InterOil Corporation
TSX : IOL
AMEX : IOC

InterOil Corporation

August 13, 2007 17:43 ET

InterOil Announces Second Quarter 2007 Financial Results

TORONTO, ONTARIO--(Marketwire - Aug. 13, 2007) - InterOil Corporation (TSX:IOL) (AMEX:IOC) (POMSoX:IOC) today announced second quarter 2007 net loss of $3.3 million (all financials expressed in United States Dollars), or $0.11 per share (diluted), which represents a $14.5million improvement compared with $17.8 million net loss or $0.60 per share (diluted) in the 2006 second quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) were $5.2 million in the second quarter, an improvement of $10.5 million compared with a negative $10.3 million in the same quarter last year. The 2007 results included $4.5 million associated with the expensing of seismic and a $6.6 million gain related to the LNG project.

"InterOil's second quarter performance reinforces the improvements the company has made over the past year in the midstream business segment," InterOil Chairman and CEO Phil Mulacek said. "The refinery operations continued to benefit from the optimization efforts completed last year, although, weakness in diesel and gasoline prices during this quarter had a modest negative impact."

In the second quarter, the refinery's gross margin was $4.5 million on sales volumes of 1.42 million barrels, which is up by $9.9 million compared to the negative margin posted in the same quarter of 2006. The company's wholesale and retail distribution business reported gross margin of $5.7, a $1.2 million increase from the second quarter of last year.

Within the upstream business, the appraisal activities at Elk continued with the drilling of Elk-2 and the acquisition of additional 2D seismic which confirms the delineation of the Elk structure and the Antelope where we plan to drill our next well. "We are extremely satisfied with the drilling results and data obtained at the Elk-2 well. The total drilled thickness of the Puri limestone reservoir is 1,929 feet (588 meters), the total drilled section of the Mendi limestone reservoir is 942 feet (287 meters). This well has confirmed 4,452 feet (1,358 meters) of hydrocarbon column from the highest known gas in Elk-1 to the lowest indicated hydrocarbons in Elk-2. We continue to be encouraged by the evidence of heavier gas and oil shows in the well as we drill deeper, confirming the possibility of an oil leg. Our forward program is to drill ahead to the bottom of the Mendi limestone, then log and test the well. Following these activities we will look to sidetrack the well to intersect the potential oil leg structurally higher in the porous Mendi limestone section." said Phil Mulacek.

In July, InterOil, Merrill Lynch Commodities, and Pacific LNG executed a shareholder agreement for the development of a liquefied natural gas (LNG) facility adjacent to the company's refinery in Papua New Guinea, establishing the framework to proceed with contractor selection and front-end engineering and design work later this year. "The execution of the shareholder agreement marks another key milestone on the path to realizing the LNG Project," said Phil Mulacek.

The current project design consists of a two-train (9 mtpa) liquefaction plant with processing capacity of nominal 1.6 bcf/d, condensate and gas liquid processing, handling and storage facilities, and a natural gas pipeline from supply sources. First production of LNG is still on track for 2012.

CONFERENCE CALL TOMORROW

InterOil will host a conference call on Tuesday, August 14, 2007 at 7:30 a.m. Central (8:30 a.m. Eastern) to discuss second quarter results and the company's outlook for the remainder of the year. The call conference can be heard through a live audio web cast on the company's website at www.interoil.com or accessed by dialing (612) 288-0329. A replay of the broadcast will be available on the website after the call.

FINANCIAL DISCLOSURE DOCUMENTS FILED

InterOil filed its unaudited financial statements and accompanying notes for the quarter ended June 30, 2007 and the related management's discussion and analysis with the relevant Canadian and United States securities regulatory authorities. Copies of the documents may be accessed electronically at www.sedar.com, www.sec.gov or on our website at www.interoil.com. Summary financial and operational data have been included with this release. You should read this summary together with our financial statements and Management's Discussion and Analysis.

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 licences covering about nine million acres, an oil refinery, and retail and commercial distribution assets, all located in Papa New Guinea. During 2006, InterOil announced a gas and condensate discovery, completed an optimization program at the refinery, and doubled its downstream business. In addition, InterOil initiated development activity related to a liquefied natural gas (LNG) project.

CAUTIONARY STATEMENTS

This news release contains projections and other forward-looking statements within the meaning of United States and Canadian securities laws. These projections and statements reflect the company's current views with respect to future events and financial performance. No assurances can be given, however, that these events will occur or that these projections will be achieved and actual results could differ materially from those projected as a result of certain factors. Some of the factors which could affect our future results and could cause results to differ materially from those expressed in our forward-looking statements include: the ability of our refinery to operate at full capacity and to operate profitability; the success of our exploration activities; political, legal and economic risks related to our operations in Papua New Guinea; our ability to market refinery output; our dependence on exclusive relationships with our suppliers and customers; our ability to obtain necessary licenses; our ability to renew our petroleum licenses with the Papua New Guinea government; adverse weather, explosions, fires, natural disasters and other operating hazards, some of which may not be insured; the impact of competition; the enforceability of legal rights; the volatility of prices for crude oil and the volatility of the difference between our purchase price of oil feedstock and the sales price of our refined products; the uncertainty of our ability to attract capital; uninsured operations; covenants in our financing and other agreements that may limit our ability to engage in business activities, raise additional financing or respond to changes in markets or competition; and the risk factors discussed in our filings with the Securities and Exchange Commission, including but not limited to those in our Annual Report for the year ended December 31, 2006 on Form 40-F.

Any forward-looking statement speaks only as of the date on which such statement is made and the company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.

InterOil currently has no reserves as defined in Canadian National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Any information contained herein regarding resources are references to undiscovered resources under NI 51-101, whether stated or not.

NON-GAAP MEASURES - EBITDA

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 InterOil to analyse operating performance. EBITDA does not have a standardized meaning prescribed by 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 Canadian generally accepted accounting principles. Further, EBITDA is not a measure of cash flow under Canadian generally accepted accounting principles and should not be considered as such. For reconciliation of EBITDA to the net income (loss) under GAAP, refer to our second quarter 2007 MD&A.



INTEROIL CORPORATION

Supplemental Financial Data

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Quarter ended Six months ended
June 30, June 30,
Key Operating Metrics 2007 2006 2007 2006
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Midstream - Refinery and Marketing
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Throughput (barrels thousands) 1,557 1,143 3,015 2,403
Operating days 79 50 158 113
Distillates as percentage of
production 64% 58% 65% 61%
Sales volumes (barrels thousands) 1,422 1,400 2,779 3,117
Gross margin ($ thousands) 4,495 (5,415) 12,700 (7,956)
Cost of production ($ per barrel) $ 2.80 $ 2.90 $ 2.52 $ 2.97
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Downstream
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Sales volumes (liters thousands) 131,414 57,301 254,084 101,301
Gross margin ($ thousands) 5,700 4,516 11,817 5,490
Cost of distribution ($ per liter) $ 0.06 $ 0.06 $ 0.07 $ 0.06
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Consolidated - Operating results Quarter ended Six months ended
($ thousands, unless otherwise June 30, June 30,
indicated) 2007 2006 2007 2006
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Sales and operating revenues 139,321 122,778 265,239 231,406
Interest revenue 545 721 1,233 1,328
Other non-allocated revenue 673 910 964 1,567
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Total revenue 140,539 124,409 267,436 234,301
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Cost of sales and operating expenses (127,277) (123,676) (239,506) (233,871)
Office and administration and other
expenses (10,426) (9,563) (18,192) (15,174)
Foreign exchange gain/(loss) 692 1,149 228 92
Gain on LNG shareholder agreement 6,553 - 6,553 -
Exploration costs (4,518) (1,660) (7,885) (1,663)
Exploration impairment (6) (23) (20) (265)
Accretion expense (343) (893) (684) (2,782)
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Earnings before interest, taxes,
depreciation and amortization 5,214 (10,257) 7,930 (19,362)
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Depreciation and amortization (3,619) (2,862) (7,079) (5,699)
Interest expense (4,857) (3,610) (9,339) (6,277)
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Loss from ordinary activities before
income taxes (3,262) (16,729) (8,488) (31,338)
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Income tax expense (47) (1,171) (545) (1,046)
Non-controlling interest 12 139 (5) 260
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Total net loss (3,297) (17,761) (9,038) (32,124)
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Net loss per share (dollars) (0.11) (0.60) (0.30) (1.09)
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Net loss per diluted share (dollars) (0.11) (0.60) (0.30) (1.09)
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Cash flows from operations 7,812 (25,231) 2,832 (17,064)
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Operating results - unaudited Quarter ended Six months ended
($ thousands, unless otherwise June 30, June 30,
indicated) 2007 2006 2007 2006
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Upstream 397 2,684 792 3,644
Midstream - refinery and marketing 114,584 106,825 217,639 209,930
Midstream - liquefaction 5 - 5 -
Downstream 93,186 37,995 170,998 65,803
Corporate and consolidated (67,633) (23,095) (122,000) (45,076)
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Sales and operating revenues 140,539 124,409 267,436 234,301
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Upstream (5,836) (2,262) (10,231) (4,488)
Midstream - refinery and marketing 3,775 (8,188) 10,111 (13,418)
Midstream - liquefaction (444) - (771) -
Downstream 2,760 3,559 5,787 3,233
Corporate and consolidated 4,959 (3,366) 3,028 (4,689)
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Earnings before interest, taxes,
depreciation and amortization 5,214 (10,257) 7,930 (19,362)
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Upstream (6,174) (2,436) (10,879) (4,862)
Midstream - refinery and marketing (1,117) (13,408) 395 (23,715)
Midstream - liquefaction (444) - (766) -
Downstream 2,242 2,426 4,293 2,143
Corporate and consolidated 2,196 (4,341) (2,079) (5,945)
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Net income (loss) per segment (3,297) (17,761) (9,038) (32,124)
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