InterOil Corporation

InterOil Corporation

February 27, 2005 22:31 ET

InterOil Announces US$125 Million for Exploration Program in Papua New Guinea




FEBRUARY 27, 2005 - 22:31 ET

InterOil Announces US$125 Million for Exploration
Program in Papua New Guinea

TORONTO, ONTARIO--(CCNMatthews - Feb. 27, 2005) - InterOil Corporation
(TSX:IOL) (AMEX:IOC) (ASX/POMSoX:IOC), a Canadian company with
operations in Papua New Guinea, today announced that it has entered into
investment agreements in respect of its ongoing exploration program in
Papua New Guinea. Under these agreements, certain institutional and
accredited investors have agreed to invest US$125 million for an
aggregate 25% indirect participation interest in the exploration
program. This program comprises eight wells, of which six will be
drilled at locations selected by InterOil and two will be drilled at
locations approved by the investors, within the three petroleum
prospecting licences in Papua New Guinea held solely by InterOil. Forty
prospective structures have been identified by InterOil within these
licences and the well locations will be chosen from 22 leads over
independent structures.

If the exploration program discovers oil or gas in commercial
quantities, the investors have the right to participate pro-rata in the
development of the fields discovered.

Each investor may convert its indirect working interest percentage into
InterOil common shares at any time after June 15, 2006 and before the
later of December 15, 2006 and 90 days after the completion of the
eighth well, at a conversion price of US$37.50 per common share. The
Toronto Stock Exchange was notified on February 4, 2005 of the proposed
transaction. InterOil's common shares closed at C$42.49 (US$34.03) on
that day. In the event that investors choose to convert all of the
indirect participation interest into common shares, this would result in
InterOil issuing 3,333,333 common shares during the second half of 2006.
Of the US$125 million proposed investment, US$33 million, backed by
convertible securities for 877,420 shares, is subject to receiving a
waiver from the Australian Stock Exchange (ASX).

The Minister for Petroleum and Energy of Papua New Guinea, The
Honourable Sir Moi Avei, said, "Papua New Guinea, with all of our vast
resources, welcomes the investment by InterOil in the largest
exploration program in Papua New Guinea history. This investment
enhances the downstream and petrochemical industry potential and
confirms that our fiscal policy reforms have made Papua New Guinea
globally competitive."

InterOil is developing a vertically integrated energy company whose
primary focus is Papua New Guinea and the surrounding region. Its assets
comprise an oil refinery, upstream petroleum exploration licenses, and
retail and commercial distribution assets. The majority of the refined
products from InterOil's refinery are secured by off-take contracts with
Shell and InterOil's wholly-owned subsidiary, InterOil Products Limited.
BP Singapore is InterOil's agent for crude oil supplied to the refinery.
InterOil is also undertaking an extensive petroleum exploration program
within its eight million acre license area located in Papua New Guinea.

InterOil's common shares trade on the Toronto Stock Exchange under the
symbol IOL in Canadian dollars; on the American Stock Exchange under the
symbol IOC in US dollars; and on the Australian Stock Exchange in CHESS
Depositary Interests in Australian dollars under the symbol IOC which
trade on a 10:1 basis to common shares. For more information please see
the InterOil website at:

Cautionary Statements

This press release contains forward-looking statements. All statements,
other than statements of historical facts, included in this release,
including without limitation, statements regarding our drilling plans,
business strategy, plans and objectives of management for future
operations and those statements preceded by, followed by or that
otherwise include the words "believe", "expects", "anticipates",
"intends", "estimates" or similar expressions or variations on such
expressions are forward-looking statements. The Company can give no
assurances that such forward-looking statements will prove to be
correct. Risks and uncertainties include, but are not limited to, the
existence of underground deposits of commercial quantities of oil and
gas; fluctuations in prices for oil and gas production; curtailments or
delays in development due to mechanical, operating, marketing or other
problems; capital expenditures that are either significantly higher or
lower than anticipated because the actual cost of identified projects
varied from original estimates; and from the number of exploration and
development opportunities being greater or fewer than currently

This press release has been issued pursuant to Rule 135(c) under the
Securities Act of 1933 and shall not constitute an offer to sell or a
solicitation of an offer to buy, nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would
be unlawful prior to the registration or publication under the
securities laws of any such state. These securities have not been
registered under the Securities Act and may not be offered or sold in
the United States absent registration or an applicable exemption from
the registration requirements.

The Company currently has no reserves as defined under Canadian National
Instrument 51-101 reserve definitions. See the Company's filings with
the Canadian securities regulators for additional risks and information
about the Company's business.


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