InterOil 2014 First Quarter Results

Milestones Reached, Exploration Starts

- Elk-Antelope deal completed with Total S.A.

- $340.5m one-off gain on Total transaction

- New leadership team in place

- Drilling under way on new exploration licenses

SINGAPORE and PORT MORESBY, Papua New Guinea, May 14, 2014 /CNW/ - InterOil Corporation (NYSE:IOC; POMSoX:IOC) (the "company") today announced a 2014 first quarter net profit of $318.6 million, due mainly to a one-off $340.5 million gain from the sale of an interest in PRL 15 to Total S.A. of France on March 26, 20141.

The profit, up from $4.0 million in the first quarter of 2013, is underpinning aggressive exploration drilling across the four petroleum prospecting licenses ("PPLs") awarded to InterOil in March by the Papua New Guinea Government.

The licenses, which are valid for six years and renewable for a further five, cover almost 4 million acres (or 16,000 square kilometres) in the Gulf Province. Drilling began in early March, and initial results are expected in the next several weeks.

Targets achieved, focus now on exploration

The company in January appointed a new senior leadership team. Jon Ozturgut was named Chief Operating Officer and Don Spector was named Chief Financial Officer.

InterOil's Chief Executive, Dr. Michael Hession, said: "We achieved several ambitious targets this quarter: a new leadership team in place, the granting of new exploration licenses and completion of the Total deal. We accomplished what we set out to do. Our strategy is on track. We remain focused on adding value, particularly through the drill bit, which is something we do well. We have a busy, exciting program ahead, and the financial capacity to deliver it."

InterOil's Chief Financial Officer, Don Spector, said: "This quarter saw the achievement of a major milestone in the history of our company. Closing the deal with Total and the receipt of the $401.3 million completion payment has significantly strengthened our balance sheet, providing the funds we require for our drilling program. Despite slower retail and wholesale demand in Papua New Guinea coupled with a weakening PNG kina, our refinery enjoyed higher margins driving a small, but positive net profit. Our downstream business saw a drop in volume sold but continued to enjoy a stable $6.0 million net profit. We intend to secure additional flexibility in our capital structure by refinancing our $250 million secured loan facility in the coming weeks."

Local sales reflect slowing PNG economy

Revenue decreased by $39.2 million to $311.1 million in Q1 2014 from $350.3 million in Q1 2013, mainly due to lower sales volumes during the quarter. The total volume of all products we sold was 1.9 million barrels compared with 2.4 million in Q1 2013, mainly due to the timing of refinery exports.

The PNG economy continued to slow in Q1 2014 as the PNG LNG Project neared completion. The total local sales volume for the quarter was 1.2 million barrels, a decrease of 0.1 million barrels, or 9.5%, on Q1 2013.

InterOil's Port Moresby refinery processed 1.829 million barrels into product in Q1 2014, compared with 2.389 million for Q1 2013. Average daily throughput (excluding shutdowns) was 26,717 bblspd compared to 27,525 bblspd in Q1 2013.

InterOil provided petroleum products to 52 retail service stations, 18 depots, and 12 aviation sites – the largest retail distribution system in the country – and the company continues to invest in new retail sites and new retail fuel distribution systems.

Total agreement provides solid financial base

On March 26, 2014, Total acquired a gross participating interest of 40.1275% (net 31.0988%, after PNG government back-in of 22.5%) in PRL 15, which contains the Elk-Antelope gas field. InterOil is entitled to additional fixed and variable resource payments at certain milestones following appraisal of the fields.

Total will provide a 75% carry on the first $50 million (gross) per well for the first three appraisal wells and on the first $60 million (gross) for the single exploration well in PRL 15. Certification of Elk-Antelope resource volumes is expected in 2015.

Total has agreed to lead construction and operation of a proposed integrated LNG project. The final investment decision will follow resource certification, concept selection, basis of design, and front-end engineering and design.

Drilling underway

On March 6, 2014, the Papua New Guinea Government granted InterOil four new PPLs, covering the same area as the company's previous licenses.

The company continued acquiring seismic over Triceratops east, south-west Antelope and across two new prospects, Bobcat in PPL 476 and Antelope Deep (formerly Big Horn) in PRL 15.

In March, 2014, InterOil began drilling an exploration well in each of PPL 474 (Wahoo-1), PPL 475 (Raptor-1) and PPL 476 (Bobcat-1). A fourth exploration well, Antelope Deep, is expected to begin in PRL 15 in early 2015, and an appraisal well, Triceratops-3, in PRL 39, is planned to begin in late 2014.

Financial highlights

  • Investments in Upstream and Midstream Liquefaction resulted in a net profit of $310.0 million (2013 net loss of $14.5 million). Corporate, Refining and Downstream collectively derived a net profit for the quarter of $8.6 million (2013 net profit of $18.5 million). The consolidated net profit for the current quarter was $318.6 million, compared to a $4.0 million profit in the first quarter of 2013. The variance was mainly driven by a $340.5 million gain from the sale of an interest in PRL 15 to Total on March 26, 2014.
  • At March 31, 2014, InterOil had cash, cash equivalents and cash restricted totalling $482.2 million (March 31, 2013$107.4 million), of which $61.5 million is restricted (March 31, 2013$38.9 million). In addition, aggregate undrawn facilities were $296.6 million, including $100 million in a Credit Suisse facility to fund the current exploration. InterOil is planning to refinance the total $250 million Credit Suisse facility with a new longer term facility with improved terms in the coming weeks. InterOil's gearing, measured by the debt-to-capital ratio, was 22% in March 31, 2014 against 19% in March 2013.

Conference call information

The full text of the news release and accompanying financials are available on the company's website at www.interoil.com.

A conference call will be held on May 14, 2014 at 8:00am US Eastern time (8:00pm Singapore) to discuss the financial and operating results, development of PRL15, the new drilling program, and the company's outlook.

The conference call can be heard through a live audio web cast on the company's website at www.interoil.com or accessed by dialing (800) 230 1092 in the US, or +1 (612) 288 0340 from outside the US.

A replay of the broadcast will be available soon afterwards on the website.

Summary of Consolidated Quarterly Financial Results for Past Eight Quarters


Quarters ended
($ thousands except per share data)

2014

2013

2012

Mar-31

Dec-31

Sep-30

Jun-30

Mar-31

Dec-31

Sep-30

Jun-30

Upstream

2,823

1,731

1,918

2,533

1,862

4,136

2,216

1,727

Midstream – Refining

249,487

353,749

251,725

289,300

305,172

301,925

274,671

236,006

Midstream – Liquefaction

-

181

-

20,089

-

-

-

-

Downstream

212,720

213,835

215,651

199,470

208,046

220,512

201,749

223,620

Corporate

32,481

31,832

31,714

36,201

34,923

37,552

26,880

24,742

Consolidation entries

(186,431)

(202,426)

(195,773)

(201,932)

(199,672)

(207,686)

(178,652)

(186,991)

Total revenues

311,080

398,902

305,235

345,661

350,331

356,439

326,864

299,104

Upstream

324,380

(19,974)

(2,842)

(19,478)

(1,311)

(873)

956

(5,730)

Midstream – Refining

5,988

10,246

(3,562)

840

12,701

12,370

13,417

(42,647)

Midstream – Liquefaction

(63)

87

2,550

19,850

(123)

192

11

672

Downstream

10,141

14,366

14,962

7,542

10,062

12,258

9,275

11,102

Corporate

2,223

6,055

13,446

1,745

10,044

14,133

9,841

9,975

Consolidation entries

(9,375)

(16,082)

(14,647)

(11,146)

(13,418)

(12,199)

(14,503)

(9,871)

EBITDA (1)

333,294

(5,302)

9,907

(647)

17,955

25,881

18,997

(36,499)

Upstream

310,567

(33,535)

(16,206)

(32,046)

(13,774)

(13,081)

(10,936)

(15,532)

Midstream – Refining

601

74

(11,074)

(4,675)

5,855

13,401

5,358

(32,969)

Midstream – Liquefaction

(555)

(430)

2,373

19,284

(681)

(394)

(573)

93

Downstream

6,013

9,237

9,435

4,346

6,005

7,716

5,626

6,045

Corporate

(684)

2,787

10,780

(1,701)

7,342

10,519

7,849

8,445

Consolidation entries

2,694

(2,946)

(1,626)

1,562

(744)

384

(1,988)

2,205

Net profit/(loss)

318,636

(24,813)

(6,318)

(13,230)

4,003

18,545

5,336

(31,713)

Net profit/(loss) per share (dollars)









Per Share – Basic

6.45

(0.51)

(0.13)

(0.27)

0.08

0.38

0.11

(0.66)

Per Share – Diluted

6.38

(0.51)

(0.13)

(0.27)

0.08

0.38

0.11

(0.66)

InterOil Corporation

Consolidated Balance Sheets

(Unaudited, Expressed in United States dollars)



















As at














March 31,

December 31,

March 31,



2014

2013

2013



$

$

$







Assets





Current assets:





Cash and cash equivalents

420,668,190

61,966,539

68,461,627


Cash restricted

32,402,896

36,149,544

27,256,734


Trade and other receivables

66,634,767

98,638,110

150,718,608


Derivative financial instruments

53,313

-

372,938


Other current assets

1,175,741

1,054,847

2,333,691


Inventories (note 5)

189,979,031

158,119,181

207,979,187


Prepaid expenses

7,067,916

8,125,270

6,043,515


Total current assets

717,981,854

364,053,491

463,166,300


Non-current assets:





Cash restricted

29,114,776

17,065,000

11,670,536


Plant and equipment

244,291,146

244,383,962

253,122,122


Oil and gas properties (note 6)

98,102,235

584,807,023

544,934,617


Deferred tax assets

48,558,269

48,230,688

62,399,028


Other non-current receivables (note 7)

581,593,476

29,700,534

29,700,534


Investments accounted for using the equity method

17,547,023

17,557,838

-


Available-for-sale investments

-

-

3,587,901


Total non-current assets

1,019,206,925

941,745,045

905,414,738


Total assets

1,737,188,779

1,305,798,536

1,368,581,038


Liabilities and shareholders' equity





Current liabilities:





Trade and other payables

182,991,664

134,027,347

224,733,505


Income tax payable

19,908,377

17,087,974

15,583,344


Derivative financial instruments

-

1,869,253

9,913


Working capital facilities (note 8)

12,658,495

36,379,031

34,297,296


Unsecured loan and current portion of secured loans (note 9)

199,814,163

134,775,077

31,379,982


Current portion of Indirect participation interest (note 10)

7,449,409

12,097,363

15,246,397


Total current liabilities

422,822,108

336,236,045

321,250,437


Non-current liabilities:





Secured loans (note 9)

53,386,003

65,681,425

87,495,705


2.75% convertible notes liability

63,601,172

62,662,628

59,930,967


Deferred gain on contributions to LNG project

-

-

5,287,152


Indirect participation interest (note 10)

-

7,449,409

14,282,001


Other non-current liabilities (note 11)

96,752,001

96,000,000

96,000,000


Asset retirement obligations

5,044,158

4,948,017

4,983,064


Total non-current liabilities

218,783,334

236,741,479

267,978,889


Total liabilities

641,605,442

572,977,524

589,229,326


Equity:





Equity attributable to owners of InterOil Corporation:





Share capital (note 12)

998,660,596

953,882,273

931,990,521


Authorized - unlimited





Issued and outstanding - 50,022,600





(Dec 31, 2013 - 49,217,242)





(Mar 31, 2013 - 48,652,640)





2.75% convertible notes

14,297,627

14,297,627

14,298,036


Contributed surplus

26,736,901

26,418,658

32,632,412


Accumulated Other Comprehensive Income

3,571,209

4,541,913

22,389,537


Accumulated earnings/(deficit)

52,317,004

(266,319,459)

(221,958,794)


Total equity attributable to owners of InterOil Corporation

1,095,583,337

732,821,012

779,351,712


Non-controlling interest

-

-

-


Total equity

1,095,583,337

732,821,012

779,351,712


Total liabilities and equity

1,737,188,779

1,305,798,536

1,368,581,038

See accompanying notes to the condensed consolidated interim financial statements



InterOil Corporation

Consolidated Income Statements

(Unaudited, Expressed in United States dollars)














Quarter ended





March 31,

March 31,


2014

2013


$

$




Revenue



Sales and operating revenues

308,222,594

349,323,775

Interest

54,284

15,003

Other

2,802,542

992,226


311,079,420

350,331,004




Changes in inventories of finished goods and work in progress

(18,000,156)

13,107,848

Raw materials and consumables used

(252,714,016)

(327,866,604)

Administrative and general expenses

(15,036,132)

(8,465,554)

Derivative gains/(losses)

934,930

(470,955)

Legal and professional fees

(2,860,389)

(1,815,875)

Exploration costs, excluding exploration impairment (note 6)

(8,696,289)

(449,505)

Finance costs

(13,865,715)

(5,336,234)

Depreciation and amortization

(5,479,476)

(5,698,142)

Gain on conveyance of oil and gas properties (note 6)

340,540,011

500,071

Loss on available-for-sale investment

-

(340,045)

Foreign exchange losses

(14,302,321)

(5,476,146)

Share of net loss of joint venture partnership accounted
for using the equity method

(10,815)

(96,051)


10,509,632

(342,407,192)

Profit before income taxes

321,589,052

7,923,812




Income taxes



Current tax expense

(3,256,981)

(3,829,598)

Deferred tax benefit/(expense)

304,392

(91,496)


(2,952,589)

(3,921,094)




Profit for the period

318,636,463

4,002,718




Profit is attributable to:



Owners of InterOil Corporation

318,636,463

4,002,718


318,636,463

4,002,718




Basic profit per share

6.45

0.08

Diluted profit per share

6.38

0.08

Weighted average number of common shares outstanding



Basic (Expressed in number of common shares)

49,368,378

48,612,015

Diluted (Expressed in number of common shares)

50,200,242

49,284,136




See accompanying notes to the condensed consolidated interim financial statements


InterOil Corporation

Consolidated Statements of Comprehensive Income

(Unaudited, Expressed in United States dollars)























Quarter ended







March 31,

March 31,



2014

2013



$

$





Profit for the period

318,636,463

4,002,718





Other comprehensive (loss)/income:



Items that may be reclassified to profit or loss:



Exchange loss on translation of foreign operations, net of tax

(970,704)

(2,267,186)

Loss on available-for-sale financial assets, net of tax

-

(376,230)

Other comprehensive loss for the period, net of tax

(970,704)

(2,643,416)

Total comprehensive income for the period

317,665,759

1,359,302





Total comprehensive income for the period is attributable to:



Owners of InterOil Corporation

317,665,759

1,359,302



317,665,759

1,359,302

See accompanying notes to the condensed consolidated interim financial statements




InterOil Corporation

Consolidated Statements of Changes in Equity

(Unaudited, Expressed in United States dollars)



















Quarter ended







March 31,

March 31,



2014

2013

Transactions with owners as owners:

$

$

Share capital




At beginning of period

953,882,273

928,659,756


Issue of capital stock (note 12)

44,778,323

3,330,765


At end of period

998,660,596

931,990,521

2.75% convertible notes




At beginning and end of period

14,297,627

14,298,036

Contributed surplus




At beginning of period

26,418,658

21,876,853


Fair value of options and restricted stock transferred to share capital

(1,515,695)

(3,902,303)


Stock compensation expense

1,833,938

2,506,982


Waiver of all remaining IPI conversion options

-

12,150,880


At end of period

26,736,901

32,632,412

Accumulated Other Comprehensive Income




Foreign currency translation reserve




At beginning of period

4,541,913

24,787,128


Foreign currency translation movement for the period, net of tax

(970,704)

(2,267,186)


Foreign currency translation reserve at end of period

3,571,209

22,519,942


Gain/(loss) on available-for-sale financial assets




At beginning of period

-

245,825


Loss on available-for-sale financial assets as a result of foreign currency translation, net of tax

-

(172,253)


Loss on revaluation of available-for-sale financial assets, net of tax

-

(203,977)


Loss on available-for-sale financial assets at end of period

-

(130,405)


Accumulated other comprehensive income at end of period

3,571,209

22,389,537

Conversion options




At beginning of period

-

12,150,880


Transfer of balance to contributed surplus

-

(12,150,880)


At end of period

-

-

Accumulated earnings/(deficit)




At beginning of period

(266,319,459)

(225,961,512)


Net profit for the period

318,636,463

4,002,718


At end of period

52,317,004

(221,958,794)

Total InterOil Corporation shareholders' equity at end of period

1,095,583,337

779,351,712

See accompanying notes to the condensed consolidated interim financial statements


InterOil Corporation

Consolidated Statements of Cash Flows

(Unaudited, Expressed in United States dollars)











Quarter ended


March 31,

March 31,


2014

2013


$

$




Cash flows generated from (used in):






Operating activities



Net profit for the period

318,636,463

4,002,718

Adjustments for non-cash and non-operating transactions



Depreciation and amortization

5,479,476

5,698,142

Deferred tax

(327,581)

1,127,430

Gain on conveyance of exploration assets

(340,540,011)

(500,071)

Accretion of convertible notes liability

938,544

884,386

Amortization of deferred financing costs

4,808,670

189,435

Timing difference between derivatives recognized and settled

(1,922,566)

(129,103)

Stock compensation expense, including restricted stock

1,833,938

2,506,982

Accretion of asset retirement obligation liability

96,141

89,208

Loss on Flex LNG investment

-

340,045

Share of net (profit)/loss of joint venture partnership accounted for using the equity method

10,815

96,051

Unrealized foreign exchange gain

(2,668)

167,774

Change in operating working capital



Decrease/(increase) in trade and other receivables

23,443,367

(15,816,189)

Decrease in other current assets and prepaid expenses

936,460

973,003

Increase in inventories

(32,731,446)

(15,303,322)

Increase in trade and other payables

4,096,709

56,256,930

Net cash (used in)/generated from operating activities

(15,243,689)

40,583,419




Investing activities



Expenditure on oil and gas properties

(102,681,272)

(38,386,230)

Proceeds from IPI cash calls

7,870,104

2,188,613

Expenditure on plant and equipment

(5,386,660)

(3,789,007)

Proceeds from Total for interest in PRL 15

401,338,497

-

(Increase)/decrease in restricted cash held as security on



borrowings

(8,303,128)

10,083,824

Change in non-operating working capital



Increase/(decrease) in trade and other payables

55,156,441

(5,799,120)

Net cash used in investing activities

347,993,982

(35,701,920)




Financing activities



Repayments of Westpac secured loan

-

(2,143,000)

Repayments of BSP and Westpac secured facility

(2,065,006)

-

Proceeds from drawdown of Credit Suisse secured facility

50,000,000

-

Proceeds from Pacific Rubiales Energy for interest in PPL237

-

76,000,000

(Repayments of)/proceeds from working capital facility

(23,720,536)

(59,993,183)

Proceeds from issue of common shares, net of transaction costs

1,736,900

-

Net cash generated from financing activities

25,951,358

13,863,817




Increase in cash and cash equivalents

358,701,651

18,745,316

Cash and cash equivalents, beginning of period

61,966,539

49,720,680

Exchange losses on cash and cash equivalents

-

(4,369)

Cash and cash equivalents, end of period

420,668,190

68,461,627

Comprising of:



Cash on Deposit

420,440,091

33,206,412

Short Term Deposits

228,099

35,255,215

Total cash and cash equivalents, end of period

420,668,190

68,461,627




See accompanying notes to the condensed consolidated interim financial statements


About InterOil

InterOil Corporation is an independent oil and gas business with a primary focus on Papua New Guinea. InterOil's assets include one of Asia's largest undeveloped gas fields, Elk-Antelope, in the Gulf Province, exploration licences covering about 16,000sqkm, Papua New Guinea's only oil refinery, and retail and commercial petroleum distribution facilities throughout the country. The company employs more than 1100 people and has its main offices in Singapore and Port Moresby. InterOil is listed on the New York and Port Moresby stock exchanges.

Investor contacts for InterOil




Houston

Singapore

Wayne Andrews, Vice President Capital Markets

Don Spector, Chief Financial Officer

Wayne.Andrews@InterOil.com

Don.Spector@InterOil.com

Phone: +1-281-292-1800

Phone: +65-6507-0222



Meg LaSalle, Investor Relations Coordinator


Meg.LaSalle@InterOil.com


Phone: +1-281-292-1800




Media contacts for InterOil




John Hurst, Cannings


jhurst@cannings.net.au


Phone: +61 418 708 663


Forward Looking Statements
This press release 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 press release that address activities, events or developments that InterOil expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements, which include statements as to planning for or the timing of the proposed LNG project and future exploration, 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 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.

1 Represents the accounting gain from completion and first certification payments less the carry cost of the asset

SOURCE InterOil Corporation

For further information:

http://www.interoil.com