InterOil Corporation Q1 2014 Conference Call Presentation

Q1 2014 RESULTS
MAY 14, 2014
INTEROIL’S EXPLORATION WELL RAPTOR-1, April 2014
PAPUA NEW GUINEA
TODAY’S PRESENTATION
CONTENTS & FORWARD LOOKING STATEMENTS
This presentation 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 announcement that
address activities, events or developments that InterOil expects, believes or anticipates will or may occur in
the future are forward-looking statements, including in particular, the presence of shallow marine carbonate
reservoir, hydrocarbon volumes, and the estimated drilling times of the Bobcat, Wahoo and Raptor wells .
These statements 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 and Triceratops 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.
Finances are reported in US$ unless otherwise stated.
Page 2
TODAY’S PRESENTATION
Overview of Q1 2014
OPERATIONS
DEVELOPMENT
GROWTH
1. STABILIZE
2. MONETIZE
3. SECURE
Our operations
Our resources
Our future
Dr. Michael Hession
Chief Executive Officer
 Key personnel in place
 Increasing efficiency
 Well financed for drill
campaign and current
operations
 Sales & Purchase
Agreement (SPA) with
Total completed -$401
million cash injection
 Appraisal locations at
Antelope 4 & 5 agreed
 Progressing to LNG
development
 Exploration drilling
underway: Wahoo-1,
Raptor-1, Bobcat-1
 Building prospect
inventory
 Evaluating growth
opportunities
 Scouting location for
Triceratops-3
Page 3
FINANCIAL HIGHLIGHTS IN Q1 2014
Completion of Total SPA and start of new exploration program
TOTAL VOLUME SOLD
REFINERY THROUGHPUT
DOWNSTREAM SALES
1.9m barrels
26,717bpd
177m liters
Q1 2013: 2.4m barrels
Q1 2013: 27,525 bpd
Q1 2013: 184m liters
Mr. Donald Spector
Chief Financial Officer
•
Lower volume sold with PNG
LNG project nearing
completion
•
•
•
•
•
52 retail stations
Largest distributor of
downstream products
CASH POSITION
NET PROFIT
$311m
$421m
$319m
Q1 2013: $350m
Q1 2013: $69m
Q1 2013: $4m
REVENUE
•
Stable refinery business
59% capacity utilization
Decrease in domestic demand
as economy slows
Kina continues to fall
•
•
•
Balance sheet strengthened
Completion payment received
Improved credit facility
•
•
One-off $341m gain
recognized from Total SPA
New exploration program
Page 4
UPSTREAM
Three exploration wells spudded in Q1 2014
Quarter ended
March 31,
EXPLORATION/APPRAISAL
Mr. Donald Spector
UP TO 8
Chief Financial Officer
New wells in 2014-15
Upstream – Operating results
($ thousands)
Other non-allocated revenue
Bobcat, Raptor, Wahoo
TOTAL SPA
$338m
One-off gain
•
•
Payment received from Total
$340.5m gain includes $2m
gain adjustment in group
consolidation
2013
1,824
592
999
1,270
Total revenue
Office and administration and other expenses
Exploration costs
2,823
(9,281)
(8,696)
1,862
(3,218)
(450)
Gain on conveyance of oil and gas properties
338,182
500
Foreign exchange gains/(losses)
EBITDA
Depreciation and amortization
1,352
324,380
(527)
(5)
(1,311)
(522)
Interest expense
(13,036)
(11,941)
Profit/(loss) before income taxes
310,817
(13,774)
(250)
-
310,567
(13,774)
185
224
Inter-segment revenue - Recharges
•
2014
Income tax expense
Net profit/(loss)
COSTS
$8.7m
Number of Employees
Note: EBITDA is a non-GAAP measure and is reconciled to IFRS under the heading “Non-GAAP Measures and
Reconciliation”in the MD&A
Exploration costs
•
New drilling program and
associated seismic
Page 5
REFINERY
Lower revenues offset by low cost of sales
PRODUCTION
Mr. Donald Spector
26,717bpd
Chief Financial Officer
Q1 2013: 27,525 bpd
Midstream Refining – Operating results
($ thousands)
Quarter ended
March 31,
2014
External sales
97,158
141,697
152,147
163,472
180
-
2
3
249,487
305,172
(226,623)
(285,301)
(2,532)
(1,597)
935
(471)
Foreign exchange losses
EBITDA
Depreciation and amortization
(15,279)
5,988
(3,295)
(5,102)
12,701
(3,122)
Interest expense
Profit before income taxes
Income tax benefit/(expense)
(2,223)
470
131
(2,454)
7,125
(1,270)
601
5,855
22,682
19,868
Inter-segment revenue - Sales
Inter-segment revenue - Recharges
•
Stable throughput
Interest and other revenue
Total segment revenue
REVENUE
Cost of sales and operating expenses
Office and administration and other expenses
Derivative gains/(losses)
$249m
Q1 2013: $305m
•
External sales of $97m
Net profit
NET PROFIT
$0.6m
Q1 2013: $5.8m
•
•
$15m in FX losses
Low cost of sales and
operating expenses
2013
Gross Margin
Key Refining Metrics
Througoutput (barrels per day)
Capacity utilization (on 36,500 bpd capacity)
Cost of production per barrel
Working capital financing cost per barrel of production
Distillates as % of production
Number of Employees
2014
2013
26,717
59%
$3.35
$0.68
51%
27,525
74%
$2.95
$0.37
52%
128
128
Note: Throughput per day has been calculated excluding shut down days. During quarters ended March 31, 2014 and 2013, the refinery was shut down for
19 days and 1 day, respectively.
Page 6
DOWNSTREAM
Stable business generating $6m in quarterly profits
TOTAL SALES VOLUME
Mr. Donald Spector
177m liters
Chief Financial Officer
Q1 2013: 184m liters
•
Stable sales across segment
Downstream – Operating results
($ thousands)
External sales
$1.10
Q1 2013 : $1.12 per liter
•
Stable gross margins
2014
2013
211,018
207,559
51
85
1,651
402
212,720
208,046
(197,395)
(193,390)
Office and administration and other expenses
(4,592)
(4,381)
Foreign exchange losses
EBITDA
Depreciation and amortization
(592)
10,141
(1,263)
(213)
10,062
(1,180)
Interest expense
Profit before income taxes
Income tax expense
(557)
8,321
(2,308)
(422)
8,460
(2,455)
6,013
6,005
13,674
14,254
Inter-segment revenue - Sales
Interest and other revenue
Total segment revenue
AVERAGE SALES PRICE
Quarter ended
March 31,
Cost of sales and operating expenses
Net profit
NET PROFIT
$6m
Q1 2013: $6m
•
•
Cashflow positive business
Respected brand with over
500 employees
Gross Margin
Key Downstream Metrics
Sales Volume (millions of liters)
Average sales price per liter ($)
Number of Employees
2014
2013
176.8
$1.10
183.7
$1.12
593
546
Page 7
BALANCE SHEET AND LIQUIDITY
As at March 31, 2014
Funds Available and Drawn as at March 31, 2014 ($m)
TOTAL ASSETS
Mr. Donald Spector
$1,737m
Chief Financial Officer
Q1 2013: $1,369m
•
$375m increase in cash
DEBT
500
450
400
350
300
250
200
150
100
50
0
161
100
273
150
Exploration
$317m
Drawn
Q1 2013: $179m
•
$250m CS-led facility under
discussions for extension to
Dec 2015
Refining
36
23
70
Downstream
Corporate
Funds available
Remaining
Funds
Summary of Cashflows ($m)
421
450
400
350
300
GEARING
250
200
22%
Debt to Capital ratio
150
100
62
50
0
•
Based on total equity to
shareholders of $1,096m
Opening Cash
Operations
Investing
Financing
Closing Cash
Page 8
EXPLORATION & APPRAISAL PROGRAM
2014 - 2015
• Active exploration & appraisal drilling campaign underway
• 3 rigs concurrently drilling
• Up to 8 wells in next 15 months
• Aggressive pursuit for high value tieback potential
• Active seismic program underway
• Up to 12 helicopters supporting drilling, site clearance and seismic
• 2 bases, 3 rig sites and several seismic camps
• 1000 personnel in the field
HERD BASE CAMP
Page 9
TRENDS AND EXPLORATION
THREE MAJOR STRUCTURAL TRENDS IN NEAR-FIELD AREA – ONLY ONE EXPLORED TO DATE
EXPLORATION
MAP SHOWING STRUCTURAL TRENDS WITH POTENTIAL LEADS & TARGETS
Triceratops
PPL476
Bob Cat
Jaguar
Mule
Deer
•
Well placement not to
scale and for
illustrative purposes
only
3 distinct thrust and fold belt
trends relating to collision of
Australia and PNG
•
Only one trend explored to
date by the drill bit, resulting in
100% success rate (3 from 3)
•
Multiple potential drill options
within tieback distance of
Antelope (red circle)
Elk
PPL475
Antelope
Puri Deep
Raptor
White
Tail
Duck
Bill
20 km
Antelope
Deep
Cold colors depict
increasing depth
PRL15
Raptor and Bobcat (red text) are currently drilling
Page 10
ACTIVE EXPLORATION AND APPRASIAL PROGRAM
INDICATIVE DRILLING TIMETABLE
2014
Bobcat-1
PPL 476
Spud March 5, 2014
2015
Antelope-4 #
Antelope-6 #
PRL15
PRL15
Plan spud Q3 2014
(Contingent )
Possible spud
Q4 2014/Q1 2015
Wahoo-1
Antelope-5 #
Triceratops-3
PPL 474
PRL15
PRL39
Spud March 8, 2014
Plan spud Q3 2014
Plan spud Q4 2014
Raptor-1
Antelope Deep-1
(Pending JV approval)
PPL 475
PRL15
Spud March 28,
2014
Possible spud
~Q1 2015
# TOT providing a
75% carry of IOC’s
costs in the first
$50M (gross) per
appraisal well
Appraisal
Well
Exploration
Well
TOT is to provide a
75% carry of IOC’s
costs in the first $60M
(gross) of a PRL-15
exploration well
Page 11
GROWTH - EXPLORATION PROGRAM
NEW EXPLORATION PROGRAM – 3 EXPLORATION WELLS CURRENTLY DRILLING – MORE TO COME
EXPLORATION PROGRAM
BOBCAT-1
4 new wells
3 currently drilling
Bobcat-1, Wahoo-1 & Raptor-1 all
spudded in March 2014
Antelope Deep-1 – possible Q1 2015
RAPTOR-1
COST
~$50m
Per Well
$401m received from Total
$250m financing package under new
negotiations
WAHOO-1
ANTELOPE DEEP
Potential high impact
Exploration well
placement not to scale
and for illustrative
purposes only
Antelope look-alike
ANTELOPE DEEP
Possible spud Q1 2015
Pending JV approval
Data being evaluated
Page 12
EXPLORATION PROGRAM - WAHOO-1
PPL474
WAHOO-1
SPUDDED
March 8, 2014
Prospective carbonate build-up,
defined by seismic and gravity
Seismic indicates several
characteristics similar to Antelope
Gas seep at surface recorded at
nearby Popo-3 well
Several follow-up targets in
PPL474
Page 13
EXPLORATION PROGRAM - RAPTOR-1
PPL475
RAPTOR-1
SPUDDED
March 28, 2014
Seismically defined, thrustcontrolled prospect
Within tieback distance at ~10km
west of Antelope
Possible follow-up targets at Duck
Bill and Puri/Kereru Deep on trend
First test of new trend near Puri-1
oil discovery. Puri-1 flowed 1610
bopd and 8 mmscf/day (1959).
Page 14
EXPLORATION PROGRAM - BOBCAT-1
PPL476
BOBCAT-1
SPUDDED
March 5, 2014
Seismic and gravity defined
structure, similar to but smaller
than Antelope
Same proven trend as Antelope &
Triceratops
Gas seep at surface identified
during well site construction
About 20km from Elk-Antelope
Jaguar prospect – possible future
target
Page 15
APPRAISAL UPDATE
SITE PREPARATON FOR ANTELOPE-4 WELL UNDERWAY
PRL15
ANTELOPE 4 & 5
2H 2014
•
•
Drilling planned 2H 2014
Antelope 6 contingent on
results from 4 & 5
Antelope-5
Antelope-4
Appraisal well locations illustrative
Page 16
APPRAISAL PROGRAM – TRICERATOPS-3
PRL39
Triceratops
APPRAISAL
Elk-Antelope
TRICERATOPS-3
SPUD Q4 2014
Targeting volume definition
PRL39
Third
discovery by InterOil
First tested by Bwata-1 in 1959,
Triceratops-1 in 2005 and
Triceratops-2 in 2012
DPE declared a discovery in 2012
Complex trapping geometry with
uncertain up-dip extent, approx.
35km NW of Antelope
Successful IOC wells
Proposed appraisal well
Page 17
SEISMIC SURVEYS ARE PROGRESSING
EXPLORATION
Exploration survey locations
are not to scale and are for
illustrative purposes only
Building prospect
inventory
•
•
Seismic survey over Antelope
Deep now complete
Acquiring seismic over
several leads and prospects
Design
Bridging
Survey
Re-survey
Drilling
Layout
Recording
IOC seismic survey lines (as at early May 2014)
Seismic preparation in PRL15
Page 18
THANK YOU
For more information, please contact:
Don.spector@interoil.com
Chief Financial Officer
Page 19
APPENDIX: NEW EXECUTIVE TEAM
Dr Michael Hession
Dr. Michael Hession
Chief Executive Officer
Chief Executive Officer and Board Member
• 25 years of international experience, primarily with BP, in exploration and
development in North Africa, North America, Russia and Australasia,
including senior executive roles on the mega Chirag Azeri Project in
Azerbaijan and Woodside Energy’s Browse and Pluto LNG projects.
Jon Ozturgut
Chief Operating Officer
Isikeli Taureka ExecutiveVice President
• Senior oil and gas executive in corporate
strategy, mergers and acquisitions, and
exploration, development and operations in
the Americas, Middle East, Africa and
Australasia with Atlantic Richfield Company,
CMS Oil and Gas, Pioneer Natural
Resources and Woodside Energy.
PNG
Donald Spector Chief Financial Officer
Thomas Nador Senior Vice President
• Senior roles in BP, CRA (now Rio Tinto)
and Woodside Energy in treasury, taxation,
risk, insurance, mergers and acquisitions,
and capital raising strategy, particularly for
the A$15 billion funding of Woodside’s
Pluto LNG Project.
• 20 years’ experience with operators and toptier contractors in operational and
management roles across oil and gas,
pipelines, mining, and construction; roles in
project strategy development across five
LNG developments in Australia.
Geoff Applegate
David Kirk Vice President, Upstream Business
General Counsel and
Corporate Secretary
• Previously partner and Special Counsel at
Gadens Lawyers of Sydney, Australia and
Port Moresby, PNG; corporate and
commercial lawyer for more than 40
years, principally in resources and oil and
gas, sectors, including 15 years in PNG.
• Extensive international oil & gas career with
Chevron Corporation, including President of
ChevronTexaco China Energy Company
with responsibility for Chevron’s upstream
activities in China, and head of Chevron’s
Geothermal and Power Operations.
Unit
• More than 30 years’ in exploration,
appraisal, asset development, production,
largely with BP and Woodside in Africa, the
North Sea and Australia, and most recently
as Chief Executive of AWT, an upstream
engineering and geosciences consultancy.
Page 20
APPENDIX: KEY FINANCIAL STATEMENTS
Summary of key financial statements for last eight quarters
Quarters ended
($ thousands except per share
data)
Upstream
Midstream – Refining
Midstream – Liquefaction
Downstream
Corporate
Consolidation entries
Total revenues
2014
2013
Mar-31
Dec-31
Sep-30
2012
Jun-30
Mar-31
Dec-31
Sep-30
Jun-30
2,823
1,731
1,918
2,533
1,862
4,136
2,216
1,727
249,487
353,749
251,725
289,300
305,172
301,925
274,671
236,006
-
181
-
20,089
-
-
-
-
212,720
213,835
215,651
199,470
208,046
220,512
201,749
223,620
32,481
31,832
31,714
36,201
34,923
37,552
26,880
24,742
(186,431)
(202,426) (195,773) (201,932) (199,672) (207,686) (178,652) (186,991)
311,080
398,902
305,235
345,661
350,331
356,439
326,864
299,104
324,380
(19,974)
(2,842)
(19,478)
(1,311)
(873)
956
(5,730)
5,988
10,246
(3,562)
840
12,701
12,370
13,417
(42,647)
(63)
87
2,550
19,850
(123)
192
11
672
10,141
14,366
14,962
7,542
10,062
12,258
9,275
11,102
2,223
6,055
13,446
1,745
10,044
14,133
9,841
9,975
(9,375)
(16,082)
(14,647)
(11,146)
(13,418)
(12,199)
(14,503)
(9,871)
333,294
(5,302)
9,907
(647)
17,955
25,881
18,997
(36,499)
310,567
(33,535)
(16,206)
(32,046)
(13,774)
(13,081)
(10,936)
(15,532)
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
Consolidation entries
(684)
2,787
10,780
(1,701)
7,342
10,519
7,849
8,445
2,694
(2,946)
(1,626)
1,562
(744)
384
(1,988)
2,205
318,636
(24,813)
(6,318)
(13,230)
4,003
18,545
5,336
(31,713)
6.45
(0.51)
(0.13)
(0.27)
0.08
0.38
0.11
(0.66)
6.38
(0.51)
(0.13)
(0.27)
0.08
0.38
0.11
(0.66)
Upstream
Midstream – Refining
Midstream – Liquefaction
Downstream
Corporate
Consolidation entries
EBITDA (1)
Upstream
Midstream – Refining
Net profit/(loss)
Net profit/(loss) per share
(dollars)
Per Share – Basic
Per Share – Diluted
Page 21