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Interoil Drilling And Q3 2015 Update

The following excerpt is from the company's SEC filing.

Antelope-4 sidetrack-1 reaches total depth

Antelope-6 to spud in December

Liquidity of $473 million at September 30

2016 expenditure estimate of $175-$195 million

InterOil Corporation (NYSE: IOC; POMSoX: IOC) reports that the Antelope-4 sidetrack-1 well in Petroleum Retention License 15 (PRL 15) in Papua New Guinea has reached total depth.

InterOil Chief Executive Dr Michael Hession said wireline logging, which was underway, would help to determine the extent of high-quality dolomite and overal l quality of the Elk-Antelope reservoir.

"The joint venture now intends to spud Antelope-6 in December this year as part of the appraisal program to define the resource for the Papua LNG Project," Dr Hession said.

"As Antelope-6 is currently the last joint venture-approved appraisal well, InterOil's certification payment from Total could be expected within four to six months of completion of this well.

"However, the joint venture is considering an additional appraisal well on the western flank of the Antelope field that could add an incremental volume of 1 to 3 Tcfe, which could enhance InterOil's certification payment by $400 million to $1.2 billion."

Dr Hession said InterOil maintained a healthy financial position with access to $473 million at the end of September 2015.

"With the transition of operatorship of PRL 15 to Total and completion of our current exploration license commitments, we have streamlined our operations to focus on Papua LNG and expect to reduce our corporate and other associated costs by more than 50% in 2016," he said.

"Our expected total expenditure for next year will be less than $200 million," he said.

Dr Hession said LNG investors and customers had shown great interest in Papua New Guinea over the past six months.

"Analysts acknowledge that the Papua LNG Project is one of the world's lowest-cost, highest-return LNG opportunities and, following prime ministerial meetings between Japan and Papua New Guinea, Japan is considering placing Papua New Guinea on its priority list as a supplier of LNG," he said.

Dr Hession said corporate activity in companies with interests in Papua New Guinea also highlighted the attractiveness of LNG assets.

"With strategic Asian buyers seeking LNG contracts in the 2020s, we are fully committed to developing the Papua LNG Project to meet this window, where demand is forecast to exceed contracted supply," he said.


Papua LNG update

The top of the reservoir was encountered in the Antelope-4 sidetrack-1 well at 1,875 meters (6,152 feet true vertical depth sub-sea), 36 meters (118 feet) higher than the original Antelope-4 penetration.

On November 12, 2015, the well had drilled to a total depth of 2,262 meters (7,421 feet true vertical depth sub-sea) and as at November 13, wireline logging had begun.

The PRL 15 joint venture, which is operated by Total, will use a High Arctic Energy Services rig, which was previously contracted by InterOil, to drill the Antelope-6 appraisal well.

The rig, which is on site, is expected to start drilling in December 2015 and will appraise the eastern flank of the Elk-Antelope field.


After positive indications from seismic reprocessing and the successful Antelope-5 well, the PRL 15 joint venture is now considering an additional appraisal well, Antelope-7, to test additional multi-Tcfe upside in the western flank of the field.

Papua LNG project

In early July 2015, the PRL 15 joint venture announced locations for key infrastructure for development of the Papua LNG Project.

The central processing facility is planned to be near the Purari River in the Gulf Province, about 360km north-west of Port Moresby, and to be connected to the LNG facility by onshore and offshore gas and condensate pipelines.

The LNG plant is intended to be built next to the existing PNG LNG Project at Caution Bay near Port...