InterOil Corporation
NYSE : IOC

InterOil Corporation

May 13, 2009 07:26 ET

InterOil Announces First Quarter 2009 Financial Results

TORONTO, ONTARIO--(Marketwire - May 13, 2009) - InterOil Corporation (NYSE:IOC)(POMSoX:IOC) announces financial results for the first quarter ending March 31, 2009. For the quarter, InterOil reported net income of $2.6 million ($0.07 per share), a $5.0 million improvement over the equivalent quarter in the prior year when a loss of $2.4 million was reported. EBITDA, (Earnings before Interest, Taxes, Depreciation and Amortization)(i) for the quarter totalled $10.9 million, an improvement of $3.8 million over 2008 first quarter EBITDA, despite sales and operating revenues of $161.7 million, which was a $30.8 million decrease from the first quarter of 2008.

Business Segment Results

During the quarter the Midstream Refining business generated a net profit of $10.3 million, compared with a net profit $0.2 million for the same quarter in 2008. This was primarily due to gains resulting from lower cost of sales in the quarter following the December write-down, an improved Naptha premium, a gain on hedge accounted transactions and non-hedge accounted contracts, as well as positive price movements applicable to sales of our refined products in Papua New Guinea under the applicable pricing formula. Gains were partially offset by adverse currency fluctuations and decreased margins on low sulphur waxy residue. Refining EBITDA in the quarter totalled $14.7 million, up from $5.7 million in the previous year.

The Company's Midstream Liquefaction segment posted a net loss of $2.6 million for the quarter, being our share of expenses incurred by the PNG LNG Inc. joint venture during the quarter to progress the Liquefied Natural Gas (LNG) project in Papua New Guinea.

The Downstream segment derived a net profit of $1.0 million compared with a net profit of $2.2 million in the first quarter of 2008. The decrease was mainly due to lower petroleum product pricing upon which this segment's margins are based. Downstream EBITDA in the quarter totalled $3.2 million compared to $4.5 million in the prior year period.

During the first quarter, the Upstream business segment recorded a net loss of $2.1 million, in line with a net loss of $2.0 million in the comparable 2008 quarter. Decreased rig and administrative expenses were offset by higher interest expense resulting from inter-company loan balances.

Liquidity and Capital Resources

As at March 31 2009, the Company's relatively strengthened financial position has benefited from the repayment in May 2008 of its $130.0 million secured credit bridging facility by means of conversion of a $60.0 million portion of the facility into equity and the repayment of the remainder funded by the issuance of $95 million principal amount of 8% convertible debentures maturing in May 2013. These transactions reduced our Debt-To-Capital Ratio (Long term Debt/(Shareholders' equity + Long term Debt) to 34% at March 31, 2009, substantially down from 68% at the same time in 2008.



Summary of Debt Facilities

----------------------------------------------------------------------------
Balance
outstanding
Organization Facility March 31, 2009 Maturity date

----------------------------------------------------------------------------
----------------------------------------------------------------------------
OPIC secured loan $62,500,000 $62,500,000 December 2015
Unsecured 8% convertible
debentures $95,000,000 $78,975,000 May 2013
BNP Paribas working
capital facility $190,000,000 $26,403,359(1) August 2009
Westpac working capital
facility $27,200,000 $9,242,663 October 2011
BSP working capital
facility $23,800,000 $7,674,525 August 2009
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(1) Excludes letters of credit totalling US$27.6 million


At March 31, InterOil held cash, cash equivalents and restricted cash of $60.0 million (March 2008 - $37.5 million), of which $17.4 million (March 2008 - $20.4 million) was restricted under the BNP Paribas working capital facility utilization requirements. Our cash inflows from operations for the quarter were $18.6 million, compared with an inflow of $10.1 million for the quarter ended March 31, 2008. The improved cash flows from operations were mainly due to improved refining margins, cash received on the close out of long term hedges and reduced working capital requirements as a result of lower crude prices.



Consolidated Balance Sheets

As at
----------------------------------------------------------------------------
March 31, December 31, March 31,
2009 2008 2008
$ $ $
----------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents
(note 5) 42,644,319 48,970,572 17,089,197
Cash restricted (note 7) 17,100,097 25,994,258 20,019,672
Trade receivables (note 8) 41,437,218 42,887,823 84,102,363
Commodity derivative contracts
(note 7) - 31,335,050 -
Other assets 1,499,007 167,885 1,092,881
Inventories (note 9) 73,669,643 83,037,326 132,316,904
Prepaid expenses 2,137,765 4,489,574 1,502,302
----------------------------------------------------------------------------
Total current assets 178,488,049 236,882,488 256,123,319
Cash restricted (note 7) 281,527 290,782 344,858
Goodwill (note 14) 5,761,940 - -
Plant and equipment (note 10) 219,930,265 223,585,559 230,075,255
Oil and gas properties (note 11) 145,768,637 128,013,959 96,667,367
Future income tax benefit 2,740,725 3,070,182 2,896,122
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Total assets 552,971,143 591,842,970 586,106,921
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Liabilities and shareholders'
equity
Current liabilities:
Accounts payable and accrued
liabilities (note 12) 64,173,145 78,147,736 138,715,939
Commodity derivative contracts
(note 7) 265,400 - 1,690,325
Working capital facility
(note 15) 43,320,547 68,792,402 33,025,778
Current portion of secured loan
(note 18) 9,000,000 9,000,000 8,991,667
Current portion of indirect
participation interest - PNGDV
(note 19) 540,002 540,002 541,105
----------------------------------------------------------------------------
Total current liabilities 117,299,094 156,480,140 182,964,814
Secured loan (note 18) 52,421,319 52,365,333 190,591,507
8% subordinated debenture
liability (note 23) 65,767,840 65,040,067 -
Preference share liability
(note 22) - - 7,797,312
Deferred gain on contributions
to LNG project (note 13) 13,076,272 17,497,110 12,203,867
Indirect participation interest
(note 19) 72,471,966 72,476,668 96,086,369
Indirect participation interest
- PNGDV (note 19) 844,490 844,490 843,387
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Total liabilities 321,880,981 364,703,808 490,487,256
----------------------------------------------------------------------------
Non-controlling interest
note 20) 7,305 5,235 4,107
----------------------------------------------------------------------------
Shareholders' equity:
Share capital (note 21) 386,424,549 373,904,356 259,324,133
Authorised - unlimited
Issued and outstanding -
36,636,623
(Dec 31, 2008 - 35,923,692)
(Mar 31, 2008 - 31,026,356)
Preference shares (note 22) - - 6,842,688
(Authorised - 1,035,554, issued
and outstanding - nil)
8% subordinated debentures
(note 23) 10,837,394 10,837,394 -
Contributed surplus (note 24) 16,644,827 15,621,767 11,042,795
Warrants (note 25) 2,119,034 2,119,034 2,119,034
Accumulated Other Comprehensive
Income 15,460,503 27,698,306 7,234,123
Conversion options (note 19) 17,140,000 17,140,000 19,840,000
Accumulated deficit (217,543,450) (220,186,930) (210,787,215)
----------------------------------------------------------------------------
Total shareholders' equity 231,082,857 227,133,927 95,615,558
----------------------------------------------------------------------------
Total liabilities and
shareholders' equity 552,971,143 591,842,970 586,106,921
----------------------------------------------------------------------------
----------------------------------------------------------------------------



Consolidated Statement of Operations

Quarter ended
----------------------------------------------------------------------------
March 31, March 31,
2009 2008
$ $
----------------------------------------------------------------------------

Revenue
Sales and operating revenues 160,840,555 191,372,275
Interest 76,061 316,528
Other 745,711 725,294
----------------------------------------------------------------------------
161,662,327 192,414,097
----------------------------------------------------------------------------

Expenses
Cost of sales and operating expenses 136,410,715 176,983,684
Administrative and general expenses 7,162,792 5,312,749
Derivative (gain)/loss (1,276,710) 1,618,425
Legal and professional fees 1,240,686 2,107,231
Exploration costs, excluding exploration
impairment (note 11) 216,046 (237,268)
Exploration impairment (note 11) - 25,331
Short term borrowing costs 1,064,795 1,557,044
Long term borrowing costs 3,571,146 4,401,854
Depreciation and amortization 3,380,575 3,484,758
Gain on sale of oil and gas properties (note
11) - -
Foreign exchange loss/(gain) 6,389,914 (1,300,177)
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158,159,959 193,953,631
----------------------------------------------------------------------------

Income/(loss) before income taxes and
non-controlling interest 3,502,368 (1,539,534)

Income taxes
Current 688,116 (842,330)
Future (1,544,934) (15,683)
----------------------------------------------------------------------------
(856,818) (858,013)
----------------------------------------------------------------------------

----------------------------------------------------------------------------
Income/(loss) before non-controlling interest 2,645,550 (2,397,547)
----------------------------------------------------------------------------

Non-controlling interest (note 20) (2,070) 185

----------------------------------------------------------------------------
Net income/(loss) 2,643,480 (2,397,362)
----------------------------------------------------------------------------

Basic income/(loss) per share (note 26) 0.07 (0.08)
Diluted income/(loss) per share (note 26) 0.07 (0.08)
Weighted average number of common shares
outstanding
Basic 35,780,538 31,026,356
Basic and diluted 36,012,528 31,026,356
----------------------------------------------------------------------------



Consolidated Statement of Cash Flows

Quarter ended
----------------------------------------------------------------------------
March 31, March 31,
2009 2008
$ $
----------------------------------------------------------------------------
Cash flows provided by (used in):

Operating activities
Net profit/(loss) 2,643,480 (2,397,362)
Adjustments for non-cash and non-operating
transactions
Non-controlling interest 2,070 (185)
Depreciation and amortization 3,380,575 3,484,758
Future income tax asset 329,457 (28,810)
Gain on sale of plant and equipment - (16,250)
Gain on sale of exploration assets - -
Amortization of discount on debentures
liability 727,773 -
Amortization of deferred financing costs 55,986 84,108
Gain on unsettled hedge contracts 75,100 -
Increase/(decrease) due to timing difference
between derivatives recognised and settled 15,339,450 (269,975)
Stock compensation expense 1,424,453 705,247
Inventory revaluation 205,546 -
Non-cash interest on secured loan facility - 1,584,039
Non-cash interest settlement on preference
shares - -
Non-cash interest settlement on debentures - -
Oil and gas properties expensed 216,046 (211,937)
Loss/(gain) on proportionate consolidation of
LNG project 724,357 (236,666)
Unrealized foreign exchange gain (1,933,145) (1,300,177)
Change in operating working capital
Increase in trade receivables (1,815,112) (24,271,409)
Increase in unrealised hedge gains 10,277,125 -
Decrease in other assets and prepaid expenses 1,020,687 2,654,349
Decrease/(increase) in inventories 6,714,079 (47,326,665)
(Decrease)/Increase in accounts payable,
accrued liabilities and income tax payable (20,801,421) 77,652,080
----------------------------------------------------------------------------
Net cash from operating activities 18,586,506 10,105,145
----------------------------------------------------------------------------

Investing activities
Expenditure on oil and gas properties (23,620,864) (14,187,187)
Proceeds from IPI cash calls 1,972,250 4,340,000
Expenditure on plant and equipment 274,719 (1,004,041)
Proceeds received on sale of assets - 312,500
Proceeds received on sale of exploration assets - -
Decrease in restricted cash held as security on
borrowings 8,903,416 2,019,830
Change in non-cash working capital
Increase in accounts payable and accrued
liabilities 5,148,486 2,490,282
----------------------------------------------------------------------------
Net cash (used in)/from investing activities (7,321,993) (6,028,616)
----------------------------------------------------------------------------

Financing activities
Repayments of secured loan - -
(Repayments of)/proceeds from bridging
facility, net of transaction costs - -
Proceeds from PNG LNG cash call - 2,626,500
Proceeds from Clarion Finanz for Elk option
agreement 3,577,288 -
Proceeds from Petromin for Elk participation
agreement 3,435,000 -
Repayments of working capital facility (25,471,855) (33,475,594)
Proceeds from issue of
common shares/conversion of debt, net of
transaction costs 868,801 -
-----------------------------------------------
Proceeds from issue of debentures, net of
transaction costs - -
----------------------------------------------------------------------------
Net cash used in financing activities (17,590,766) (30,849,094)
----------------------------------------------------------------------------

Decrease in cash and cash equivalents (6,326,253) (26,772,565)
Cash and cash equivalents, beginning of period 48,970,572 43,861,762
----------------------------------------------------------------------------
Cash and cash equivalents, end of period
(note 5) 42,644,319 17,089,197
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Consolidated Statements of Shareholders' Equity

Quarter ended Year ended Quarter ended
----------------------------------------------------------------------------
March 31, December 31, March 31,
2009 2008 2008
$ $ $
----------------------------------------------------------------------------
Share capital

At beginning of period 373,904,356 259,324,133 259,324,133
Issue of capital stock
(note 21) 12,520,193 114,580,223 -
----------------------------------------------------------------------------
At end of period 386,424,549 373,904,356 259,324,133
----------------------------------------------------------------------------
Preference shares

At beginning of period - 6,842,688 6,842,688
Issue of preference shares
(note 22) - - -
Converted to common shares
(note 22) - (6,842,688) -
----------------------------------------------------------------------------
At end of period - - 6,842,688
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8% subordinated debentures

At beginning of period 10,837,394 - -
Issue of debentures (note 23) - 13,036,434 -
Conversion to common shares
during the year - (2,199,040) -
----------------------------------------------------------------------------
At end of period 10,837,394 10,837,394 -
----------------------------------------------------------------------------
Contributed surplus

At beginning of period 15,621,767 10,337,548 10,337,548
Fair value of options
exercised transferred to share
capital (note 24) (401,393) (456,867) -
Stock compensation expense
(note 24) 1,424,453 5,741,086 705,247
----------------------------------------------------------------------------
At end of period 16,644,827 15,621,767 11,042,795
----------------------------------------------------------------------------
Warrants

At beginning of period
(note 25) 2,119,034 2,119,034 2,119,034
Movement for period - - -
----------------------------------------------------------------------------
At end of period 2,119,034 2,119,034 2,119,034
----------------------------------------------------------------------------
Accumulated Other Comprehensive
Income
Deferred hedge (loss)/gain
At beginning of period 18,012,500 - -
Deferred hedge movement for
period, net of tax (note 7) (5,908,775) 18,012,500 -
----------------------------------------------------------------------------
Deferred hedge gain at end of
period 12,103,725 18,012,500 -
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Foreign currency translation
reserve
At beginning of period 9,685,806 6,025,019 6,025,019
Foreign currency translation
movement for period, net of tax (6,329,028) 3,660,787 1,209,104
----------------------------------------------------------------------------
Foreign currency translation
reserve at end of period 3,356,778 9,685,806 7,234,123
----------------------------------------------------------------------------
Accumulated other
comprehensive income at end of
period 15,460,503 27,698,306 7,234,123
----------------------------------------------------------------------------
Conversion options

At beginning of period 17,140,000 19,840,000 19,840,000
Movement for period (note 19) - (2,700,000) -
----------------------------------------------------------------------------
At end of period 17,140,000 17,140,000 19,840,000
----------------------------------------------------------------------------
Accumulated deficit

At beginning of period (220,186,930) (208,389,853) (208,389,853)
Net loss for period 2,643,480 (11,797,077) (2,397,362)
----------------------------------------------------------------------------
At end of period (217,543,450) (220,186,930) (210,787,215)
----------------------------------------------------------------------------
Shareholders' equity at end of
period 231,082,857 227,133,927 95,615,558
----------------------------------------------------------------------------
----------------------------------------------------------------------------


NON-GAAP EBITDA Reconciliation

Earnings before interest, taxes, depreciation and amortization, commonly referred to as 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 United States or Canadian generally accepted accounting principles 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 GAAP. Further, EBITDA is not a measure of cash flow under GAAP and should not be considered as such. For reconciliation of EBITDA to the net income (loss) under GAAP, refer to the following table.

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 2009 2008 2007
($ thou-
sands) Mar-31 Dec-31 Sep-30 Jun-30 Mar-31 Dec-31 Sep-30 Jun-30
----------------------------------------------------------------------------
Upstream (470) (2,483) 231 10,164 (1,135) (3,128) (5,015) (5,492)
Midstream -
Refining 14,747 (13,976) 17,516 16,329 5,724 9,589 (1,332) 3,775
Midstream -
Liquefac-
tion (2,360) (2,501) (1,570) (1,784) (1,636) (797) (4,104) (444)
Downstream 3,241 (7,244) 610 7,893 4,529 3,627 3,301 2,760
Corporate 3,052 226 764 (2,155) 1,796 2,145 6,248 3,329
Consoli-
dation
Entries (7,286) (2,866) (736) (3,092) (2,143) (4,540) (9,353) 1,630
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Earnings
before
interest,
taxes,
deprecia-
tion
and
amortiza-
tion 10,924 (28,844) 16,815 27,355 7,135 6,896 (10,255) 5,558
----------------------------------------------------------------------------
Subtract:
----------------------------------------------------------------------------
Upstream (1,552) (1,345) (1,137) (841) (704) (474) (177) (178)
Midstream -
Refining (1,786) (2,771) (2,113) (2,263) (2,761) (4,397) (8,155) (2,156)
Midstream -
Lique-
faction (158) (65) (63) (60) (53) (53) (53) -
Downstream (1,142) (2,232) (885) (715) (1,005) (1,145) (3,320) 66
Corporate (2,325) (2,320) (2,484) (2,871) (3,091) (3,005) (2,870) (2,808)
Consoli-
dation
Entries 2,922 2,866 2,636 1,823 2,425 3,629 9,353 218
----------------------------------------------------------------------------
Interest
expense (4,041) (5,867) (4,046) (4,927) (5,189) (5,445) (5,222) (4,858)
----------------------------------------------------------------------------
Upstream - - - - - - - -
Midstream -
Refining - - - - - (44) 69 12
Midstream -
Liquefac-
tion (13) (12) (25) (49) (24) (13) - -
Downstream (485) 4,297 82 (3,213) (753) (1,112) 261 (32)
Corporate (359) (163) (21) (122) (81) (11) 212 (15)
Consoli-
dation
Entries (2) 4 (3) (2) 0 (1) 2 0
----------------------------------------------------------------------------
Income taxes
and non-
controlling
interest (859) 4,126 33 (3,386) (858) (1,181) 544 (35)
----------------------------------------------------------------------------
Upstream (112) (175) (134) (135) (154) (134) 299 (338)
Midstream -
Refining (2,611) (2,742) (2,742) (2,723) (2,761) (2,158) (2,781) (2,748)
Midstream -
Liquefac-
tion (21) (19) (19) (16) (15) (15) - -
Downstream (651) (722) (693) (582) (573) (700) (497) (552)
Corporate (18) (19) (18) (16) (15) (12) (12) (12)
Consoli-
dation
Entries 32 32 32 32 32 34 33 33
----------------------------------------------------------------------------
Depreciation
and
amorti-
sation (3,381) (3,645) (3,574) (3,440) (3,486) (2,985) (2,958) (3,617)
----------------------------------------------------------------------------
Upstream (2,134) (4,003) (1,039) 9,188 (1,993) (3,736) (4,893) (6,009)
Midstream -
Refining 10,349 (19,490) 12,660 11,345 201 2,990 (12,199) (1,117)
Midstream -
Liquefac-
tion (2,553) (2,596) (1,677) (1,910) (1,727) (878) (4,157) (444)
Downstream 964 (5,900) (886) 3,383 2,197 670 (254) 2,242
Corporate 350 (2,276) (1,759) (5,164) (1,390) (882) 3,578 494
Consoli-
dation
Entries (4,333) 35 1,929 (1,240) 314 (877) 34 1,881
----------------------------------------------------------------------------
Net profit
(loss) per
segment 2,643 (34,230) 9,228 15,602 (2,398) (2,713) (17,891) (2,953)
----------------------------------------------------------------------------
----------------------------------------------------------------------------


COMPANY DESCRIPTION

InterOil Corporation is developing a vertically integrated energy business whose primary focus is Papua New Guinea and the surrounding region. InterOil's assets consist of petroleum licenses covering about 4.6 million acres, an oil refinery, and retail and commercial distribution facilities, all located in Papua New Guinea. In addition, InterOil is a shareholder in a joint venture established to construct an LNG plant on a site adjacent to InterOil's refinery in Port Moresby, Papua New Guinea.

InterOil's common shares trade on the NYSE in US dollars.

Cautionary Statements

This press release may include "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 statements concerning the development of a Liquefied natural Gas facility in Papua New Guinea. These statements are based on certain assumptions made by the Company based on its experience and perception of current conditions, expected future developments 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 with the Securities and Exchange Commission and SEDAR, including but not limited to those in the Company's Annual Report for the year ended December 31, 2008 on Form 40-F and its Annual Information Form for the year ended December 31, 2008.

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 and its Annual Information Form available on SEDAR at www.sedar.com, including in particular the risk factors discussed in the Company's filings.

Contact Information