INTEROIL CORP

ExxonMobil completed the acquisition. Each InterOil share became 0.5459 ExxonMobil shares plus a contingent resource payment placed in escrow at closing, to be released after Elk-Antelope is certified, and InterOil was delisted from the New York Stock Exchange. Shareholders were bought out with the cash half of their consideration still riding on a resource number that Antelope-7 had not helped.

business combination

The Antelope-7 sidetrack passed its planned total depth, reaching 2,383 metres against about 2,300 planned, still without evidence of the Antelope reservoir, and the operator drilled on toward a deeper exploration target. Two days before the takeover closed, the well meant to size the contingent resource payment had not found the field.

drilling progress report

More than 91% of votes cast approved the amended ExxonMobil transaction, above the 80% recorded at the September meeting. The Yukon hearing for the final order was set for 20 February.

business combination

Antelope-7 - the well whose result feeds the certification that sets the contingent payment - had reached 2,127 metres against a planned total depth of about 2,300 metres without intersecting the Antelope reservoir. It sits on the western flank, 1.45 km from Antelope-5. InterOil now holds 36.5% of it.

drilling progress report

InterOil answered the court's objections by putting the deal to a four-member independent transaction committee, which unanimously recommended it, and by improving the terms: the contingent resource payment cap rises from 10 to 11 Tcfe, lifting maximum consideration from about US$71.87 to about US$78.94 a share, while the break fee InterOil could owe rises from US$67 million to US$100 million. New record date 10 January, new vote in mid-February, new outside date 31 March 2017.

business combination

InterOil said ExxonMobil remained fully supportive, that it was in talks to extend the outside date, and that it was weighing an application for leave to appeal to the Supreme Court of Canada while addressing the issues the Yukon appeal court raised.

business combination

The Court of Appeal allowed Mulacek's appeal and overturned the Supreme Court of Yukon's approval. A transaction backed by more than 80% of votes cast and found fair by the court below was undone by the founder's appeal, and InterOil and ExxonMobil were left working out a route to closing.

business combination

The Yukon Court of Appeal granted Mulacek a stay of the approval order and set his appeal down for an expedited hearing on 31 October, so the transaction cannot close until the appeal is decided.

business combination

The Supreme Court of Yukon approved the transaction on 7 October and found it fair and reasonable, but Mulacek at once filed a notice of appeal and asked for a stay. InterOil said it would seek an expedited hearing.

business combination

The Yukon court reserved its decision after a contested hearing at which InterOil's founder Phil Mulacek objected to the transaction. Without a final order by 29 September the deal could not close in September as planned.

business combination

More than 80% of votes cast approved the ExxonMobil transaction at a special meeting. Closing still needed a final order from the Supreme Court of Yukon, set down for 27 September.

business combination

Oil Search did not match and its agreement was terminated; ExxonMobil agreed to buy InterOil in a transaction worth more than US$2.5 billion. Shareholders get US$45.00 a share in ExxonMobil stock plus a non-transferable contingent resource payment of US$7.07 a share for each Tcfe of certified Elk-Antelope resource above 6.2 Tcfe up to 10 Tcfe - US$26.87 a share at the cap, for US$71.87 in total. The certification that decides it includes Antelope-7, a well not yet drilled.

business combination

The bidder was ExxonMobil, and the board judged its offer superior to Oil Search's: US$45.00 a share paid in ExxonMobil stock on a ten-day volume-weighted average, plus a contingent resource payment of about US$7.07 a share for each Tcfe certified above 6.2, capped at 10 Tcfe. Oil Search had until 21 July to match.

business combination

An unnamed third party made an unsolicited, conditional, non-binding proposal to buy all of InterOil, and the board used the fiduciary-out in the Oil Search agreement to open talks with it while still recommending Oil Search. The Yukon court had granted the interim order for the 28 July shareholder vote two days earlier.

business combination

Oil Search agreed to acquire all of InterOil for 8.05 Oil Search shares per InterOil share, an implied US$40.25 a share or about US$2.2 billion, plus an uncapped contingent value right paying roughly US$6.05 a share for each Tcfe of certified 2C resource at Elk-Antelope above 6.2 Tcfe. A cash alternative of up to US$770 million was offered. In a linked memorandum Oil Search would immediately on-sell 60% of the acquired PRL 15 interest and 62% of the exploration assets to Total, de-risking its own purchase. Certification is to include the not-yet-drilled Antelope-7 well.

business combination

Full-year 2015 with the appraisal picture: Antelope-6 found 42 metres of dolomite connected to the rest of the field, and GLJ's first independent assessment of the exploration discoveries put gross unrisked 2C contingent resources at 3.6 Tcfe for Raptor and 2.4 Tcfe for Bobcat. Elk-Antelope data was to go to two independent auditors for certification, a four-to-six-month process. Liquidity US$252 million against 2016 spending guided down to US$155-170 million, with talks under way to increase and extend the credit facility.

drilling progress report

The second Antelope-5 extended test averaged 53.3 million cubic feet a day through a 48/64-inch choke over 14 days, mostly stabilised near 57, then shut in for over 14 days for pressure build-up; preliminary analysis confirmed the reservoir quality and connectivity seen in mid-2015. Antelope-6, on the opposite flank, gave about 13 million cubic feet a day over 24 hours through a 40/64-inch choke - a much smaller number, but from a far shorter test over only the upper 66 metres of the reservoir, before drilling on to the gas-water contact.

flow test result

A second extended well test began at Antelope-5, flowing about 50 million cubic feet a day for roughly two weeks before shutting in to record the pressure build-up, with gauges in Antelope-1 as an observation well - five times the gas moved in the first test, run specifically to firm up the field's minimum connected volume. Antelope-6 was drilling ahead at 1,120 metres below sea level.

flow test result

Total spudded Antelope-6 on the field's eastern flank, 2 km from Antelope-3, to a planned 2,464 metres below sea level. InterOil now holds only 36.5% of the well against Total's 40.1% and Oil Search's 22.8%.

drilling spud

Wireline logs on the Antelope-4 sidetrack measured 182 vertical metres of gas-bearing dolomite and a gross gas column of about 339 metres, confirming the high-quality reservoir extends south. InterOil also said Antelope-4 and -5 data suggest the field-wide gas-water contact is deeper than previously interpreted.

drilling result

Antelope-4 sidetrack-1 reached total depth and Antelope-6 was to spud in December as the last joint-venture-approved appraisal well. InterOil said Total's certification payment could be expected four to six months after that well, and that a further well on the western flank could add 1-3 Tcfe and US$400 million to US$1.2 billion to what it is paid. Liquidity US$473 million; 2016 spending guided to US$175-195 million.

drilling progress report

Pacific Exploration & Production, formerly Pacific Rubiales, withdrew from Papua New Guinea altogether under the withdrawal right in its 2012 farm-in, ending a partnership that had paid InterOil US$116 million. InterOil's gross interest in PRL 39, which contains Triceratops, goes from 87.1% to 100%, and it said it would then hold more than 78% of both the Triceratops and Raptor discoveries - simpler ownership to sell on to someone else.

material agreement termination

Triceratops-3 flowed 17.1 million cubic feet of gas a day and an average 200.3 barrels of condensate, stabilised over several five-hour intervals through a 72/64-inch choke with the flow constrained by the tubing - a short test on a satellite structure, not the multi-week extended tests being run at Antelope. The Antelope-4 sidetrack came in 36 metres higher than the original penetration.

well test result

Second-quarter results built around the claim that the latest Antelope-5 test data support a two-train LNG project: downhole pressure data during the June flow test showed no sign of the field being compartmentalised laterally or vertically, and InterOil described a multi-darcy reservoir with strong deliverability. Liquidity was US$541 million, and with Total now operating PRL 15 the company was cutting its own organisation back.

well test result

The Wahoo-1 sidetrack never intersected a carbonate reservoir and the well was plugged and abandoned at 1,589 metres, closing out a wildcat that had already cost a suspended first attempt in 2014. It proved a working source rock and an effective seal in a frontier area 170 km from Elk-Antelope, but no field.

drilling result

Total took over as operator of PRL 15 on 1 August 2015, five months after the joint venture voted for it. InterOil stayed on to provide technical services to the end of 2015 and to drill the Antelope-4 sidetrack on Total's behalf, after which Total would drill Antelope-6 itself.

joint venture update

The PRL 15 joint venture accepted Total's recommendations for its infrastructure sites - a central processing facility near the Purari River and an LNG plant at Caution Bay, next to ExxonMobil's existing PNG LNG - and named the venture Papua LNG. Concept selection waits on the end of Elk-Antelope appraisal, then expected in early 2016.

joint venture update

Flow testing began at Antelope-5, with the rate held by reservoir engineers to a maximum of about 70 million cubic feet a day - a limit of the test design, not of the well. Pressure gauges were to be placed across the field for an extended test to measure size, productivity and connectivity. The PNG Prime Minister visited the well site.

flow test result

The PRL 15 joint venture voted unanimously to appoint Total as operator, subject to government approval and a transition plan. InterOil, which found Elk-Antelope and drilled every well on it, will no longer run the field it discovered.

joint venture update

Antelope-5 intersected the top of the reservoir at 1,534 metres below sea level, 230 metres higher than the operator's reference case. An extended well test was planned with pressure gauges in the other appraisal wells to measure how well the field is connected - the question that decides whether it supports one LNG train or two.

drilling result

An International Chamber of Commerce arbitration panel dismissed every claim by the PAC LNG companies, affiliates of Oil Search, that they held pre-emptive rights over the sale of the Elk-Antelope interest, and declared Total a party to the PRL 15 joint venture operating agreement. The challenge to the Total sale is gone and Total's standing in the joint venture is settled.

joint venture update

Antelope-5 spudded 1.8 km from Antelope-3 to appraise the western edge of the Elk-Antelope field.

drilling spud

InterOil declared a discovery at Bobcat-1 after the well flowed and flared hydrocarbons from about 320 metres of Kapau limestone. The same release says the well sits close to the gas-water contact in the transition zone and that new seismic puts the crest of the structure several kilometres west and several hundred metres higher - a real discovery, drilled off the top of the structure, which InterOil now plans to deepen and appraise.

drilling result

Gas and condensate reached surface and were flared at Raptor-1, tested over about 330 metres of open hole including roughly 200 metres of Kapau limestone. No flow rate was given in the release - the well was still being cleaned up and testing continued.

well test result

Raptor-1 intersected 200 metres of the Kapau Limestone with wireline logs indicating hydrocarbons, and InterOil moved to well testing to establish fluid type, column height, flow rate and reservoir quality. Bobcat-1 drilled through the seal into the same limestone and was preparing to drill on.

drilling progress report

Antelope-5 spudded, the first of at least two appraisal wells on the Antelope field and the most southerly on it, about 1 km south of Antelope-2. Appraisal drilling is what sets the certified resource, and under the March agreement the certified resource is what sets Total's remaining payments to InterOil.

drilling spud

Wahoo-1 was suspended short of its target after hitting pressures nearly 50% above those at Antelope, 170 km away, with methane through butane entering the well bore from permeable zones above the objective. InterOil pointed to a proven seal and thermogenic gas, but stated plainly that the reservoir had not been penetrated and Wahoo cannot be called a discovery until it is.

drilling progress report

InterOil sold the companies holding the Napa Napa refinery, 52 service stations and 30 depots, terminals and aviation sites to Puma Energy for US$525.6 million after an unsolicited approach, transferring all downstream staff. The refinery had secured the 2012 term loan and backed the 2013 working capital line; after ten years as a vertically integrated business InterOil is now upstream and LNG only.

asset acquisition disposition

The Total sale closed, but smaller than agreed in December: Total bought a subsidiary holding a gross 40.1% of PRL 15 rather than 61.3%, and InterOil kept 35.5% rather than about 30%. InterOil received US$401 million on closing, with US$73 million due at final investment decision and US$65 million at first cargo, and the December resource-linked variable payments carried over pro-rated to the smaller stake. Oil Search sits alongside on 22.8% after buying out the Pacific LNG group's interests.

business combination

After a two-year partnering search InterOil agreed to sell Total a gross 61.3% of PRL 15, keeping a material 30% of an integrated LNG development, and gave Total an exclusive right to negotiate a farm-in across its other PNG licences. Fixed payments of US$613 million at completion, US$112 million at final investment decision and US$100 million at first cargo, plus resource-linked variable payments the company illustrated at US$1.5-3.6 billion for a certified 5.4-9.0 Tcfe. From here the price InterOil receives is a direct function of a resource number nobody has yet certified.

asset acquisition disposition

The ExxonMobil exclusivity lapsed after three months, with InterOil saying only that talks continued. In the same release it took a one-year US$75 million secured loan from Westpac PNG and Bank South Pacific, drawn in tranches with US$37.5 million available immediately, to keep the exploration and drilling programme going.

debt financing

InterOil and Pacific LNG entered exclusive negotiations with ExxonMobil over selling enough of PRL 15 to feed an extra LNG train at ExxonMobil's existing Konebada site, with staged payments before and after production, a funded delineation drilling programme and recertification of the resource. Any deal needed PNG government approval.

material agreement

Pacific Rubiales funded the final US$55 million on 23 March, completing the full US$116 million cash payment and closing the farm-in signed in July 2012. Reimbursement of its share of Triceratops-2 drilling costs was still to follow.

farm in farm out completion

Logging of Antelope-3 finished: 10.2% average porosity over 1,810 feet of net pay at 66% net-to-gross, sitting between Antelope-1's 8.8% and Antelope-2's 13.1%. Reservoir quality consistent with the existing model rather than better than it. Separately, binding bids in the LNG partnering process were set to close on 28 February 2013.

drilling result

Antelope-3 reached total depth on 25 December and Schlumberger's preliminary logs showed the same reefal limestone and dolomite as Antelope-1 and -2, sharing a water contact at 7,310 feet below sea level for a hydrocarbon column of about 2,301 feet - the tallest yet measured in the Antelope field. The Mitsui and Energy World deadlines were extended again in the same release to leave room for partner selection.

drilling progress report

The first drill-stem test on Antelope-3 flowed a maximum 44.8 million cubic feet of gas a day with 10.4-14.9 barrels of condensate per million cubic feet, through a 64/64-inch choke over a 584-foot open-hole interval at 2,331 psi flowing tubing pressure. InterOil said in the same release that the rate was significantly limited by the downhole test equipment and the surface separator, so this is an equipment-constrained maximum, not a sustained deliverability figure.

well test result

Antelope-3 hit the top of the reservoir at 5,328 feet measured depth, 217 feet above the pre-drill estimate and 92 feet higher than Antelope-1. The well flowed and was shut in at surface, the gas kick circulated out and flared, before casing went in. A drill-stem test was planned once about 300 feet of reservoir had been drilled.

drilling progress report

Papua New Guinea's cabinet approved InterOil's Gulf LNG project at a minimum 3.8 million tonnes a year, and at the same time approved the State buying a further 27.5% of the Elk-Antelope fields on commercial terms, on top of the 22.5% it can take under the Oil and Gas Act. Approval and dilution arrived in the same decision.

regulatory community update

Antelope-3 spudded, an appraisal well about 1 km south of Antelope-1 planned to roughly 8,366 feet and intended to be completed as a future producer. InterOil's Rig 3 was to move on to Elk-3, the last well needed to satisfy the first two-year work commitment on PRL 15.

drilling spud

The Pacific Rubiales farm-in was executed on materially the same terms as April's heads of agreement, but completion remained up to 18 months away and conditional on joint venture operating agreements and PNG government approval. Pacific Rubiales kept the right to terminate at stages of the work programme and recover up to US$96 million of its US$116 million cash out of future production proceeds. Pacific LNG took 25% of the Triceratops payments by cutting its own indirect interest.

farm in farm out agreement

Pacific Rubiales agreed to farm in for a 10% net (12.9% gross) interest in PPL 237, which contains the Triceratops structure, for US$116 million of staged cash plus a carry on an agreed work programme and a final resource payment. Explicitly separate from the Elk-Antelope partnering process running in parallel.

farm in farm out agreement

Drilling began on Triceratops-2, an appraisal well on a structure first tested by the Bwata-1 well in 1959, which flowed up to 28 million cubic feet of gas a day over a 512-foot gas column. Planned to about 7,579 feet and 60-120 days to drill, log and test; new seismic had mapped a larger closure with the same character as the Antelope reef.

drilling spud