From Tilson’s latest communication with investors: Speaking of our largest shorts, though I haven’t commented on it in a while, InterOil (IOC, Financial) has gotten better and better as a short, as the company continues to miss deadlines on its unrealistic promises, which will likely never be fulfilled, yet the company still has a $2.7 billion market cap (vs. its intrinsic value of ZERO). The government of Papua New Guinea is finally waking up to this gigantic promotion and has demanded that the company find an “internationally-recognized LNG operating partner,” which is highly unlikely (see: http://seekingalpha.com/article/307654-3-problems-interoil-has-with-finding-a-major-partner).
Here is laundry list of what InterOil has promised by year-end:
- Secure FID with Mitsui for condensate stripping plant (CSP)
- Secure FEED and FID with Energy World Corp. (EWC) for modular LNG plant
- Secure FEED and FID with Flex LNG on floating LNG plant
- Sign definitive agreement with Noble Group for 1MTPA offtake
- Secure “internationally-recognized LNG operating partner”
- Sign additional HOA for 1-2MTPA offtake
With only a month to go in the year, the only one of these that IOC has delivered on is the last one, announcing last week that it had signed “a Heads of Agreement (HOA) with Gunvor Singapore Pte. Ltd., for the supply of one million tonnes per annum (mtpa) of liquefied natural gas (LNG).” Ah, but as is almost always the case, all is not as it appears at InterOil, as Gunvor, according to Wikipedia (http://en.wikipedia.org/wiki/Gunvor_%28oil_trader%29), has unsavory ties:
Following the major Wikileaks release of US State Department cables in November 2010, it was reported by the London Daily Telegraph[17] that the wealth of Russian Prime Minister Vladimir Putin is linked to a "secretive Swiss-based oil trading firm" called Gunvor. It said that John Beyrle, the United States Ambassador to the Russian Federation stated that close connections exist between Gunvor and the Russian Government and that he reported: "its secretive ownership is rumoured to include prime minister Putin."
The whole point of an offtake agreement is so lenders will lend the nearly $10 billion this project would cost – and who’s going to lend that kind of money against an agreement with a firm like Gunvor?!
There’s ZERO chance that InterOil will meet its year-end deadlines for all of these deals, which the company just acknowledged today, saying “the company was targeting late this year or early next year”:
InterOil sees investment decision on Gulf LNG project in months
PERTH | Mon Nov 28, 2011 5:41am EST
Nov 28 (Reuters) - InterOil Corp is on track to make a final investment decision on its $6-billion Gulf LNG project in Papua New Guinea in the next few months and expects to receive government approval for the project.
The Papua New Guinea government criticised InterOil's project plan earlier this year on grounds that it fell short of the project that had originally been approved.
"We are very confident that we are on track to build this plant with full support of the government of Papua New Guinea," Dinny Kutty, InterOil's chief accountant, said at an industry conference in Perth, Australia.
"I'm not going to give a date, but the government wants this project off the ground as soon as possible. It is providing huge economics to the country," Kutty said, adding that the company was targeting late this year or early next year, while the Papua New Guinea government wanted to see a final investment decision by the end of the year.
A spokesman for Papua New Guinea's state-owned oil company, Petromin PNG Holdings, was not immediately available for comment.
InterOil is also in the process of seeking an operating and equity partner with previous LNG developement experience.
"We keep the government in the loop to make sure there won't be any objections once the process is completed," Kutty said.
The project, which Interoil is developing with Pacific LNG in a joint venture called Liquid Niguini Gas Limited (LNGL), will initially produce 5 million tonnes per annum (mtpa), ramping up in stages to 7.6 mtpa and 10 mtpa.
The company currently has sold 2.3 mtpa, or less than half of the plant's initial capacity, through preliminary sales agreements, with 1 mtpa each going to Noble Group and Gunvor, and 0.3 mtpa going to the Philippines' EWC.
LNG developers typically try to lock in around 85 percent of sales contracts before making a final investment decision on a project.
"We are confident that there will be more (agreements) in the near future," Kutty said, adding that InterOil aimed to sell another 2 to 3 million tonnes in the next few months.
"There's definitely interest from the Asian region because there's a lot of demand for LNG," said Kutty, adding that the project would break even at a sales price of $0.70 per mmBtu, including revenue from condensates also produced by the project.
For more the most in-depth expose of IOC, see: www.businessinsider.com/interoil-ioc-major-momentum-or-just-a-castle-in-the-air-a-new-investigation-2010-4, which links to 12 pages starting here: www.businessinsider.com/interoil-ioc-major-momentum-or-just-a-castle-in-the-air-a-new-investigation-2010-4#the-background-1
For a more recent take, see: http://seekingalpha.com/article/307939-has-interoil-turned-into-a-full-blown-scam
Here is laundry list of what InterOil has promised by year-end:
- Secure FID with Mitsui for condensate stripping plant (CSP)
- Secure FEED and FID with Energy World Corp. (EWC) for modular LNG plant
- Secure FEED and FID with Flex LNG on floating LNG plant
- Sign definitive agreement with Noble Group for 1MTPA offtake
- Secure “internationally-recognized LNG operating partner”
- Sign additional HOA for 1-2MTPA offtake
With only a month to go in the year, the only one of these that IOC has delivered on is the last one, announcing last week that it had signed “a Heads of Agreement (HOA) with Gunvor Singapore Pte. Ltd., for the supply of one million tonnes per annum (mtpa) of liquefied natural gas (LNG).” Ah, but as is almost always the case, all is not as it appears at InterOil, as Gunvor, according to Wikipedia (http://en.wikipedia.org/wiki/Gunvor_%28oil_trader%29), has unsavory ties:
Following the major Wikileaks release of US State Department cables in November 2010, it was reported by the London Daily Telegraph[17] that the wealth of Russian Prime Minister Vladimir Putin is linked to a "secretive Swiss-based oil trading firm" called Gunvor. It said that John Beyrle, the United States Ambassador to the Russian Federation stated that close connections exist between Gunvor and the Russian Government and that he reported: "its secretive ownership is rumoured to include prime minister Putin."
The whole point of an offtake agreement is so lenders will lend the nearly $10 billion this project would cost – and who’s going to lend that kind of money against an agreement with a firm like Gunvor?!
There’s ZERO chance that InterOil will meet its year-end deadlines for all of these deals, which the company just acknowledged today, saying “the company was targeting late this year or early next year”:
InterOil sees investment decision on Gulf LNG project in months
PERTH | Mon Nov 28, 2011 5:41am EST
Nov 28 (Reuters) - InterOil Corp is on track to make a final investment decision on its $6-billion Gulf LNG project in Papua New Guinea in the next few months and expects to receive government approval for the project.
The Papua New Guinea government criticised InterOil's project plan earlier this year on grounds that it fell short of the project that had originally been approved.
"We are very confident that we are on track to build this plant with full support of the government of Papua New Guinea," Dinny Kutty, InterOil's chief accountant, said at an industry conference in Perth, Australia.
"I'm not going to give a date, but the government wants this project off the ground as soon as possible. It is providing huge economics to the country," Kutty said, adding that the company was targeting late this year or early next year, while the Papua New Guinea government wanted to see a final investment decision by the end of the year.
A spokesman for Papua New Guinea's state-owned oil company, Petromin PNG Holdings, was not immediately available for comment.
InterOil is also in the process of seeking an operating and equity partner with previous LNG developement experience.
"We keep the government in the loop to make sure there won't be any objections once the process is completed," Kutty said.
The project, which Interoil is developing with Pacific LNG in a joint venture called Liquid Niguini Gas Limited (LNGL), will initially produce 5 million tonnes per annum (mtpa), ramping up in stages to 7.6 mtpa and 10 mtpa.
The company currently has sold 2.3 mtpa, or less than half of the plant's initial capacity, through preliminary sales agreements, with 1 mtpa each going to Noble Group and Gunvor, and 0.3 mtpa going to the Philippines' EWC.
LNG developers typically try to lock in around 85 percent of sales contracts before making a final investment decision on a project.
"We are confident that there will be more (agreements) in the near future," Kutty said, adding that InterOil aimed to sell another 2 to 3 million tonnes in the next few months.
"There's definitely interest from the Asian region because there's a lot of demand for LNG," said Kutty, adding that the project would break even at a sales price of $0.70 per mmBtu, including revenue from condensates also produced by the project.
For more the most in-depth expose of IOC, see: www.businessinsider.com/interoil-ioc-major-momentum-or-just-a-castle-in-the-air-a-new-investigation-2010-4, which links to 12 pages starting here: www.businessinsider.com/interoil-ioc-major-momentum-or-just-a-castle-in-the-air-a-new-investigation-2010-4#the-background-1
For a more recent take, see: http://seekingalpha.com/article/307939-has-interoil-turned-into-a-full-blown-scam
