InterOil Second Quarter Profit Rises (USA)

InterOil Corporation announced financial and operating results for the second quarter ended June 30, 2011.

Second Quarter 2011 Highlights and Recent Developments

• On April 11, 2011, InterOil together with Pacific LNG Operations Ltd. (PacLNG) entered into framework agreements with Samsung Heavy Industries and Flex LNG Ltd. (Flex LNG), conditional upon a final investment decision (FID), relating to the construction and operation of a 1.8 million tonnes per annum (mtpa) floating natural gas liquefaction processing vessel. The project is intended to be integrated with and augment proposed infrastructure to liquefy natural gas from the onshore Elk and Antelope fields in the Gulf Province of Papua New Guinea. The onshore liquefaction facility is being pursued with Energy World Corp. and Mitsui & Co., Ltd.

• During, and subsequent to the quarter, four additional seismic lines were acquired over the Triceratops/Bwata structure in Petroleum Prospecting Licence (PPL) 237. Preparation of the Triceratops 2 (Triceratops/Bwata field) drilling location is underway, and we plan to drill this well later in the year.

• During the quarter, the site specific engineering for the land based modular liquefied natural gas (LNG) and floating LNG facilities were underway and we are continuing our pre-investment in the LNG project to lower bidder risks and to help secure the project timeline and costs.

• InterOil recorded a consolidated net profit for the quarter ended June 30, 2011 of $23.5 million. The operating segments of Corporate, Midstream Refining and Downstream collectively derived a net profit for the quarter of $34.5 million, while the development segments of Upstream and Midstream Liquefaction had a net loss of $11.0 million.

• Subsequent to the quarter end, on August 2, 2011, InterOil announced the signing of a Heads of Agreement (HOA) with Noble Clean Fuels Limited, a wholly owned subsidiary of Noble Group Limited, which is to form the basis for negotiation of a binding, definitive agreement for the supply to Noble of 1.0 mtpa of LNG from InterOil’s proposed Gulf LNG project in Papua New Guinea.

InterOil Chief Executive Officer Phil Mulacek commented, “In addition to continuing to pre-invest in the Gulf LNG Project in advance of FID, InterOil achieved another milestone in advancing our development project with the recent execution of a HOA with Noble Group. Noble has a proven track record of providing long-term fuel supply to major utilities across Japan, Korea and China and is a good fit with InterOil’s strategy of expanding LNG markets.”

“The addition of Rt. Hon Sir Rabbie Namaliu, former Prime Minister and former Petroleum and Energy Minister of Papua New Guinea, to InterOil’s PNG Advisory Board should assist InterOil in discussions with government departments in developing the Gulf LNG Project.”

“Furthermore, we have advanced our understanding of the structure of the Triceratops/Bwata structure, having recently completed the acquisition of three of the four additional seismic lines over the field, and are now preparing to drill the Triceratops 2 well.”

Corporate Financial Results

InterOil recorded a net profit for the quarter ended June 30, 2011 of $23.5 million, compared with a net profit of $7.8 million for the same period in 2010, an improvement of $15.7 million. The operating segments of Corporate, Midstream Refining and Downstream collectively returned a net profit for the quarter of $34.5 million. The development segments of Upstream and Midstream Liquefaction yielded a net loss of $11.0 million. This movement was mainly due to higher foreign exchange gains realized on the strengthening of the PGK against the USD from 0.3895 at the start of the second quarter of 2011 to ending the quarter at 0.4350, and the gains realized on shares acquired as an investment interest in Flex LNG. These increases were partly offset by a reduction in gross margin mainly due to inventory write downs that were recognized at quarter end, and an increase in future income tax expense relating to the refinery due to the end of the five year tax holiday.

InterOil’s earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter ended June 30, 2011 was a gain of $39.0 million, compared with a gain of $14.9 million for the same period in 2010, an increase of $24.1 million. Total revenue increased by $78.5 million from $225.3 million in 2010 to $303.8 million for the second quarter ended June 30, 2011.

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Source: InterOil, August 11, 2011;