InterOil Third Quarter 2013 Results

PORT MORESBY, Papua New Guinea and HOUSTON, Nov. 11, 2013 /PRNewswire/ -- InterOil Corporation (NYSE: IOC) (POMSoX:IOC) today announced financial and operating results for the third quarter ended September 30, 2013.

Key Points

  • Net loss for the quarter of $6.3 million compared to a profit of $5.3 million for the same period in 2012
  • $250 million secured syndicated capital expenditure facility led by Credit Suisse AG
  • Continuing focus on streamlining business units and reducing costs
  • Negotiations with a number of supermajors relating to the monetization of the Elk and Antelope resource in final stages; announcement expected by year end
  • Initiated seismic data acquisition and drilling activity including a well in each of the Company's three Petroleum Prospecting Licenses (PPLs)

Commenting on the results, InterOil chief executive Dr Michael Hession said, "The Company is delivering on its commitments to strengthen its financial position, complete a monetization transaction and resume exploration".

"We are pleased to have the support of a high calibre syndicate of international banks to bridge our funding requirements between the execution of a sales and purchase agreement (SPA) and completing the monetization transaction".

"The management team is focused on the key drivers that create value for shareholders. We have identified priority objectives within our core business streams which are appropriately staffed and funded".

"Negotiations with a number of supermajors regarding the monetization of our gas resources are in the final stages. We expect to be able to make an announcement on the selection of our development partner before year end".

"Ongoing exploration activity is one of InterOil's four core business units in Papua New Guinea, the others being midstream refining, downstream wholesale and retail petroleum distribution and the monetization of its gas resources."

"InterOil supports the communities in which it operates. We are proud to work with the people and Government of Papua New Guinea as we commit to further development that will provide revenue and employment for the PNG economy."

Group Financial Results
InterOil's recorded net loss for the quarter ended September 30, 2013 was $6.3 million, compared with a profit of $5.3 million for the same period in 2012. The $11.6 million decrease in net profit was mainly due to an $8.6 million increase in foreign exchange losses and a $7.6 million decrease in gross margin on account of a relatively stable crude and product prices movement during the current quarter as compared to increases in the same quarter of 2012.

EBITDA for the third quarter of 2013 was $9.9 million, a decrease of $9.1 million compared to EBITDA of $19.0 million for the same period in 2012.

Total revenues decreased by $21.6 million to $305.2 million, primarily due to lower sales volumes during the quarter. The total volume of all products sold was 2.0 million barrels, compared with 2.3 million barrels in the same quarter of 2012, mainly due to the timing of refinery exports in the third quarter of 2012.

Business Segment Results
Upstream – InterOil today announced a seismic data acquisition and drilling program which will involve three initial wells in the Company's Petroleum Prospecting Licenses (PPLs) in Papua New Guinea.  The work program consists of six wells (1 well each in our prospecting licenses PPL236, 237 and 238, 2 wells in PRL15, and 1 well in APRL39), plus a seismic program in Triceratops east, south west Antelope and a new prospect Bobcat.

The Wahoo-1 well, the first well in the multi-well exploration drilling plan, is planned to be drilled utilizing InterOil's exploration Rig#3 in PPL 236. The Bob Cat-1 exploration well will be drilled utilising InterOil Rig#2. The proposed Bob Cat-1 location is in PPL 238 and is a target defined by an aero-magnetic, gravity and seismic data, and is on trend between the Antelope and Triceratops fields. 

During the previous quarter previous seismic data obtained from DPE archives over the Raptor prospect in PPL237 was reprocessed.  The Company has contracted an additional rig to drill the Raptor-1 well with its exploration partner Pacific Rubiales Energy (PRE). The Raptor-1 well in PPL 237 is an exploration well delineated by aero-magnetic and gravity data as well as seismic data and is planned to commence drilling during the first quarter next year.

Additional wells and seismic data acquisition will be conducted in PRL15 and Triceratops (APRL 39) to support development planning and to meet licence obligations.  Beyond this InterOil intends to maintain an active work program across the portfolio of exploration targets in our core licences in the highly prospective Eastern Papuan Basin.

The Upstream segment realized a net loss of $16.2 million in the quarter. The increased loss of $5.3 million over the same period in 2012 was mainly due to a decrease in gain on oil and gas properties due to the recognition of the sale of interest in PPL 237 to PRE in the prior year's comparable quarter, reduced revenue from civil works recovery and higher interest expense on inter-company loan balances.

Midstream Refining – Total refinery throughput for the quarter ended September 30, 2013 was 26,786 barrels per operating day, compared with 23,980 barrels per operating day during the quarter ended September 30, 2012.

Capacity utilization of the refinery for the quarter ended September 30, 2013, based on 36,500 barrels per day operating capacity, was 65% compared with 61% for quarter ended September 30, 2012. During the quarters ended September 30, 2013 and 2012, our refinery was shut down for 11 day and 9 days, respectively, for general maintenance activities.

On July 17, 2013, we entered into a $350.0 million working capital structured facility secured by our rights, title and interest in inventory and working capital of the refinery (see Balance Sheet and Liquidity). 

The midstream refining segment generated a net loss of $11.1 million in the quarter compared to a profit of $5.4 million for the same period in 2012.  The variance was largely due to a decrease in gross margin resulting from relatively stable crude and product prices movement during the current quarter as compared to increasing prices in the comparable period a year ago, and an increase in foreign exchange losses for the current quarter resulting from weakening of Kina against USD.

Midstream Liquefaction – On August 6, 2013, InterOil signed an agreement with PacLNG relating to the alignment of interests in the Midstream – Liquefaction Joint Venture to those in the PRL15.  Following the alignment, the Company's interest in the joint venture is 77.165% and PacLNG's interest is 22.835%.

The Midstream Liquefaction segment had a net gain of $2.4 million during the quarter mainly due to $2.6 million profit recognized on the disposal of our interest in PNG LNG as a result of the equalization agreement with PacLNG.

Downstream – Total sales volumes for the quarter were 194.7 million litres, an increase of 9.7 million litres, or 5.2 per cent, over the same period in 2012. Movement of plant equipment at the PNGLNG project and Government contracts increased sales of Diesel and Jet A1 during the current quarter.

The retail business accounted for approximately 14% of total downstream sales in the third quarter of 2013 compared to 15% in the same period last year. During the quarter, the Company acquired a key high volume independently owned retail site.

The Downstream business unit generated a net profit of $9.4 million in the third quarter, which compares to $5.6 million in the same period a year ago.  The increased profit was mainly due to IPP price increases during the current quarter as opposed to price declines in the prior quarter.

Corporate – The Corporate operations generated a net profit of $10.8 million against a gain of $7.8 million in the same period a year ago.  The improvement resulted mainly from an increase in inter-segment recharges, and a gain recognized for the disposal of FLEX LNG shares. This was partially offset by increased office and administrative expenses resulting from corporate employees in Papua New Guinea and the operation of the Napa Napa camp being captured in the Corporate segment since October 1, 2012.

Summary of Consolidated Quarterly Financial Results for Past Eight Quarters

Quarters ended

($ thousands except per share data)

2013

2012

2011

Sep-30

Jun-30

Mar-31

Dec-31

Sep-30

Jun-30

Mar-31

Dec-31  

Upstream

1,918

2,533

1,862

4,136

2,216

1,727

2,284

1,891

Midstream – Refining

251,725

289,300

305,172

301,925

274,671

236,006

302,310

237,640

Midstream – Liquefaction 

-

20,089

-

-

-

-

-

-

Downstream

215,651

199,470

208,046

220,512

201,749

223,620

218,974

209,678

Corporate

31,714

36,201

34,923

37,552

26,880

24,742

24,757

21,831

Consolidation entries

(195,773)

(201,932)

(199,672)

(207,686)

(178,652)

(186,991)

(210,174)

(181,428)

Total revenues

305,235

345,661

350,331

356,439

326,864

299,104

338,151

289,612

Upstream

(2,842)

(19,478)

(1,311)

(873)

956

(5,730)

(6,374)

665

Midstream – Refining

(3,562)

840

12,701

12,370

13,417

(42,647)

18,933

2,604

Midstream – Liquefaction

2,550

19,850

(123)

192

11

672

(1,410)

(4,129)

Downstream

14,962

7,542

10,062

12,258

9,275

11,102

21,414

6,808

Corporate

13,446

1,745

10,044

14,133

9,841

9,975

9,188

10,134

Consolidation entries

(14,647)

(11,146)

(13,418)

(12,199)

(14,503)

(9,871)

(14,216)

(11,280)

EBITDA (1)

9,907

(647)

17,955

25,881

18,997

(36,499)

27,535

4,802

Upstream

(16,206)

(32,046)

(13,774)

(13,081)

(10,936)

(15,532)

(17,244)

(9,402)

Midstream – Refining

(11,074)

(4,675)

5,855

13,401

5,358

(32,969)

11,320

15,684

Midstream – Liquefaction

2,373

19,284

(681)

(394)

(573)

93

(1,969)

(4,574)

Downstream

9,435

4,346

6,005

7,716

5,626

6,045

13,195

3,621

Corporate

10,780

(1,701)

7,342

10,519

7,849

8,445

6,270

7,616

Consolidation entries

(1,626)

1,562

(744)

384

(1,988)

2,205

(2,136)

252

Net (loss)/profit

(6,318)

(13,230)

4,003

18,545

5,336

(31,713)

9,436

13,197

Net (loss)/profit per share (dollars)









Per Share – Basic

(0.13)

(0.27)

0.08

0.38

0.11

(0.66)

0.20

0.27

Per Share – Diluted

(0.13)

(0.27)

0.08

0.38

0.11

(0.66)

0.19

0.27

(1)

EBITDA is a non-GAAP measure and is reconciled to IFRS under the heading "Non-GAAP Measures and Reconciliation".

Balance Sheet and Liquidity
InterOil closed the third quarter of 2013 with cash, cash equivalents and cash restricted totalling $79.3 million (September 30, 2012 - $96.7 million), of which $38.9 million is restricted (September 30, 2012 - $39.6 million).

On July 17, 2013, the Company entered into a $350.0 million working capital structured facility arranged by BNP Paribas to replace the $240.0 million facility.  Out of the $350.0 million, $270.0 million will be a syndicated secured working capital facility with the support of five banking partners, namely BNP Paribas, Australia and New Zealand Banking Group Limited ("ANZ"), Natixis, Intesa Sanpaolo, and Bank South Pacific Limited ("BSP").  In addition, BNP Paribas provided an $80.0 million bilateral non-recourse discounting facility.  As at September 30, 2013, $182.3 million of the $270.0 million facility had been utilized, and the remaining facility of $87.7 million remained available for use.  There were no amounts outstanding under the non-recourse discounting facility.

As at September 30, 2013, the Company had an approximate $39.5 million (Papua New Guinea Kina ("PGK") 95.0 million) revolving working capital facility for its Downstream operations in PNG from BSP and Westpac Bank PNG Limited ("Westpac").  On September 30, 2013, none of this combined facility had been utilized, and the full amount of the facility remained available for use.

In August 2013, we entered into a one year $75.0 million equivalent combined secured loan facility with Westpac and BSP to be drawn in tranches, either USD and/or PGK.   Borrowings under the facility will be used for exploration and drilling activities with $37.5 million available immediately, and a further $37.5 million available upon the execution of an agreement in relation to the monetization of the Elk and Antelope resource.  The principal repayment will be made on the earlier of, the first resource payment or 12 months from the first drawdown. As at September 30, 2013, $34.6 million of the facility had been utilized. 

Subsequent to quarter end, on November 11, 2013, the Company entered into a one-year $250 million secured syndicated capital expenditure facility, led by Credit Suisse AG, to fund the proposed exploration and drilling program. The other participating lenders are Commonwealth Bank of Australia, ANZ, UBS, Macquarie, BSP, BNP Paribas and Westpac. The facility is secured by the Company's existing Upstream and Corporate Entities. The credit facility bears interest at LIBOR plus 5.5 percent margin on the drawn amount for the first six months. After the first six month period the margin escalates 2.0 percent every two months to a maximum of 11.5% in the last two months of the 12-month term. The facility is payable in full (within a certain timeframe) upon any sale or disposal of the Company's interest in the Elk and Antelope fields.

The Company is managing its gearing levels by maintaining the debt-to-capital ratio (debt/(shareholders' equity + debt)) at 50% or less.  Our debt-to-capital ratio was 20% on September 30, 2013, up from 13% a year ago.

Summary of Debt Facilities
Summarized below are the debt facilities available to us and the balances outstanding as at September 30, 2013.

Organization

Segment

Facility

Balance outstanding
September 30, 2013

Effective interest rate

Maturity date

ANZ, BSP and BNP syndicated secured loan facility

Midstream - Refining

$100,000,000

$92,000,000

6.94%

November 2017

BNP working capital facility(1)

Midstream - Refining

$270,000,000

$107,584,830(2)

2.87%

February 2015

BNP non-recourse discounting facility(1)

Midstream - Refining

$80,000,000

$0

2.87%

February 2015

Westpac PGK working capital facility

Downstream

$18,720,000(3)

$0

9.15%

November 2014

BSP PGK working capital facility

Downstream

$20,800,000

$0

9.45%

November 2014

BSP and Westpac combined secured facility

Downstream

$75,000,000

$34,604,377

8.89%

August 2014

2.75% convertible notes

Corporate

$70,000,000

$69,998,000

7.91%(3)

November 2015



(1)

In August 2013, the BNP Paribas working capital facility agreement with a maximum availability of $240.0 million was replaced with a new facility agreement with a maximum availability of $350.0 million (including an $80.0 million facility for discounted receivables). Under the new facility, discounted receivables are not included in the available for use balance as they are non-recourse discounted receivables that fall within the separate $80.0 million facility with BNP Paribas. There were no discounted receivables as at September 30, 2013.

(2)

Excludes letters of credit totaling $74.7 million, which reduces the available borrowings under the facility to $87.7 million at September 30, 2013.

(3)

Effective rate after bifurcating the equity and debt components of the $70 million principal amount of 2.75% convertible senior notes due 2015.

NON-GAAP EBITDA Reconciliation

EBITDA represents our net income/(loss) plus total interest expense (excluding amortization of debt issuance costs), income tax expense, depreciation and amortization expense.  EBITDA is used by us to analyze operating performance.  EBITDA does not have a standardized meaning prescribed by GAAP (i.e., IFRS) and, therefore, may not be comparable with the calculation of similar measures for other companies.  The items excluded from EBITDA are significant in assessing our operating results.  Therefore, EBITDA should not be considered in isolation or as an alternative to net earnings, operating profit, net cash provided from operating activities and other measures of financial performance prepared in accordance with IFRS.  Further, EBITDA is not a measure of cash flow under IFRS and should not be considered as such.

The following table reconciles net income/(loss), a GAAP measure, to EBITDA, a non-GAAP measure for each of the last eight quarters.

Quarters ended

($ thousands)

2013

2012

2011

Sep-30

Jun-30

Mar-31

Dec-31

Sep-30

Jun-30

Mar-31

Dec-31

Upstream

(2,842)

(19,478)

(1,311)

(873)

956

(5,730)

(6,374)

665

Midstream – Refining

(3,562)

840

12,701

12,370

13,417

(42,647)

18,933

2,604

Midstream – Liquefaction 

2,550

19,850

(123)

192

11

672

(1,410)

(4,129)

Downstream

14,962

7,542

10,062

12,258

9,275

11,102

21,414

6,808

Corporate

13,446

1,745

10,044

14,133

9,841

9,975

9,188

10,134

Consolidation Entries

(14,647)

(11,146)

(13,418)

(12,199)

(14,503)

(9,871)

(14,216)

(11,280)

Earnings before interest, taxes, depreciation and amortization

9,907

(647)

17,955

25,881

18,997

(36,499)

27,535

4,802

Subtract:









Upstream

(12,814)

(12,043)

(11,941)

(11,734)

(11,438)

(10,517)

(9,408)

(8,712)

Midstream – Refining

(2,351)

(2,235)

(2,454)

(11,390)

(1,654)

(2,011)

(2,771)

(3,285)

Midstream – Liquefaction

(177)

(566)

(558)

(586)

(584)

(579)

(559)

(445)

Downstream

(536)

(263)

(422)

(337)

(394)

(909)

(1,233)

(1,170)

Corporate

(1,842)

(2,081)

(1,600)

(1,601)

(1,540)

(1,535)

(1,510)

(1,498)

Consolidation Entries

12,989

12,677

12,642

12,552

12,482

12,044

12,047

11,500

Interest expense

(4,731)

(4,511)

(4,333)

(13,096)

(3,128)

(3,507)

(3,434)

(3,610)

Upstream

-

-

-

-

-

-

-

-

Midstream – Refining

(1,736)

(118)

(1,270)

16,574

(3,484)

14,580

(1,948)

19,243

Midstream – Liquefaction

-

-

-

-

-

-

-

-

Downstream

(3,804)

(1,667)

(2,455)

(3,070)

(1,791)

(2,907)

(5,746)

(595)

Corporate

108

(483)

(196)

(1,330)

177

535

(880)

(493)

Consolidation Entries

-

-

-

-

-

-

-

-

Income taxes

(5,432)

(2,268)

(3,921)

12,174

(5,098)

12,208

(8,574)

18,155

Upstream

(550)

(525)

(522)

(474)

(454)

715

(1,462)

(1,355)

Midstream – Refining

(3,425)

(3,162)

(3,122)

(4,153)

(2,921)

(2,891)

(2,894)

(2,878)

Midstream – Liquefaction

-

-

-

-

-

-

-

-

Downstream

(1,187)

(1,266)

(1,180)

(1,135)

(1,464)

(1,241)

(1,240)

(1,422)

Corporate

(932)

(882)

(906)

(683)

(629)

(530)

(528)

(527)

Consolidation Entries

32

31

32

31

33

32

33

32

Depreciation and amortisation

(6,062)

(5,804)

(5,698)

(6,414)

(5,435)

(3,915)

(6,091)

(6,150)

Upstream

(16,206)

(32,046)

(13,774)

(13,081)

(10,936)

(15,532)

(17,244)

(9,402)

Midstream – Refining

(11,074)

(4,675)

5,855

13,401

5,358

(32,969)

11,320

15,684

Midstream – Liquefaction

2,373

19,284

(681)

(394)

(573)

93

(1,969)

(4,574)

Downstream

9,435

4,346

6,005

7,716

5,626

6,045

13,195

3,621

Corporate

10,780

(1,701)

7,342

10,519

7,849

8,445

6,270

7,616

Consolidation Entries

(1,626)

1,562

(744)

384

(1,988)

2,205

(2,136)

252

Net (loss)/profit per segment

(6,318)

(13,230)

4,003

18,545

5,336

(31,713)

9,436

13,197



InterOil Corporation

Consolidated Income Statements

(Unaudited, Expressed in United States dollars)







 Quarter ended 

 Nine months ended 







September 30,

September 30,

September 30,

September 30,


2013

2012

2013

2012


$

 $ (revised)* 

$

 $ (revised)* 






Revenue





  Sales and operating revenues 

304,410,212

324,109,090

997,808,538

956,335,547

  Interest

19,865

23,348

71,443

226,014

  Other

804,705

2,732,247

3,345,777

7,557,014


305,234,782

326,864,685

1,001,225,758

964,118,575






  Changes in inventories of finished goods and work in progress

11,190,418

(35,607,503)

(16,370,774)

(6,263,770)

  Raw materials and consumables used

(285,373,097)

(250,722,505)

(892,870,471)

(896,694,438)

  Administrative and general expenses 

(6,565,506)

(11,104,381)

(28,720,644)

(30,708,081)

  Derivative losses

(2,451,608)

(4,929,234)

(3,274,054)

(4,715,186)

  Legal and professional fees

(2,139,377)

(1,384,270)

(5,679,054)

(3,667,042)

  Exploration costs, excluding exploration impairment (note 6)

(2,992,323)

(2,056,367)

(3,963,500)

(14,660,051)

  Finance costs

(7,006,444)

(4,209,765)

(18,124,592)

(13,646,887)

  Depreciation and amortization

(6,062,074)

(5,435,305)

(17,563,239)

(15,441,862)

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

-

2,895,000

500,071

2,895,000

  Gain on available-for-sale investment (note 8)

4,746,997

-

3,719,907

-

  Foreign exchange (losses)/gains

(12,045,232)

(3,494,290)

(25,068,717)

3,992,945

  Share of net profit/(loss) of joint venture partnership accounted for using the equity method (note 15)

2,578,112

(382,224)

2,265,442

(687,777)


(306,120,134)

(316,430,844)

(1,005,149,625)

(979,597,149)

(Loss)/profit before income taxes

(885,352)

10,433,841

(3,923,867)

(15,478,574)






Income taxes





  Current tax expense 

(4,048,959)

(2,561,068)

(9,672,693)

(11,623,696)

  Deferred tax (expense)/benefit 

(1,383,405)

(2,537,251)

(1,948,582)

10,160,813


(5,432,364)

(5,098,319)

(11,621,275)

(1,462,883)






(Loss)/profit for the period

(6,317,716)

5,335,522

(15,545,142)

(16,941,457)






(Loss)/profit is attributable to:





Owners of InterOil Corporation

(6,317,716)

5,335,522

(15,545,142)

(16,941,457)


(6,317,716)

5,335,522

(15,545,142)

(16,941,457)






Basic (loss)/profit per share 

(0.13)

0.11

(0.32)

(0.35)

Diluted (loss)/profit per share

(0.13)

0.11

(0.32)

(0.35)

Weighted average number of common shares outstanding





 Basic (Expressed in number of common shares)

48,815,218

48,445,397

48,712,015

48,271,469

 Diluted (Expressed in number of common shares)

48,815,218

48,785,877

48,712,015

48,271,469






See accompanying notes to the consolidated financial statements

* Revised to effect transition to IFRS 11 - Joint arrangements, refer note 2(c)(ii) for further information



InterOil Corporation

Consolidated Balance Sheets 

(Unaudited, Expressed in United States dollars)









As at














September 30,

December 31,

September 30,



2013

2012

2012



$

$ (revised) * 

$ (revised) * 







Assets





Current assets:





    Cash and cash equivalents

40,405,336

49,720,680

57,151,655


    Cash restricted

27,345,725

37,340,631

33,610,455


    Trade and other receivables 

77,714,542

161,578,481

157,903,504


    Derivative financial instruments

86,654

233,922

-


    Other current assets

4,130,877

832,869

906,610


    Inventories (note 5)

178,500,565

194,871,339

164,808,029


    Prepaid expenses

7,593,970

8,517,340

5,891,713


Total current assets

335,777,669

453,095,262

420,271,966


Non-current assets:





    Cash restricted

11,574,797

11,670,463

5,980,832


    Plant and equipment

244,989,862

255,031,257

251,555,833


    Oil and gas properties (note 6)

569,800,760

510,669,431

472,077,713


    Deferred tax assets (note 7)

53,718,113

63,526,458

47,585,649


    Other non-current receivables (note 12)

29,700,534

5,000,000

-


    Investments accounted for using the equity method (note 15)

17,548,190

-

-


    Available-for-sale investments (note 8)

-

4,304,176

5,462,570


Total non-current assets

927,332,256

850,201,785

782,662,597


Total assets

1,263,109,925

1,303,297,047

1,202,934,563


Liabilities and shareholders' equity





Current liabilities:





    Trade and other payables

74,092,829

178,313,483

169,572,265


    Income tax payable

15,190,761

11,977,681

9,592,164


    Derivative financial instruments

708,925

-

371,143


    Working capital facilities (note 9)

107,584,830

94,290,479

87,076,286


    Unsecured loan and current portion of secured loans (note 10)

49,786,062

31,383,115

25,198,297


    Current portion of Indirect participation interest (note 11)

16,283,309

15,246,397

13,770,156


Total current liabilities

263,646,716

331,211,155

305,580,311


Non-current liabilities:





    Secured loans (note 10)

73,476,706

89,446,137

30,238,125


    2.75% convertible notes liability

61,737,934

59,046,581

58,175,245


    Deferred gain on contributions to LNG project (note 15)

-

5,191,101

5,388,692


    Indirect participation interest (note 11)

13,245,089

16,405,393

20,904,686


    Other non-current liabilities (note 12)

96,000,000

20,961,380

20,000,000


    Asset retirement obligations

4,598,327

4,978,334

4,947,101


Total non-current liabilities

249,058,056

196,028,926

139,653,849


Total liabilities

512,704,772

527,240,081

445,234,160


Equity:





Equity attributable to owners of InterOil Corporation:





    Share capital (note 13)

942,190,761

928,659,756

927,913,817


        Authorized - unlimited





        Issued and outstanding - 48,824,038





        (Dec 31, 2012 - 48,607,398)





        (Sep 30, 2012 - 48,587,461)





    2.75% convertible notes

14,297,627

14,298,036

14,298,036


    Contributed surplus

28,214,688

21,876,853

20,107,937


    Accumulated Other Comprehensive Income

7,208,731

25,032,953

27,736,411


    Conversion options (note 11)

-

12,150,880

12,150,880


    Accumulated deficit 

(241,506,654)

(225,961,512)

(244,506,678)


Total equity attributable to owners of InterOil Corporation

750,405,153

776,056,966

757,700,403


Total liabilities and equity

1,263,109,925

1,303,297,047

1,202,934,563

See accompanying notes to the consolidated financial statements

* Revised to effect transition to IFRS 11 - Joint arrangements, refer note 2(c)(ii) for further information



InterOil Corporation

Consolidated Statements of Cash Flows 

(Unaudited, Expressed in United States dollars)







 Quarter ended 

Nine months ended


September 30,

September 30,

September 30,

September 30,


2013

2012

2013

2012


$

 $ (revised) *  

$

 $ (revised) *  






Cash flows generated from (used in):










Operating activities





    Net (loss)/profit for the period

(6,317,716)

5,335,522

(15,545,142)

(16,941,457)

    Adjustments for non-cash and non-operating transactions





      Depreciation and amortization

6,062,074

5,435,305

17,563,239

15,441,862

      Deferred tax 

6,652,202

2,872,882

9,808,345

(13,509,767)

      Gain on conveyance of exploration assets

-

(2,895,000)

(500,071)

(2,895,000)

      Accretion of convertible notes liability

911,048

858,478

2,693,065

2,537,615

      Amortization of deferred financing costs

204,579

36,986

598,436

129,959

      Timing difference between derivatives recognized and settled

644,766

1,122,929

856,193

955,126

      Stock compensation expense, including restricted stock

587,345

2,112,932

4,298,468

5,777,472

      Inventory write down

-

(24,636,489)

-

-

      Accretion of asset retirement obligation liability

53,875

82,774

267,623

248,322

      Gain on conversion of convertible notes

-

-

(500)

-

      Gain on Flex LNG investment

(4,746,997)

-

(3,719,907)

-

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

(2,578,112)

382,224

(2,265,442)

687,777

      Unrealized foreign exchange (gain)/loss

(2,077,712)

22,277

(2,656,039)

(876,631)

    Change in operating working capital





      Decrease/(increase) in trade and other receivables

38,314,619

(34,491,093)

4,216,495

(28,988,922)

      (Increase)/decrease in other current assets and prepaid expenses

(4,073,788)

2,360,624

(2,374,638)

(458,678)

      (Increase)/decrease in inventories

(12,367,665)

59,593,399

9,821,506

4,014,645

      Increase/(decrease) in trade and other payables

4,871,933

6,708,330

(13,561,815)

6,017,991

    Net cash generated from/(used in) operating activities

26,140,451

24,902,080

9,499,816

(27,859,686)






Investing activities





    Expenditure on oil and gas properties

(38,394,448)

(43,978,574)

(105,262,287)

(134,615,057)

    Proceeds from IPI cash calls

12,069,226

-

27,058,053

3,497,542

    Expenditure on plant and equipment

(8,442,763)

(7,685,789)

(20,076,112)

(20,966,317)

    Proceeds from Pacific Rubiales Energy (conveyance accounted portion)

-

-

-

20,000,000

    Maturity of short term treasury bills

-

-

-

11,832,110

    Proceeds from disposal of Flex LNG Ltd shares, net of transaction costs

7,778,258

-

7,778,258

-

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

(6,226,515)

906,997

10,090,572

(340,524)

    Change in non-operating working capital





      Decrease in trade and other receivables

-

-

5,000,000

-

      Increase/(decrease) in trade and other payables

7,590,678

12,192,886

(13,630,823)

22,818,296

    Net cash used in investing activities

(25,625,564)

(38,564,480)

(89,042,339)

(97,773,950)






Financing activities





    Repayments of OPIC secured loan

-

-

-

(4,500,000)

    (Repayments to)/proceeds from Mitsui for Condensate Stripping Plant

(34,375,748)

3,578,489

(34,375,748)

3,578,489

    (Repayments of)/proceeds from Westpac secured loan

(10,714,000)

(2,143,000)

(12,857,000)

12,857,000

    Proceeds from drawdown of BSP and Westpac secured facility

34,604,377

-

34,604,377

-

    Proceeds from Pacific Rubiales Energy for interest in PPL237 (net of

       transaction costs)

-

20,000,000

73,600,000

20,000,000

    (Repayments of)/proceeds from working capital facility

(14,443,836)

24,188,225

13,294,351

70,595,783

    Repayments of ANZ, BSP & BNP syndicated loan 

-

-

(8,000,000)

-

    Proceeds from issue of common shares, net of transaction costs

-

4,757,023

3,995,228

10,618,423

    Payment on conversion of convertible notes

-

-

(1,546)

-

  Net cash (used in)/generated from financing activities

(24,929,207)

50,380,737

70,259,662

113,149,695






(Decrease)/increase in cash and cash equivalents

(24,414,320)

36,718,337

(9,282,861)

(12,483,941)

Cash and cash equivalents, beginning of period

64,842,032

20,435,206

49,720,680

68,575,269

Exchange (losses)/gains on cash and cash equivalents

(22,376)

(1,888)

(32,483)

1,060,327

Cash and cash equivalents, end of period 

40,405,336

57,151,655

40,405,336

57,151,655

Comprising of:





Cash on Deposit

35,178,235

56,516,825

35,178,235

56,516,825

Short Term Deposits

5,227,101

634,830

5,227,101

634,830

Total cash and cash equivalents, end of period

40,405,336

57,151,655

40,405,336

57,151,655






See accompanying notes to the consolidated financial statements

* Revised to effect transition to IFRS 11 - Joint arrangements, refer note 2(c)(ii) for further information

About InterOil
InterOil Corporation is developing a vertically integrated energy business whose primary focus is Papua New Guinea.  InterOil's assets consist of petroleum licenses covering about 3.9 million acres, an oil refinery, and retail and commercial distribution facilities, all located in Papua New Guinea.  InterOil's common shares trade on the NYSE in US dollars. 

Investor Contacts for InterOil:


Wayne Andrews

Meg LaSalle

V. P. Capital Markets

Investor Relations Coordinator

Wayne.Andrews@InterOil.com

Meg.LaSalle@InterOil.com

The Woodlands, TX USA

The Woodlands, TX USA

Phone: +1-281-292-1800

Phone:+1-281-292-1800



Media Contacts:



John Hurst


Cannings Corporate Communications




+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 the InterOil expects, believes or anticipates will or may occur in the future are forward-looking statements, including in particular further seismic-related exploration activities, development activities,  the ability to attract a strategic LNG partner and complete the LNG partnering process and the timing of such process, the construction and development of the proposed LNG project, the characteristics of our properties, the ability to commercially develop our resources, anticipated financial conditions and performance, business prospects, strategies, regulatory developments, the ability to obtain financing on acceptable terms, the ability to identify drilling locations and the ability to develop reserves and production through development and exploration activities. Statements relating to 'resources' are forward looking, as they involve the applied assessment, based on certain estimates and assumptions, that the resources described exist in the quantities estimated. These statements are based on certain assumptions made by the Company based on its experience and perception of current conditions, expected future developments, the terms of agreements with its joint venture partners and other factors it believes are appropriate in the circumstances. No assurances can be given however, that these events will occur. Actual results will 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 December 31, 2012 on Form 40-F and its Annual Information Form for the year ended December 31, 2012. 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.

SOURCE InterOil Corporation



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