costs. It is planned
that following commissioning freight can be scheduled without the
unpredictable commissioning events. This should reduce our future
freight and logistics costs significantly from those incurred during
the commissioning activities. -- InterOil's historical average margins (January 2000 to May 2004) for
the expected product slate would have generated an average margin per
barrel of input to the refinery of approximately US$4.85 per barrel. -- Since the current refined product market is slightly different than
when the refinery was designed over five years ago, minor modifications
to the refinery processes will be implemented over the next few
quarters to optimise the product stream to reach target margins. The
costs incurred in the commissioning of the catalytic reformer along
with the irregular production fluctuations have made it necessary to
increase the total refinery project budget by 7.3% (US$15.6 million) to
US$230.0 million. -- The anticipated product split is approximately 50% domestic and 50%
export at a throughput of 36,500 barrels per day.
Downstream
-- On September 24, 2004, InterOil re-branded its first retail outlet to
the InterOil Products Limited name. The re-branding program will be an
ongoing project expected to be completed by year-end 2004. -- Operating revenue for the 3rd quarter was US$21.1 million compared to
US$33.7 million since the acquisition date of April 29, 2004. -- The introduction of a new pricing template by the PNG Independent
Consumer & Competition Commission in August 2004. The implications of
the new pricing template for the downstream sector have been the
capping of available refined product margins for the upcoming year
starting September 8, 2004, to 24 toea (US$0.07) per liter. The new
pricing template provides for an overall improvement in the ability to
recover sea and road transportation costs incurred in the supply and
distribution chain. We had planned for a reduction in available
margins under the pricing review that was expected post commencement of
supply from the refinery and we are well placed to maintain a
competitive position in the PNG market.
InterOil is developing a vertically integrated energy company whose primary
focus is Papua New Guinea and the surrounding region. Its assets comprise an
oil refinery, upstream petroleum exploration licenses, and retail and
commercial distribution assets. The majority of the refined products from
InterOil's refinery are secured by off-take contracts with Shell and InterOil's
wholly-owned subsidiary, InterOil Products Limited. BP Singapore is InterOil's
agent for crude oil supplied to the refinery. InterOil is also undertaking an
extensive petroleum exploration program within its eight million acre license
area located in Papua New Guinea.
InterOil's common shares trade on the Toronto Stock Exchange under the symbol
IOL in Canadian dollars; on the American Stock Exchange under the symbol IOC in
US dollars; and on the Australian Stock Exchange in CHESS Depositary Interests
in Australian dollars under the symbol IOC which trade on a 10:1 basis to
common shares. For more information please see the InterOil website at:
http://www.interoil.com/ .
FOR FURTHER INFORMATION: Gary M Duvall Anesti Dermedgoglou
V.P., Corporate Development V.P., Investor Relations
InterOil Corporation InterOil Corporation
Houston, TX USA Cairns, Qld Australia
Phone: +1 281 292 1800 Phone: +617 4046 4600
Cautionary Statements This press release contains forward-looking statements. All statements, other
than statements of historical facts, included in this release, including
without limitation, statements regarding our drilling plans, business strategy,
plans and objectives of management for future operations and those statements
preceded by, followed by or that otherwise include the words "believe",
"expects", "anticipates", "intends", "estimates" or similar expressions or
variations on such expressions are forward-looking statements. The Company can
give no assurances that such forward-looking statements will prove to be
correct. Risks and uncertainties include, but are not limited to, the existence
of underground deposits of commercial quantities of oil and gas; fluctuations
in prices for oil and gas production; curtailments or delays in development due
to mechanical, operating, marketing or other problems; capital expenditures
that are either significantly higher or lower than anticipated because the
actual cost of identified projects varied from original estimates; and from the
number of exploration and development opportunities being greater or fewer than
currently anticipated.
The Company currently has no reserves as defined under Canadian National
Instrument 51-101 reserve definitions. See the Company's filings with the
Canadian securities regulators for additional risks and information about the
Company's business. DATASOURCE: InterOil Corporation CONTACT: Gary M Duvall, V.P., Corporate Development, or +1-281-292-1800, or Anesti Dermedgoglou, V.P., Investor Relations, or +617 4046 4600, both of InterOil Corporation Web site: http://www.interoil.com/
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