SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT
TO
RULE 13a-16 OR 15d-16 OF THE SECURITIES
EXCHANGE ACT OF 1934
For the month of November 2015
Commission File Number: 001-32179
INTEROIL CORPORATION
(Exact name of registrant as specified in
its charter)
YUKON, CANADA
(Province or other jurisdiction of incorporation
or organization)
163 PENANG ROAD
#06-02 WINSLAND HOUSE II
SINGAPORE 238463
(Address of principal
executive offices)
Registrant’s telephone number, including
area code: +65 6507-0222
Indicate by check mark whether the registrant
files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ¨
Form 40-F þ
Indicate by check mark if the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):¨
Indicate by check mark if the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Indicate by check mark whether by furnishing
the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to
Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨ No þ
If “Yes” is marked, indicate
below the file number assigned to the registrant in connection with Rule 12g3-2(b):
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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INTEROIL CORPORATION |
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By: |
/s/ Michael Hession |
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Michael Hession |
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Chief Executive Officer |
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Date: |
November 13, 2015 |
INTEROIL CORPORATION
FORM 6-K FOR THE MONTH OF NOVEMBER 2015
Exhibit Index
| 1. | Management’s Discussion and Analysis for the quarter and nine months ended September 30,
2015. |
| 2. | Unaudited Condensed Consolidated Interim Financial Statements for the quarter and nine months ended
September 30, 2015 and 2014. |
Exhibit 1
InterOil
Corporation
Management
Discussion and Analysis
For the quarter and nine months
ended September 30, 2015
November 13, 2015 |
|
TABLE OF CONTENTS
FORWARD-LOOKING
STATEMENTS |
2 |
ABBREVIATIONS AND EQUIVALENCIES |
3 |
CONVERSION |
3 |
OIL AND GAS DISCLOSURES |
4 |
GLOSSARY OF TERMS |
4 |
INTRODUCTION |
7 |
BUSINESS STRATEGY |
7 |
OPERATIONAL HIGHLIGHTS |
7 |
SELECTED FINANCIAL INFORMATION AND HIGHLIGHTS |
10 |
DISCOUNTINUED OPERATIONS |
17 |
LIQUIDITY AND CAPITAL RESOURCES |
18 |
RISK FACTORS |
21 |
CRITICAL ACCOUNTING ESTIMATES |
21 |
NEW ACCOUNTING STANDARDS |
22 |
NON-GAAP MEASURES AND RECONCILIATION |
22 |
PUBLIC SECURITIES FILINGS |
23 |
DISCLOSURE CONTROLS AND PROCEDURES AND
INTERNAL CONTROLS OVER FINANCIAL REPORTING |
23 |
This MD&A (as defined herein) should
be read in conjunction with our Condensed Consolidated Interim Financial Statements (as defined herein) and accompanying notes,
the Consolidated Financial Statements (as defined herein) and 2014 AIF (as defined herein). This MD&A was prepared by management
and provides a review of our performance for the quarter and nine months ended September 30, 2015, and of our financial condition
and future prospects.
Our financial statements and the financial
information contained in this MD&A have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board applicable to the preparation of financial statements and are presented
in United States dollars (“USD” or “$”) unless otherwise specified.
In this MD&A, references to “we,”
“us,” “our,” “the Company,” and “InterOil” refer to InterOil Corporation or InterOil
Corporation and its subsidiaries as the context requires. Information is presented in this MD&A as at September 30, 2015 and
for the quarter and nine months ended September 30, 2015 unless otherwise specified. A listing of specific defined terms can be
found in the “Glossary of Terms” section of this MD&A.
Management Discussion and Analysis INTEROIL CORPORATION 1 |
FORWARD-LOOKING
STATEMENTS
This MD&A contains “forward-looking
statements” as defined in U.S. federal and Canadian securities laws. Such statements are generally identifiable by the terminology
used such as “may,” “plans,” “believes,” “expects,” “anticipates,”
“intends,” “estimates,” “forecasts,” “budgets,” “targets” or other
similar wording suggesting future outcomes or statements regarding an outlook. We have based these forward-looking statements
on our current expectations and projections about future events. All statements, other than statements of historical fact, included
in or incorporated by reference in this MD&A are forward-looking statements.
Forward-looking statements include, without
limitation, statements regarding our business strategies and plans; plans for and anticipated timing of our exploration and appraisal
(including drilling plans) and other business activities and results therefrom; anticipated timing of certain well testing and
resource certifications under the Total SSA (as defined herein); characteristics of our properties; construction and development
of a proposed liquefaction plant and central processing facility in Papua New Guinea; the timing and cost of such construction
and development; commercialization and monetization of any resources; whether sufficient resources will be established; the likelihood
of successful exploration for gas and gas condensate or other hydrocarbons; cash flows from operations; sources of capital and
its sufficiency; operating costs; contingent liabilities; environmental matters; and plans and objectives for future operations;
and timing, maturity and amount of future capital and other expenditures.
Many risks and uncertainties may affect
matters addressed in these forward-looking statements, including but not limited to:
| · | the
uncertainty associated with the availability, terms and deployment of capital;
|
| · | our
ability to obtain and maintain necessary permits, concessions, licenses and approvals
from relevant State (as defined herein) authorities to develop our gas and condensate
resources within reasonable periods and on reasonable terms or at all; |
| · | inherent
uncertainty of oil and gas exploration; |
| · | the
difficulties with recruitment and retention of qualified personnel; |
| · | the
political, legal and economic risks in Papua New Guinea; |
| · | landowner
claims and disruption; |
| · | compliance
with and changes in Papua New Guinean laws and regulations, including environmental laws; |
| · | the
exploration and production businesses are competitive; |
| · | the
inherent limitations in all control systems, and misstatements due to errors that may
occur and not be detected; |
| · | exposure
to certain uninsured risks stemming from our operations; |
| · | weather
conditions and unforeseen operating hazards; |
| · | compliance
with environmental and other government regulations could be costly and could negatively
impact our business; |
| · | general
economic conditions, including further economic downturn, availability of credit and
the decline in commodity prices; |
| · | risk
of legal action against us; and |
| · | law
enforcement difficulties. |
Forward-looking statements and information
are based on our current beliefs as well as assumptions made by, and information currently available to us concerning anticipated
financial conditions and performance, business prospects, strategies, regulatory developments, the ability to attract joint venture
partners, future hydrocarbon commodity prices, the ability to secure adequate capital funding, the ability to obtain equipment
and qualified personnel in a timely manner to develop resources, the ability to obtain financing on acceptable terms, and the
ability to develop reserves and production through development and exploration activities.
Management Discussion and Analysis INTEROIL CORPORATION 2 |
Although we believe that the assumptions
underlying our forward-looking statements are reasonable, any of the assumptions could be inaccurate, and, therefore, we cannot
assure you that the forward-looking statements will eventuate.
In light of the significant uncertainties
inherent in our forward-looking statements, the inclusion of such information should not be regarded as a representation by us
or any other person that our objectives and plans will be achieved.
Some of these assumptions and other risks
and uncertainties that could cause actual results to differ materially from such forward-looking statements are more fully described
under the heading “Risk Factors” in our 2014 AIF.
Further, forward-looking statements contained
in this MD&A are made as of the date hereof and, except as required by applicable law, we will not update publicly or revise
any of these forward-looking statements. The forward-looking statements contained in this MD&A are expressly qualified by
this cautionary statement.
ABBREVIATIONS AND EQUIVALENCIES
Abbreviations
Crude Oil and Natural Gas Liquids |
|
Natural Gas |
bbl |
one barrel equalling 34.972
Imperial gallons or 42 U.S. gallons |
|
btu |
British Thermal Units |
bblspd |
barrels per day |
|
mcf |
thousand standard cubic feet |
boe(1) |
barrels of oil equivalent |
|
mcfpd |
thousand standard cubic feet per day |
boepd |
barrels of oil equivalent per day |
|
mmbtu |
million British Thermal Units |
bpsd |
barrels per stream day |
|
mmbtupd |
million British Thermal Units per day |
mboe |
thousand barrels of oil equivalent |
|
mmcf |
million standard cubic feet |
mbbl |
thousand barrels |
|
mmcfpd |
million standard cubic feet per day |
MMbbls |
million barrels |
|
mtpa |
million tonnes per annum |
MMboe |
million barrels of oil equivalent |
|
scfpd |
standard cubic feet per day |
WTI |
West Texas Intermediate crude oil delivered
at Cushing, Oklahoma |
|
tcfe(2) |
trillion standard cubic feet equivalent |
bscf |
billion
standard cubic feet |
|
psi |
pounds
per square inch |
Note:
| (1) | All calculations converting natural
gas to crude oil equivalent have been made using a ratio of six mcf of natural gas to
one barrel of crude equivalent. Boe may be misleading, particularly if used in isolation.
A boe conversion ratio of six mcf of natural gas to one barrel of crude oil equivalent
is based on an energy equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead. |
| (2) | Tcfes may be misleading, particularly
if used in isolation. A tcfe conversion ratio of one barrel of oil to six thousand cubic
feet of gas is based on an energy equivalency conversion method primarily applicable
at the burner tip and does not represent a value equivalency at the wellhead. |
CONVERSION
This table outlines certain standard conversions
between Standard Imperial Units and the International System of Units (metric units).
Management Discussion and Analysis INTEROIL CORPORATION 3 |
To Convert From |
|
To |
|
Multiply By |
mcf |
|
cubic meters |
|
28.317 |
cubic meters |
|
cubic feet |
|
35.315 |
bbls |
|
cubic meters |
|
0.159 |
cubic meters |
|
bbls |
|
6.289 |
feet |
|
meters |
|
0.305 |
meters |
|
feet |
|
3.281 |
miles |
|
kilometers |
|
1.609 |
kilometers |
|
miles |
|
0.621 |
acres |
|
hectares |
|
0.405 |
hectares |
|
acres |
|
2.471 |
OIL AND GAS DISCLOSURES
We are required to comply with the Canadian
Securities Administrators’ NI 51-101, which prescribes disclosure of oil and gas reserves and resources. GLJ Petroleum Consultants
Ltd., an independent qualified reserve evaluator based in Calgary, Canada, has evaluated our resources data as at December 31,
2014 in accordance with NI 51-101. This evaluation is summarized in our 2014 AIF available at www.sedar.com. We do not
have any production or reserves, including proved reserves, as defined under NI 51-101 or as per the guidelines set by the SEC,
as at September 30, 2015.
Well flow test results are not necessarily
indicative of long-term performance or of ultimate recovery.
The SEC permits oil and gas companies,
in their filings with the SEC, to disclose only proved, possible and probable reserves that a company has demonstrated by actual
production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions.
We include in this MD&A information that the SEC’s guidelines generally prohibit U.S registrants from including in filings
with the SEC.
GLOSSARY
OF TERMS
“2014 AIF” means InterOil’s
Annual Information Form for the year ended December 31, 2014.
“2014 MD&A” means
Management’s Discussion and Analysis for the year ended December 31, 2014.
“ANZ” means Australia
and New Zealand Banking Group (PNG) Limited.
“BNP Paribas” means
BNP Paribas Capital (Singapore) Limited.
“BSP” means Bank of
South Pacific Limited.
“CBA” means Commonwealth
Bank of Australia.
“condensate” means
a component of natural gas which is a liquid at surface conditions.
“Condensed Consolidated Interim
Financial Statements” means the unaudited condensed consolidated interim financial statements for the quarter and nine
months ended September 30, 2015.
“Consolidated Financial Statements”
means the audited consolidated financial statements for the years ended December 31, 2014, 2013 and 2012.
Management Discussion and Analysis INTEROIL CORPORATION 4 |
“Convertible Notes” means
the 2.75% convertible senior notes of InterOil due November 15, 2015.
“Credit Suisse” means
Credit Suisse A.G.
"crude oil" means a mixture
consisting mainly of pentanes and heavier hydrocarbons that exists in the liquid phase in reservoirs and remains liquid
at atmospheric pressure and temperature. Crude oil may contain small amounts of sulfur and other non-hydrocarbons but does not
include liquids obtained from the processing of natural gas.
"DPE" means the Department
of Petroleum and Energy, a PNG government department responsible for regulating oil and gas activities in PNG.
“EBITDA” represents
net income/(loss) plus total interest expense (excluding amortization of debt issuance costs), income tax expense, depreciation
and amortization expense. EBITDA is a non-GAAP measure used to analyze operating performance. See “Non-GAAP Measures
and Reconciliation”.
“GAAP” means Canadian
generally accepted accounting principles.
“gas” means a mixture
of lighter hydrocarbons that exist either in the gaseous phase or in solution in crude oil in reservoirs but are gaseous at atmospheric
conditions. Gas may contain sulfur or other non-hydrocarbon compounds.
“IPI holders” means
investors holding indirect participating working interests in certain exploration wells required to be drilled pursuant to the
indirect participating interest agreement between us and certain investors dated February 25, 2005, as amended.
“LIBOR” means daily
reference rate based on the interest rates at which banks borrow unsecured funds from banks in the London, United Kingdom, wholesale
money market.
“LNG” means liquefied
natural gas. Natural gas may be converted to a liquid state by pressure and severe cooling for transportation purposes, and then
returned to a gaseous state to be used as fuel. LNG, which is predominantly artificially liquefied methane, is not to be confused
with NGLs, natural gas liquids, which are heavier fractions that occur naturally as liquids.
“Macquarie” means Macquarie
Group Limited.
“MD&A” means this
Management’s Discussion and Analysis for the quarter and nine months ended September 30, 2015.
“MUFG” means Bank of
Tokyo-Mitsubishi UFJ, Ltd.
“natural gas” means
a naturally occurring mixture of hydrocarbon and non-hydrocarbon gases found in porous geological formations beneath the earth's
surface, often in association with petroleum. The principal constituent is methane.
“NI 51-101” means National
Instrument 51-101 - Standards of Disclosure for Oil and Gas Activities adopted by the Canadian Securities Administrators.
“Oil Search” means
Oil Search Limited, a company incorporated in PNG, and its subsidiaries.
“Papua LNG Project”
means the Elk-Antelope liquefied natural gas joint venture project operated by Total on behalf of the PRL 15 joint venture, which
includes Total, Oil Search and us.
“PGK” means the kina,
currency of PNG.
Management Discussion and Analysis INTEROIL CORPORATION 5 |
“PNGDV” means PNG
Drilling Ventures Limited, an entity with which we entered into an amended and restated indirect participation agreement
on May 1, 2006.
“PPL” means the Petroleum
Prospecting License, an exploration tenement granted under the Oil & Gas Act 1997 (PNG).
“PRE” means Pacific
Exploration and Production Corporation (formerly Pacific Rubiales Energy Corporation), a company incorporated under the laws of
British Columbia, Canada.
“PRL” means the Petroleum
Retention License, the tenement granted under the Oil & Gas Act 1997 (PNG) to allow the license holder to evaluate the commercial
and technical options for the potential development of an oil and/or gas discovery.
“Puma” means Puma Energy
Pacific Holdings Pte Ltd.
“Puma Transaction”
means the transaction by which Puma acquired all of the shares of certain of our subsidiaries that held our refinery and petroleum
products distribution businesses for approximately $524.6 million. The transaction was completed on June 30, 2014.
“SEC” means the United
States Securities and Exchange Commission.
“SocGen” means Société Generale
Hong Kong branch.
“State” or “PNG”
means the independent State of Papua New Guinea.
“Total” means Total
S.A., a French multinational integrated oil and gas company and its subsidiaries.
“Total SSA” means the
share purchase agreement under which Total acquired, through the purchase of all of the shares of SPI (200) Limited, a wholly
owned subsidiary, a gross 40.1275% interest in PRL 15.
“UBS” means UBS A.G.
“Westpac” means Westpac
Bank PNG Limited.
Management Discussion and Analysis INTEROIL CORPORATION 6 |
INTRODUCTION
We are an independent upstream oil and
gas business with a sole focus on PNG. Our assets include licenses covering the Elk, Antelope and Triceratops fields and Raptor
and Bobcat discoveries in the Gulf Province of PNG and exploration licenses covering about 16,000 square kilometers (about 4 million
acres) in PNG. We have our main offices in Singapore and Port Moresby. We are listed on the New York Stock Exchange and the Port
Moresby Stock Exchange. At September 30, 2015, we had 345 full-time employees.
BUSINESS
STRATEGY
Our strategy is to unlock significant
value to shareholders by finding oil and gas safely and competitively; enable its development through the right partnerships,
funding and project development capability; and to repeat this process. Running an effective and efficient business is the core
component of this strategy. This business model is founded on exploration and drilling discipline and success, strong commercial
and project development acumen and being a “partner of choice”. The focus areas for our strategy are to:
| - | Continue to develop as a prudent
and responsible business operator; |
| - | Enable our discovered resources
with strategic joint venture partners; |
| - | Maximize the value of our exploration
assets; and |
| - | Position for long-term success. |
Further details of our business strategy
can be found under the heading “Business Strategy” in our 2014 AIF available at www.sedar.com.
OPERATIONAL
HIGHLIGHTS
Summary of operational highlights
A summary of the key operational matters
and events for the quarter is as follows:
| - | On January 17, 2015, we began
the acquisition of high resolution airborne gravity gradiometry over all of our PPLs
and PRLs. As at September 30, 2015, we had completed 80% of the planned survey. |
| - | A seismic survey over Triceratops
in PRL 39 began in April 2015 and was completed in July 2015. |
| - | The Murua Phase 2 seismic program
in PPL 476 began in June 2015 and was completed in September 2015. |
| - | On June 10, 2015, we resumed
drilling at Wahoo with the Wahoo-1 side-track exploration well to follow-up Wahoo-1,
which was suspended in July 2014 due to higher-than-expected pressures. |
| - | On August 12, 2015, we advised
the market that the Wahoo-1 sidetrack operations had not intersected a carbonate reservoir
and the well was plugged and abandoned. As a result, we expensed $78.2 million of costs
relating to the Wahoo exploration program. |
| - | The Raptor-1 exploration well
is about 12 kilometers west of the Elk and Antelope gas fields. On November 14, 2014,
we notified the DPE of a discovery at Raptor-1. On October 19, 2015, we announced
that our appraisal drilling of the Raptor discovery will be deferred, until the Elk-Antelope
appraisal program is complete. |
Management Discussion and Analysis INTEROIL CORPORATION 7 |
| - | In August 2015, we received notification
from PRE of their intention to withdraw from further participating in PPL 475. In accordance
with the Farm-In Agreement dated July 27, 2012 between us and PRE, we are required to
refund to PRE $3.0 million in monthly installments commencing in the month subsequent
to our receipt of any net cash proceeds from commercial sale of product from PRL 15,
although the $3.0 million must be repaid in full within 6 years of receiving the notification.
Subsequent to PRE’s withdrawal, our interest in the Raptor discovery is 79.1114%,
and in PPL 475 (excluding the Raptor discovery) is 100% (94.25% assuming PNGDV will elect
to exercise their option to participate at their 5.75% interest election). |
| · | PRL
15 – Antelope-4, Antelope-4 Side Track and Antelope-6 |
| - | The Antelope-4 appraisal well
was spudded on September 16, 2014. On April 27, 2015, the well was suspended because
of drilling difficulties and the WDL rig was replaced by Rig 103. |
| - | Antelope-4 well operations resumed
on August 13, 2015. On August 27, 2015, PRL 15 joint venture started drilling a side-track
well at the Antelope-4 site. The side-track was initiated at a measured depth of 862
meters (2,828 feet). On September 18, 2015, the Antelope-4 side track intersected the
reservoir 36 meters (118 feet) higher than the original Antelope-4 penetration. On November
12, 2015, the well had drilled to a planned total depth of 2,262 meters (7,421 feet true
vertical depth sub-sea) and the drill bit was pulling out of the hole prior to running
wireline logs. |
| - | Antelope-6 site preparation is
well advanced and drilling is scheduled to commence in the fourth quarter of 2015. On
October 19, 2015, we announced that one of the drilling rigs currently contracted to
us will be used to drill the Antelope-6 appraisal well in PRL 15. |
| - | On February 27, 2015, the PRL
15 joint venturers unanimously appointed Total as operator of the PRL 15 joint venture
which includes the Papua LNG Project. The formal change of operatorship from InterOil
to Total occurred on August 1, 2015. InterOil will provide certain technical services
for Total until the end of 2015. |
| - | On July 2, 2015, the PRL 15 joint
venture unanimously endorsed locations for key infrastructure sites for development of
the Papua LNG Project. The central processing facility is expected to be near the Purari
River in the Gulf Province, about 360 kilometers north-west of Port Moresby, and will
be connected to the LNG facility by onshore and offshore gas and condensate pipelines.
Caution Bay near Port Moresby has been selected as the site for the liquefied natural
gas plant. |
| - | The Triceratops-3 appraisal well
was spudded on June 15, 2015. The well is about 5.6 kilometers west-north-west
of Triceratops-1 and 35 kilometers north-west of the Elk and Antelope gas fields. |
| - | On September 18, 2015, we announced
Triceratops-3 flowed gas at 17.1 mmcfpd and condensate at an average of 200.3 bblspd.
Stabilized flow rates were obtained over several five-hour intervals and were measured
through a 72/64” choke with the flow constrained by tubing. The well reached a
total depth of 2,090 meters (6,856 feet). |
| - | Subsequent to the quarter end,
we received notification from PRE of their intention to withdraw from further participation
in PRL 39. In accordance with the Farm-In Agreement dated July 27, 2012 between us and
PRE, we are required to refund to PRE $93.0 million in monthly installments commencing
in the month subsequent to our receipt of any net cash proceeds from commercial sale
of product from PRL 15, although the $93.0 million must be repaid in full within 6 years
of receiving the notification. We also have a receivable of $29.7 million which is refundable
from Pacific LNG Operations Ltd and other indirect participating interest holders if
PRE exercised its option to terminate the Farm-In Agreement, under the same terms as
the amount refundable to PRE. Subsequent to PRE’s withdrawal, our interest in the
Triceratops discovery is 78.1114%, and in PRL 39 (excluding the Triceratops discovery)
is 100% (94.25% assuming PNGDV will elect to exercise their option to participate at
their 5.75% interest election). |
Management Discussion and Analysis INTEROIL CORPORATION 8 |
| - | On August 1, 2015, Ms. Sheree
Ford replaced Mr. Geoff Applegate as the General Counsel and Corporate Secretary. Ms.
Ford is an experienced corporate lawyer who has worked with BHP Billiton, Oil Search,
Roc Oil and Pexco Energy. |
| - | On July 8, 2015, we filed a final
short-form base shelf prospectus in the Province of Alberta and with the SEC pursuant
to a registration statement on Form F-10 to enable us to add financial flexibility and
to issue up to an aggregate of $1.0 billion of securities in one or more offerings over
25 months. These issuances may consist of one or more of common shares, preferred shares,
warrants, debt securities or a combination thereof. |
| - | On September 1, 2015, Mr. Thomas
Nador was appointed as Executive Vice President, PNG Business Operations. Mr. Nador’s
appointment follows the election of Mr. Isikeli Taureka, the Executive Vice President,
PNG, to the company’s board of directors. Mr. Taureka becomes Executive Director,
PNG. |
Management Discussion and Analysis INTEROIL CORPORATION 9 |
SELECTED
FINANCIAL INFORMATION AND HIGHLIGHTS
Consolidated Results for the
Quarters and Nine Months Ended September 30, 2015 and 2014
Consolidated – Operating results | |
Quarter ended September 30, | | |
Nine months ended September 30, | |
($ thousands, except per share data) | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
| | |
| | |
| | |
| |
Interest revenue | |
| 11,244 | | |
| 8,799 | | |
| 8,380 | | |
| 17,205 | |
Other | |
| 578 | | |
| 1,950 | | |
| 3,013 | | |
| 9,136 | |
Total revenue | |
| 11,822 | | |
| 10,749 | | |
| 11,393 | | |
| 26,341 | |
Adminstrative and general expenses | |
| (6,103 | ) | |
| (7,661 | ) | |
| (19,762 | ) | |
| (28,116 | ) |
Legal and professional fees | |
| 414 | | |
| (4,841 | ) | |
| (2,345 | ) | |
| (10,583 | ) |
Exploration costs, excluding exploration impairment | |
| (27,172 | ) | |
| (6,962 | ) | |
| (54,144 | ) | |
| (21,509 | ) |
Exploration impairment | |
| (78,236 | ) | |
| - | | |
| (78,236 | ) | |
| - | |
Finance costs, excluding interest expense | |
| (1,917 | ) | |
| (2,883 | ) | |
| (10,514 | ) | |
| (16,626 | ) |
Gain on conveyance of exploration and evaluation assets | |
| - | | |
| - | | |
| - | | |
| 340,540 | |
Foreign exchange (losses)/gains | |
| (646 | ) | |
| (528 | ) | |
| 872 | | |
| 4,542 | |
Share of net losses of joint venture partnership accounted for using the equity method | |
| - | | |
| (7 | ) | |
| - | | |
| (26 | ) |
EBITDA (1) | |
| (101,838 | ) | |
| (12,133 | ) | |
| (152,736 | ) | |
| 294,563 | |
Depreciation and amortization | |
| (118 | ) | |
| (923 | ) | |
| (373 | ) | |
| (3,272 | ) |
Interest expense | |
| (1,513 | ) | |
| (1,367 | ) | |
| (4,483 | ) | |
| (9,946 | ) |
(Loss)/profit for the period from continuing operations before income taxes | |
| (103,469 | ) | |
| (14,423 | ) | |
| (157,592 | ) | |
| 281,345 | |
Income tax expense | |
| (256 | ) | |
| (199 | ) | |
| (534 | ) | |
| (907 | ) |
(Loss)/profit for the period from continuing operations | |
| (103,725 | ) | |
| (14,622 | ) | |
| (158,126 | ) | |
| 280,438 | |
(Loss)/profit for the period from discontinued operations, net of tax | |
| - | | |
| (2,308 | ) | |
| - | | |
| 73,534 | |
(Loss)/profit for the period | |
| (103,725 | ) | |
| (16,930 | ) | |
| (158,126 | ) | |
| 353,972 | |
Basic (loss)/earnings per share | |
| (2.09 | ) | |
| (0.34 | ) | |
| (3.19 | ) | |
| 7.12 | |
From continuing operations | |
| (2.09 | ) | |
| (0.29 | ) | |
| (3.19 | ) | |
| 5.64 | |
From discontinued operations | |
| - | | |
| (0.05 | ) | |
| - | | |
| 1.48 | |
Diluted (loss)/earnings per share | |
| (2.09 | ) | |
| (0.34 | ) | |
| (3.19 | ) | |
| 7.12 | |
From continuing operations | |
| (2.09 | ) | |
| (0.29 | ) | |
| (3.19 | ) | |
| 5.64 | |
From discontinued operations | |
| - | | |
| (0.05 | ) | |
| - | | |
| 1.48 | |
Total assets | |
| 1,231,923 | | |
| 1,337,452 | | |
| 1,231,923 | | |
| 1,337,452 | |
Total liabilities | |
| 354,756 | | |
| 244,952 | | |
| 354,756 | | |
| 244,952 | |
Total long-term liabilities | |
| 96,000 | | |
| 161,521 | | |
| 96,000 | | |
| 161,521 | |
Notes:
| (1) | EBITDA is a non-GAAP measure and is
reconciled to IFRS under the heading “Non-GAAP Measures and Reconciliation”. |
Analysis Comparing Financial Condition
as at September 30, 2015 and 2014
As at September 30, 2015, our debt-to-capital
ratio (being debt divided by [shareholders’ equity plus debt]) was 7%, compared to 6% as at September 30, 2014, well below
our targeted maximum gearing level of 50%. Gearing targets are based on factors that include operating cash flows, cash needs
for development, capital market and economic conditions, and are assessed regularly. Our current ratio (being current assets divided
by current liabilities), which measures our ability to meet short-term obligations, was 2.8 times as at September 30, 2015, compared
to 12.4 times as at September 30, 2014. The current ratio satisfied our internal target of above 1.5 times as at September 30,
2015.
Management Discussion and Analysis INTEROIL CORPORATION 10 |
Variance in Total Assets:
As at September 30, 2015, our total assets
amounted to $1,231.9 million, compared with $1,337.5 million as at September 30, 2014. The decrease of $105.6 million, or 8%,
from September 30, 2014, was primarily due to:
| - | $324.4 million decrease in cash
and cash equivalents and restricted cash, mainly attributable to the seismic activities
carried out during the twelve months ended September 30, 2015 in addition to drilling
activities for Triceratops-3 well, Wahoo-1 side track well, Antelope-4 well, Antelope-4
side track well and Antelope-5 well, as well as the site preparation costs incurred for
Antelope-6 well and Triceratops-4 well. |
| - | $17.5 million decrease in investments
accounted for using the equity method, which is attributable to our share of losses incurred
by PNG LNG, Inc. (a joint venture established in 2007 to hold the interests of certain
joint venturers in the proposed venture to construct the proposed liquefaction facilities
for development of the Elk-Antelope discovery in PRL 15), resulting from the impairment
of joint venture assets, as we are now progressing the Papua LNG Project with Total. |
These decreases have been partially
offset by:
| - | $215.1 million increase in exploration
and evaluation assets costs capitalized during the twelve months ended September 30,
2015, primarily associated with drilling costs for Triceratops-3 in PRL 39; Raptor-1
in PPL 475; Bobcat-1 in PPL 476; Antelope-4, Antelope-4 side track and Antelope-5 in
PRL 15; conceptual development studies for PRL 15; site preparation for Antelope-6 in
PRL 15; and appraisal seismic. These increases were partly reduced by the recognition
of $78.2 million exploration impairment for the Wahoo exploration costs, which was plugged
and abandoned during the quarter ended September 30, 2015. |
| - | $25.5 million increase in trade
and other receivables, mainly due to higher outstanding cash call receivables from joint
venture partners as at the current quarter ended September 30, 2015. |
Variance in Total Liabilities:
As at September 30, 2015, our total liabilities
amounted to $354.8 million, compared with $245.0 million at September 30, 2014. The increase of $109.8 million, or 45%, from September
30, 2014, was primarily due to:
| - | $105.6 million increase in trade
and other payables resulting from an increase in seismic and drilling payables as at
September 30, 2015 due to increased activities in comparison to the previous year and
PRL 15 non-operator costs accrual as at September 30, 2015. |
Analysis of Consolidated Financial
Results Comparing Quarters and Nine Months Ended September 30, 2015 and 2014
Our net loss for the quarter ended September
30, 2015 was $103.7 million, compared with a net loss of $16.9 million for the same quarter in 2014, an increase of $86.8 million.
This was primarily due to the recognition of the $78.2 million exploration impairment relating to the write off of the Wahoo exploration
well costs and the $20.2 million increase in exploration costs, mainly from the Murua seismic program in PPL 474 and PPL 476 during
the quarter ended September 30, 2015. These increases have been partly reduced by the $5.3 million decrease in legal and professional
fees, resulting from the higher consultant fees for group restructuring and arbitration on PRL 15 during the quarter ended September
30, 2014 and the reimbursement of $1.5 million legal expenses from Oil Search in relation to arbitration on PRL 15 during the
quarter ended September 30, 2015; and the $2.4 million increase in interest accretion income on the receivables recognized in
relation to interim resource payments expected under the Total SSA.
Our net loss for the nine months ended
September 30, 2015 was $158.1 million, compared with a net profit of $354.0 million for the same period in 2014, a decrease of
profit by $512.1 million. This primarily resulted from the recognition of the $340.5 million gain on conveyance of exploration
and evaluation assets under the Total SSA during the nine months ended September 30, 2014, the $78.2 million exploration impairment
recognized for the write off of the Wahoo exploration well costs, the $73.5 million profit from discontinued operations during
the nine months ended September 30, 2014, and the $32.6 million increase in exploration costs incurred for the Murua seismic program
in PPL 474 and PPL 476 and Raptor in PPL 475, rig 116 stack costs, rig 3 demobilization costs and airborne gravity survey costs
during the nine months ended September 30, 2015.
Management Discussion and Analysis INTEROIL CORPORATION 11 |
The table below analyzes key movements,
the net of which primarily explains the variance in results between the quarters and nine months ended September 30, 2015 and
2014:
|
|
Quarterly
Variance
($ millions) |
|
Nine Month
Variance
($ millions) |
|
|
|
|
($86.8) |
|
($512.1) |
|
Net (loss)/profit variance for the comparative periods primarily due to: |
Ø |
Interest revenue |
$2.4 |
|
($8.8) |
|
Interest income was primarily attributable to interest accretion income on receivables for
interim resource payments expected under the Total SSA for the Elk and Antelope. Decrease in interest income for
the nine month period was mainly due to an adjustment to the amount receivable under the Total SSA as a result of a change
in the timing of interim certification payments to June 2016. |
Ø |
Other revenue |
($1.4) |
|
($6.1) |
|
Following divestment of our operating
businesses on June 30, 2014, we have ceased to operate a shared services model that resulted in the recognition of other
revenue from the internal support of exploration and development. These costs have been allocated to those activities
as a recovery of cost, rather than as other revenue. We have moved to a more outsourced services model with third party
rigs and related services rather than internally servicing exploration and development.
Other revenues for the quarter
and nine months ended September 30, 2015 were comprised of support services (post divestment) recharged to Puma. |
Ø |
Administrative and general expenses |
$1.6 |
|
$8.4 |
|
The decrease in administrative
and general expenses was mainly due to the new cost methodology employed since the fourth quarter of 2014, where operational
costs were allocated to exploration and evaluation assets, rather than a standard cost recharge process, which previously
resulted in expensing of under-recovered costs incurred for joint venture projects.
A total of $3.0 million from administrative
and general expenses for the nine months ended September 30, 2015 ($0.6 million for the quarter ended September 30, 2015)
was charged to Puma as other revenue for certain support services provided post divestment. These services mainly related
to computing and communications services and occupancy expenses in PNG. |
Ø |
Legal and professional fees |
$5.3 |
|
$8.2 |
|
The decrease in legal and professional fees was mainly due to lower consultant fees during
the quarter and nine months ended September 30, 2015, due to completion of the office transition from Cairns, Australia, and
the arbitration on PRL 15. During the quarter ended September 30, 2015, we also received a reimbursement of legal expenses
amounting to $1.5 million from Oil Search in relation to arbitration regarding PRL 15. |
Ø |
Exploration costs |
($20.2) |
|
($32.6) |
|
The increase in exploration costs was primarily attributable to the expensing of seismic activities
in PPL 474 and PPL 476, exploration seismic carried out over PPL 475, airborne gravity survey costs incurred for PPL 476,
PPL 477 and PRL15, rig 116 stack costs due to the deferral of appraisal drilling until the completion of the Elk-Antelope
appraisal program and rig 3 demobilization costs during the quarter and nine months ended September 30, 2015. |
Management Discussion and Analysis INTEROIL CORPORATION 12 |
Ø |
Exploration impairment |
($78.2) |
|
($78.2) |
|
The increase in exploration impairment was attributable to the recognition of
exploration impairment associated with the write off of the Wahoo exploration costs, which was plugged and abandoned during
the quarter ended September 30, 2015. |
Ø |
Finance costs |
$1.0 |
|
$6.1 |
|
The decrease in finance costs was primarily due to facility fees for the Credit Suisse led
syndicated facility and Westpac and BSP bridge facility during the quarter and nine months ended September 30, 2014. During
the quarter and nine months ended September 30, 2015, finance costs comprised of facility fees for the maturity date extension
of the Credit Suisse facility to December 2016 and commitment fees on the undrawn facility. |
Ø |
Gain on conveyance of exploration and evaluation assets |
$0.0 |
|
($340.5) |
|
The gain on conveyance of exploration and evaluation assets for completion of the Total SSA
recognized during the nine months ended September 30, 2014 under which Total acquired, through the purchase of all shares
of a wholly owned subsidiary, a gross participating interest in PRL 15 of 40.1275% (net 31.0988%, after the State back-in
right of 22.5%), which contains the Elk and Antelope gas fields. |
Ø |
Foreign exchange (losses)/ gains |
($0.1) |
|
($3.7) |
|
The decrease in foreign exchange gains was primarily due to lower depreciation of the PGK
against USD as compared to the nine months ended September 30, 2014. |
Ø |
Depreciation and amortization |
$0.8 |
|
$2.9 |
|
The decrease in depreciation expense was due to capitalization of depreciation for supporting
assets to respective projects during the nine months ended September 30, 2015. Depreciation of assets supporting
exploration costs that were expensed has been included in the exploration costs line above. |
Ø |
Interest expense |
($0.1) |
|
$5.5 |
|
The decrease in interest expense was largely due to use of the Credit Suisse led syndicated
facility and the Westpac and BSP bridge facility during the quarter and nine months ended September 30, 2014. During the quarter
and nine months ended September 30, 2015, the Credit Suisse led syndicated facility was not used. The interest expense comprised
the interest and accretion in relation to the Convertible Notes. |
Ø |
(Loss)/profit from discontinued operations |
$2.3 |
|
($73.5) |
|
The decrease in profit from discontinued operations resulted from the sale of the refinery,
distribution and shipping business during the nine months ended September 30, 2014 as a result of the Puma Transaction. |
Analysis of Consolidated Cash
Flows Comparing Quarters and Nine Months Ended September 30, 2015 and 2014
As at September 30, 2015, we had cash,
cash equivalents, and restricted cash of $126.3 million (September 30, 2014 - $450.7 million), of which $8.2 million (September
30, 2014 - $8.3 million) was restricted. Of the total restricted cash at September 30, 2015, $8.0 million was restricted as a
debt reserve under the Credit Suisse led syndicated secured loan and the balance was made up of a cash deposit for lease of office
premises and term deposits on our PPLs.
Management Discussion and Analysis INTEROIL CORPORATION 13 |
Cash flows from discontinued operations
have been combined with the cash flows from continuing operations in the consolidated statements of cash flows for the quarter
and nine months ended September 30, 2014 in the table below:
| |
Quarter ended September 30, | | |
Nine months ended
September 30, | |
($ thousands) | |
2015 | | |
2014 | | |
2015 | | |
2014 | |
Net cash (outflows)/inflows from: | |
| | | |
| | | |
| | | |
| | |
Operations | |
| (16,700 | ) | |
| (50,621 | ) | |
| (61,126 | ) | |
| (60,905 | ) |
Investing | |
| (57,488 | ) | |
| (32,337 | ) | |
| (214,202 | ) | |
| 668,806 | |
Financing | |
| - | | |
| (41,754 | ) | |
| - | | |
| (227,492 | ) |
Net cash movement | |
| (74,188 | ) | |
| (124,712 | ) | |
| (275,328 | ) | |
| 380,409 | |
Opening cash | |
| 192,265 | | |
| 567,088 | | |
| 393,405 | | |
| 61,967 | |
Closing cash | |
| 118,077 | | |
| 442,376 | | |
| 118,077 | | |
| 442,376 | |
Cash flows used in operating activities
Cash outflows from operating activities
for the quarter ended September 30, 2015 were $16.7 million compared with an outflow of $50.6 million for the quarter ended September
30, 2014, a net decrease in cash outflows of $33.9 million. Cash outflows from operating activities for the nine months ended
September 30, 2015 were $61.1 million compared with an outflow of $60.9 million for the nine months ended September 30, 2014,
a net increase in cash outflows of $0.2 million.
This table outlines key variances in the
cash inflows/(outflows) from operating activities between the quarters and nine months ended September 30, 2015 and 2014:
|
|
|
Quarterly
variance
($ millions) |
|
Nine Months
variance
($ millions) |
|
|
|
|
|
$33.9 |
|
($0.2) |
|
Variance for the comparative periods primarily due to: |
Ø |
Cash used in operations, before changes in operating working capital |
|
($16.4) |
|
($63.3) |
|
The increase in cash used in operations,
before changes in operating working capital for the nine month period, was mainly due to the increase in net loss mainly
from exploration activities expensed as incurred, financing costs and administrative expenses and the net cash inflows
from the sale of discontinued operations in the prior nine months ended September 30, 2014.
The increase in cash used in operations,
before changes in operating working capital for the quarter, was mainly due to the increase in net loss mainly from exploration
activities expensed as incurred, financing costs and administrative expenses. |
Ø |
Cash generated from operations relating to changes in operating working capital |
|
$50.3 |
|
$63.1 |
|
The increase in cash generated from operations relating to changes in operating working capital
was due to reduced working capital requirements as a result of the Puma Transaction. |
Management Discussion and Analysis INTEROIL CORPORATION 14 |
Cash flows (used in)/generated from
investing activities
Cash outflows from investing activities
for the quarter ended September 30, 2015 were $57.5 million compared with an outflow of $32.3 million for the quarter ended September
30, 2014, a net increase in cash outflows of $25.2 million. Cash outflows from investing activities for the nine months ended
September 30, 2015 were $214.2 million compared with an inflow of $668.8 million for the nine months ended September 30, 2014,
a net increase in cash outflows of $883.0 million.
This table outlines key variances in cash
(outflows)/inflows from investing activities between the quarters and nine months ended September 30, 2015 and 2014:
|
|
|
Quarterly
variance
($ millions) |
|
Nine Months
variance
($ millions) |
|
|
|
|
|
($25.2) |
|
($883.0) |
|
Variance for the comparative periods primarily due to: |
Ø |
Proceeds from Total for interest in PRL 15 |
|
$0.0 |
|
($401.3) |
|
Receipt of a $401.3 million completion payment from Total in accordance with the Total SSA
during the nine months ended September 30, 2014. |
Ø |
Proceeds from sale of subsidiaries, net of transaction costs |
|
$0.0 |
|
($428.0) |
|
Receipt of $525.6 million gross proceeds from the Puma Transaction less $39.4 million of cash
and cash equivalents held by those businesses, $52.9 million of secured loan repayments undertaken as part of the Puma Transaction,
and $4.3 million of transaction costs during the nine months ended September 30, 2014. |
Ø |
Decrease in restricted cash held as security on borrowings |
|
($17.4) |
|
($44.8) |
|
The movement in restricted cash
held as security on borrowings for the nine month period was mainly due to the restricted cash requirements under the
Midstream Refining segment which were withdrawn as the secured loan and working capital facilities under these entities
were either repaid or transferred to Puma following the Puma Transaction during the nine months ended September 30, 2014.
The movement in restricted cash
held as security on borrowings for the quarter was mainly due to the release of cash held as deposit on a rig lease from
the restricted cash and replaced with a non-cash backed letter of credit during the quarter ended September 30, 2014. |
Ø |
Expenditure on exploration and evaluation assets net of JV contributions |
|
$33.7 |
|
$34.4 |
|
The decrease in expenditure on exploration and evaluation assets is due to a reduction in
exploration drilling in the quarter and nine months ended September 30, 2014. |
Ø |
Expenditure on plant and equipment |
|
$1.7 |
|
$11.2 |
|
The decrease in expenditure on plant and equipment for the nine month period was mainly due
to sale of the refinery and distribution businesses to Puma during the nine months ended September 30, 2014. |
Ø |
Cash (used in)/ generated from investing activities relating to change in non-operating working
capital |
|
($43.2) |
|
($55.2) |
|
The movement in non-operating working capital was primarily related to trade payables and
accruals in our exploration and development operations, in addition to an increase in receivables due to billings to Total
under the transitional services arrangements for transfer of operatorship to Total. |
Management Discussion and Analysis INTEROIL CORPORATION 15 |
Cash flows used in financing activities
Cash flow movement from financing activities
for the quarter ended September 30, 2015 amounted to zero, compared with an outflow of $41.8 million for the quarter ended September
30, 2014, a net decrease of cash outflows of $41.8 million. Cash outflows from financing activities for the nine months ended
September 30, 2015 amounted to zero, compared with an outflow of $227.5 million for the nine months ended September 30, 2014,
a net decrease in cash outflows of $227.5 million.
This table outlines key variances in cash
inflows/(outflows) from financing activities between quarters and nine months ended September 30, 2015 and 2014:
|
|
|
Quarterly
variance
($ millions) |
|
Nine Months
variance
($ millions) |
|
|
|
|
|
$41.8 |
|
$227.5 |
|
Variance for the comparative periods primarily due to: |
Ø |
Repayments of BSP and Westpac secured facility |
|
$0.0 |
|
$24.8 |
|
Net repayment of the BSP and Westpac combined secured loan facility during the nine months
ended September 30, 2014. |
Ø |
Proceeds from drawdown of Credit Suisse secured facility |
|
$0.0 |
|
($50.0) |
|
Drawdown of $50.0 million from the Credit Suisse led syndicated secured loan facility during
the nine months ended September 30, 2014. |
Ø |
Repayment of Credit Suisse secured facility |
|
$0.0 |
|
$150.0 |
|
Repayment of the $150.0 million Credit Suisse led syndicated secured loan facility during
the nine months ended September 30, 2014. |
Ø |
Proceeds from working capital facility |
|
$0.0 |
|
($20.9) |
|
Movement in use of the BNP Paribas working capital facility in our discontinued operations
during the nine months ended September 30, 2014. |
Ø |
Repayments of ANZ, BSP & BNP syndicated loan |
|
$0.0 |
|
$84.0 |
|
Repayment of the ANZ, BSP and BNP Paribas syndicated loan during the nine months ended September
30, 2014. |
Ø |
Proceeds from issue of common shares |
|
$0.0 |
|
($2.2) |
|
Movement due to cash receipts from the exercise of stock options during the nine months ended
September 30, 2014. |
Ø |
Payment on share buyback |
|
$41.8 |
|
$41.8 |
|
Movement due to the cash paid for the redemption of 730,000 common shares during the quarter
and nine months ended September 30, 2014. |
Management Discussion and Analysis INTEROIL CORPORATION 16 |
Summary of Consolidated
Quarterly Financial Results for Past Eight Quarters
This table contains consolidated results
for the eight quarters ended September 30, 2015 on a consolidated basis.
Quarters ended ($ thousands except per share | |
2015 | | |
2014 | | |
2013 | |
data) | |
Sep-30 | | |
Jun-30 | | |
Mar-31 | | |
Dec-31 | | |
Sep-30 | | |
Jun-30 | | |
Mar-31 | | |
Dec-31 | |
Total revenues | |
| 11,822 | | |
| (13,643 | ) | |
| 13,215 | | |
| (13,182 | ) | |
| 10,749 | | |
| 13,689 | | |
| 1,903 | | |
| 712 | |
EBITDA (1) | |
| (101,838 | ) | |
| (30,583 | ) | |
| (20,317 | ) | |
| (60,443 | ) | |
| (12,133 | ) | |
| (10,253 | ) | |
| 316,948 | | |
| (27,272 | ) |
Net (loss)/profit | |
| (103,725 | ) | |
| (32,531 | ) | |
| (21,869 | ) | |
| (64,205 | ) | |
| (16,930 | ) | |
| 52,265 | | |
| 318,636 | | |
| (24,812 | ) |
From continuing operations | |
| (103,725 | ) | |
| (32,531 | ) | |
| (21,869 | ) | |
| (62,474 | ) | |
| (14,622 | ) | |
| (15,765 | ) | |
| 310,824 | | |
| (32,024 | ) |
From discontinued operations | |
| - | | |
| - | | |
| - | | |
| (1,731 | ) | |
| (2,308 | ) | |
| 68,030 | | |
| 7,812 | | |
| 7,212 | |
Basic (loss)/earnings per share | |
| (2.09 | ) | |
| (0.66 | ) | |
| (0.44 | ) | |
| (1.30 | ) | |
| (0.34 | ) | |
| 1.05 | | |
| 6.46 | | |
| (0.50 | ) |
From continuing operations | |
| (2.09 | ) | |
| (0.66 | ) | |
| (0.44 | ) | |
| (1.26 | ) | |
| (0.29 | ) | |
| (0.31 | ) | |
| 6.30 | | |
| (0.65 | ) |
From discontinued operations | |
| - | | |
| - | | |
| - | | |
| (0.04 | ) | |
| (0.05 | ) | |
| 1.36 | | |
| 0.16 | | |
| 0.15 | |
Diluted (loss)/earnings per share | |
| (2.09 | ) | |
| (0.66 | ) | |
| (0.44 | ) | |
| (1.30 | ) | |
| (0.34 | ) | |
| 1.05 | | |
| 6.38 | | |
| (0.50 | ) |
From continuing operations | |
| (2.09 | ) | |
| (0.66 | ) | |
| (0.44 | ) | |
| (1.26 | ) | |
| (0.29 | ) | |
| (0.31 | ) | |
| 6.22 | | |
| (0.65 | ) |
From discontinued operations | |
| - | | |
| - | | |
| - | | |
| (0.04 | ) | |
| (0.05 | ) | |
| 1.36 | | |
| 0.16 | | |
| 0.15 | |
| (1) | EBITDA is a non-GAAP measure and is
reconciled to IFRS under the heading “Non-GAAP Measures and Reconciliation”. |
DISCOUNTINUED
OPERATIONS
We had previously organized our operations
into Upstream, Midstream, Downstream and Corporate. On June 30, 2014, we disposed of our Midstream Refining and Downstream businesses
as a result of the Puma Transaction. As a result, these businesses have been classified as discontinued operations for reporting
purposes. In addition, the shipping business, which was previously included within the Corporate segment, has also been classified
as a discontinued operation as the activities of that business were transferred with the sale of the refining and distribution
businesses. At September 30, 2015, no additional discontinued operations have been recognized.
Further
details in relation to discontinued operations can be found under the heading “Discontinued Operations” in our 2014
AIF available at www.sedar.com.
Management Discussion and Analysis INTEROIL CORPORATION 17 |
LIQUIDITY
AND CAPITAL RESOURCES
Summary of Debt Facilities
This table summarizes the debt facilities
available to us and the balances outstanding as at September 30, 2015:
Organization | |
Facility | | |
Balance outstanding September 30, 2015 | | |
Weighted average interest rate | | |
Maturity date |
Credit Suisse led syndicated, senior secured capital expenditure facility | |
$ | 300,000,000 | | |
$ | Nil | | |
| Nil | % | |
December 2016 |
Convertible Notes | |
$ | 70,000,000 | | |
$ | 69,998,000 | | |
| 7.91 | %(1) | |
November 2015 |
| (1) | Effective rate after bifurcating the
equity and debt components of the $70.0 million principal amount of 2.75% convertible
senior notes due 2015. |
Credit Suisse led Syndicated
Secured Loan
On June 17, 2014, we entered into a $300.0
million syndicated, senior secured capital expenditure facility through a consortium of banks led by Credit Suisse. The facility
is supported by the participating lenders CBA, ANZ, UBS, Macquarie, BSP, Westpac, MUFG and SocGen. The facility has an annual
interest rate of LIBOR plus 5% and matures at the end of 2016.
No drawdowns had been made under this
facility as at September 30, 2015. As at September 30, 2015, we were in compliance with the debt covenants, which include a defined
calculation for gearing not to exceed 60% at any time, a requirement that the equity does not fall below $500.0 million at any
time and agreed expenditure limits tested for the six months period ending March 31 and September 30 each year. The Convertible
Notes mature on November 15, 2015 and we intend to repay the Convertible Notes in full upon maturity.
Unsecured 2.75% Convertible
Notes
On November 10, 2010, we completed the
issuance of $70.0 million of Convertible Notes with a maturity of five years (November 15, 2015). The Convertible Notes rank junior
to any secured indebtedness and to all existing and future liabilities of us and our subsidiaries, including the Credit Suisse
led syndicated secured loan facility, trade payables and lease obligations.
We pay interest on the Convertible Notes
semi-annually on May 15 and November 15. The Convertible Notes are convertible into cash or our common shares, based on an initial
conversion rate of 10.4575 common shares per $1,000 principal amount, which represents an initial conversion price of approximately
$95.625 per common share. Only $2,000 of the Convertible Notes have been converted into cash since issuance.
Other Sources of Capital
Our share of expenditure on exploration
wells, appraisal wells and extended well test programs is funded by capital raising activities, debt, cash calls from joint venture
partners and asset sales.
Capital Expenditure
Net capital expenditure on exploration
and evaluation assets
Net capital expenditures on our exploration
and evaluation assets in PNG for the quarter ended September 30, 2015 were a net decrease of $11.2 million. Total net capital
expenditure for the nine months ended September 30, 2015 was $135.2 million.
This analysis outlines key net capital
expenditure in the quarter and nine months ended September 30, 2015:
Management Discussion and Analysis INTEROIL CORPORATION 18 |
|
Quarterly
movement
($ millions) |
|
Nine Months
movement
($ millions) |
|
|
|
$471.4 |
|
$325.0 |
|
Opening balance of exploration and evaluation assets |
|
($11.2) |
|
$135.2 |
|
Net capital expenditure consisting of following: |
Ø |
$1.8 |
|
$1.3 |
|
Costs for site preparation and pre-spud work of Raptor-1 side track. |
Ø |
($56.8) |
|
($36.0) |
|
Recognition of exploration impairment relating to the Wahoo exploration well costs, which
was plugged and abandoned during the quarter ended September 30, 2015. |
Ø |
($1.1) |
|
$6.3 |
|
Costs for testing of Bobcat-1. |
Ø |
$23.3 |
|
$51.6 |
|
Costs for site preparation, pre-spud work and drilling of Triceratops-3. |
Ø |
$1.0 |
|
$1.5 |
|
Costs for site preparation of Triceratops-4. |
Ø |
$1.9 |
|
$17.7 |
|
Costs for drilling of Antelope-4. |
Ø |
$15.5 |
|
$20.0 |
|
Costs for site preparation, pre-spud work and drilling of Antelope-4 side track. |
Ø |
$2.6 |
|
$17.1 |
|
Costs for drilling and interference test for Antelope-5. |
Ø |
$0.9 |
|
$8.9 |
|
Costs for site preparation and pre-spud work for Antelope-6. |
Ø |
$0.4 |
|
$9.6 |
|
Appraisal seismic over the Raptor field. |
Ø |
($1.3) |
|
$13.2 |
|
Appraisal seismic over the Bobcat and Triceratops fields. |
Ø |
($6.2) |
|
$1.7 |
|
Decrease in inventories for the quarter was mainly due to the consumption of inventory in
operations and inventories sold to Total. |
Ø |
$5.8 |
|
$5.8 |
|
Costs for development survey, environmental and societal studies, preparation works, project
finance and operator transition for Papua LNG Project. |
Ø |
($1.4) |
|
$8.7 |
|
Expenditure for concept select studies led by Total for the Elk and Antelope fields in PRL
15. |
Ø |
$2.4 |
|
$7.8 |
|
Other expenditures, including equipment purchases, indirect project support costs and field
care and maintenance for PRL 15, and site preparation costs of the Antelope South well. |
|
$460.2 |
|
$460.2 |
|
Closing balance of exploration and evaluation assets |
Gross capital expenditure on exploration
and evaluation assets
Gross capital expenditure on our exploration
and evaluation assets in PNG for the quarter ended September 30, 2015 was $101.1 million. Total gross capital expenditure for
the nine months ended September 30, 2015 was $395.5 million.
This analysis outlines key gross capital
expenditures in the quarter and nine months ended September 30, 2015:
|
Quarterly
movement
($ millions) |
|
Nine Months
movement
($ millions) |
|
|
|
$101.1 |
|
$395.5 |
|
Gross capital expenditure consisting of following: |
Ø |
$4.5 |
|
$3.8 |
|
Costs for site preparation and pre-spud work of Raptor-1 side track. |
Management Discussion and Analysis INTEROIL CORPORATION 19 |
Ø |
($0.1) |
|
$13.9 |
|
Appraisal seismic over the Raptor field. |
Ø |
($0.0) |
|
$2.0 |
|
Costs for care and maintenance of the suspended Wahoo-1 well. |
Ø |
$19.1 |
|
$38.0 |
|
Costs for site preparation, pre-spud work and drilling of the Wahoo-1 side track. |
Ø |
($1.6) |
|
$7.5 |
|
Costs for testing of Bobcat-1. |
Ø |
$1.5 |
|
$17.0 |
|
Appraisal seismic over the Bobcat and Triceratops fields. |
Ø |
$47.7 |
|
$90.7 |
|
Costs for site preparation, pre-spud and drilling work for Triceratops-3. |
Ø |
$1.7 |
|
$2.2 |
|
Costs for site preparation of Triceratops-4. |
Ø |
$0.1 |
|
$1.2 |
|
Testing costs for Antelope-1. |
Ø |
$0.4 |
|
$45.3 |
|
Costs for drilling of Antelope-4. |
Ø |
$21.2 |
|
$33.5 |
|
Costs for site preparation, pre-spud work and drilling of Antelope-4 side track. |
Ø |
$2.3 |
|
$59.1 |
|
Costs for drilling and interference test for Antelope-5. |
Ø |
$2.2 |
|
$37.1 |
|
Costs for site preparation and pre-spud work for Antelope-6. |
Ø |
$2.0 |
|
$6.6 |
|
Costs for site preparation of Antelope South. |
Ø |
($1.0) |
|
$26.6 |
|
Expenditure and true up costs for concept select studies led by Total for the Elk and Antelope
fields in PRL 15. |
Ø |
$5.9 |
|
$5.9 |
|
Costs for development survey, environmental and societal studies, preparation works, project
finance and operator transition for Papua LNG Project. |
Ø |
($6.2) |
|
$1.7 |
|
Decrease in inventories for the quarter was mainly due to the consumption of inventory in
operations and inventories sold to Total. |
Ø |
$1.4 |
|
$3.4 |
|
Other expenditures, including equipment purchases, indirect project support costs and field
care and maintenance for PRL 15. |
Capital Requirements
Existing cash balances and credit facilities
will be sufficient to settle debt obligations and facilitate further development of the Elk and Antelope fields, appraisal of
Triceratops and exploration to meet our license commitments. However, oil and gas exploration and development and liquefaction
are capital intensive and our business plans involve raising capital, which depends on market conditions when we raise such capital.
Additionally, our joint venture share of costs of construction of a liquefaction plant, central processing facility and other
infrastructure associated with the proposed Papua LNG Project may amount to billions of dollars and thus exceed our existing cash
balances. No assurance can be given that we will obtain new capital on terms that are acceptable to us, particularly with market
volatility.
Noted below are our contractual obligations
and commitments over the next five years which are required at a minimum to maintain our licenses in good standing.
Contractual Obligations and Commitments
This table contains information on payments
to meet our contracted exploration and debt obligations for each of the next five years and beyond. It should be read in conjunction
with our Condensed Consolidated Interim Financial Statements, Consolidated Financial Statements and respective notes thereto.
Management Discussion and Analysis INTEROIL CORPORATION 20 |
| |
Payments Due by Period | |
Contractual obligations
($ thousands) | |
Total | | |
Less than 1 year | | |
1 - 2 years | | |
2 - 3 years | | |
3 - 4 years | | |
4 - 5 years | | |
More than 5 years | |
PPL and PRL | |
| 381,521 | | |
| 9,105 | | |
| - | | |
| 176,866 | | |
| 250 | | |
| 195,300 | | |
| - | |
Convertible Notes obligations | |
| 70,319 | | |
| 70,319 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Total | |
| 451,840 | | |
| 79,424 | | |
| - | | |
| 176,866 | | |
| 250 | | |
| 195,300 | | |
| - | |
The PPL and PRL amounts represent our
commitments for these licenses as at September 30, 2015. On March 6, 2014, our applications for new petroleum prospecting licenses
were approved with PPL 474 replacing PPL 236, PPL 475 replacing PPL 237, and PPL 476 and PPL 477 replacing PPL 238. The new licenses
included commitments for us to spend $351.9 million over the remainder of the six-year terms.
The terms of grant of PRL 39 require us
to spend $29.6 million on the license area by the end of 2018.
Off Balance Sheet Arrangements
During the quarter ended, nor as at September
30, 2015, we had no off balance sheet arrangements or relationships with unconsolidated entities or financial partnerships.
Transactions with Related Parties
No related party transaction took place
during the quarter and nine months ended September 30, 2015.
Share Capital
Our authorized share capital consists
of an unlimited number of common shares and unlimited number of preferred shares, of which 1,035,554 Series A preferred shares
are authorized (none of which are outstanding). As of September 30, 2015, we had 49,560,160 common shares issued and outstanding
(50,697,369 common shares on a fully diluted basis) and no preferred shares issued and outstanding. The potential dilutive instruments
outstanding as at September 30, 2015 included employee stock options and restricted stock in respect of 405,205 common shares
and 732,004 common shares relating to the $70.0 million of Convertible Notes.
As of November 10, 2015, we had 49,560,611
common shares issued and outstanding (50,707,095 common shares on a fully diluted basis) and no preferred shares issued and outstanding.
The potential dilutive instruments outstanding as November 10, 2015 included employee stock options and restricted stock in respect
of 414,480 common shares and 732,004 common shares relating to the $70.0 million of Convertible Notes.
RISK
FACTORS
Our business operations and financial
position are subject to risks. A summary of the key risks that may affect matters addressed in this document have been included
under “Forward Looking Statements” above. Detailed risk factors can be found under “Risk Factors” in our
2014 AIF available at www.sedar.com.
CRITICAL
ACCOUNTING ESTIMATES
The preparation of financial statements
in accordance with IFRS requires our management to make estimates and assumptions that affect the amounts reported in the Condensed
Consolidated Interim Financial Statements and accompanying notes. Actual results could differ from those estimates. The effect
of changes in estimates on future periods have not been disclosed in the Condensed Consolidated Interim Financial Statements as
estimating it is impracticable. During the nine months ended September 30, 2015, there were no changes in the methodology used
to make critical accounting estimates to those disclosed in our 2014 MD&A.
Management Discussion and Analysis INTEROIL CORPORATION 21 |
For a discussion of those accounting policies,
please refer to Note 2 of the notes to our Consolidated Financial Statements for the year ended December 31, 2014, available at
www.sedar.com, which summarizes our significant accounting policies.
NEW
ACCOUNTING STANDARDS
New accounting standards not yet
applicable as at September 30, 2015
These
new standards have been issued but are not yet effective for the financial year beginning January 1, 2015 and have not been early
adopted:
| - | IFRS
9 ‘Financial Instruments’ (effective from January 1, 2018):
This addresses the classification and measurement of financial assets. The standard
is not applicable until January 1, 2018 but is available for early adoption. We have
yet to assess IFRS 9’s full impact, but we do not expect any material changes due
to this standard. We have not yet decided whether to early adopt IFRS 9. |
| - | IFRS
15 ‘Revenue from contracts with customers’ (effective from January
1, 2018): The new standard is based on the principle that revenue is recognized
when control of a good or service transfers to a customer, so the notion of control replaces
the existing notion of risks and rewards. We are currently evaluating the impact of adopting
this standard. |
NON-GAAP
MEASURES AND RECONCILIATION
Non-GAAP measures, including EBITDA, included
in this MD&A are not defined nor have a standardized meaning prescribed by IFRS. Accordingly, they may not be comparable to
similar measures provided by other issuers.
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.
This table reconciles net (loss)/profit
from continuing operations, a GAAP measure, to EBITDA from continuing operations, a non-GAAP measure for each of the last eight
quarters.
Management Discussion and Analysis INTEROIL CORPORATION 22 |
Quarters ended | |
2015 | | |
2014 | | |
2013 | |
($ thousands) | |
Sep-30 | | |
Jun-30 | | |
Mar-31 | | |
Dec-31 | | |
Sep-30 | | |
Jun-30 | | |
Mar-31 | | |
Dec-31 | |
Earnings before interest, taxes, depreciation and amortization | |
| (101,838 | ) | |
| (30,583 | ) | |
| (20,317 | ) | |
| (60,443 | ) | |
| (12,133 | ) | |
| (10,253 | ) | |
| 316,948 | | |
| (27,272 | ) |
Interest expense | |
| (1,513 | ) | |
| (1,492 | ) | |
| (1,477 | ) | |
| (1,464 | ) | |
| (1,367 | ) | |
| (4,409 | ) | |
| (4,170 | ) | |
| (2,546 | ) |
Income taxes | |
| (256 | ) | |
| (207 | ) | |
| (70 | ) | |
| (211 | ) | |
| (199 | ) | |
| (194 | ) | |
| (514 | ) | |
| (791 | ) |
Depreciation and amortisation | |
| (118 | ) | |
| (249 | ) | |
| (5 | ) | |
| (356 | ) | |
| (923 | ) | |
| (909 | ) | |
| (1,440 | ) | |
| (1,415 | ) |
From continuing operations | |
| (103,725 | ) | |
| (32,531 | ) | |
| (21,869 | ) | |
| (62,474 | ) | |
| (14,622 | ) | |
| (15,765 | ) | |
| 310,824 | | |
| (32,024 | ) |
From discontinued operations | |
| - | | |
| - | | |
| - | | |
| (1,731 | ) | |
| (2,308 | ) | |
| 68,030 | | |
| 7,812 | | |
| 7,212 | |
Net (loss)/profit | |
| (103,725 | ) | |
| (32,531 | ) | |
| (21,869 | ) | |
| (64,205 | ) | |
| (16,930 | ) | |
| 52,265 | | |
| 318,636 | | |
| (24,812 | ) |
PUBLIC
SECURITIES FILINGS
You may access additional information
about us, including our 2014 AIF, in documents filed with the Canadian Securities Administrators at www.sedar.com, and
in documents, including our Form 40-F, filed with the SEC at www.sec.gov. Additional information is also available on our website
www.interoil.com.
DISCLOSURE CONTROLS AND PROCEDURES
AND INTERNAL CONTROLS OVER FINANCIAL REPORTING
Disclosure Controls and Procedures
Our Chief Executive Officer and Chief
Financial Officer have designed, or caused to be designed under their supervision, disclosure controls and procedures to provide
reasonable assurance that: (i) material information relating to us is made known to our Chief Executive Officer and Chief Financial
Officer by others, particularly during the period in which the annual and interim filings are being prepared; and (ii) information
required to be disclosed by us in our annual filings, interim filings or other reports filed or submitted by us under securities
legislation is recorded, processed, summarized and reported within the time specified in securities legislation. Such officers
have evaluated, or caused to be evaluated under their supervision, the effectiveness of our disclosure controls and procedures
at our financial year-end and have concluded that our disclosure controls and procedures are effective at December 31, 2014 for
the foregoing purposes.
While our Chief Executive Officer and
Chief Financial Officer believe that our disclosure controls and procedures provide reasonable assurance that they are effective,
they do not expect that the disclosure controls and procedures will necessarily prevent all errors and fraud. A control system,
no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met.
Internal Controls over Financial
Reporting
Our Chief Executive Officer and Chief
Financial Officer have designed, or caused to be designed under their supervision, internal controls over financial reporting
to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements
for external purposes in accordance with IFRS. Such officers have evaluated, or caused to be evaluated under their supervision,
the effectiveness of our internal controls over financial reporting at our financial year-end and concluded that our internal
control over financial reporting is effective, at December 31, 2014, for the foregoing purpose.
Management Discussion and Analysis INTEROIL CORPORATION 23 |
Material Changes in Internal Control
over Financial Reporting
No material change in our internal controls
over financial reporting were identified during the nine months ended September 30, 2015, that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial reporting.
A control system, including our disclosure
and internal controls and procedures, can provide only reasonable, but not absolute, assurance that the objectives of the control
system will be met, no matter how well it is conceived, and it should not be expected that the disclosure and internal controls
and procedures will prevent all errors or fraud.
Management Discussion and Analysis INTEROIL CORPORATION 24 |
Exhibit 2
InterOil Corporation
Condensed Consolidated Interim Financial Statements
(Unaudited, Expressed in United States dollars)
Quarter and nine months ended September 30, 2015 and 2014 |
|
InterOil Corporation
Condensed Consolidated Interim Financial Statements
(Unaudited, Expressed in United States dollars) |
|
Table of contents |
|
|
|
Consolidated Balance Sheets |
1 |
|
|
Consolidated Income Statements |
2 |
|
|
Consolidated Statements of Comprehensive Income |
3 |
|
|
Consolidated Statements of Changes in Equity |
4 |
|
|
Consolidated Statements of Cash Flows |
5 |
|
|
Notes to the Condensed Consolidated Interim Financial Statements |
6 |
InterOil Corporation
Consolidated Balance Sheets
(Unaudited, Expressed in United States dollars) |
|
| |
As at | |
| |
September 30, | | |
December 31, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2014 | |
| |
$ | | |
$ | | |
$ | |
| |
| | |
| | |
| |
Assets | |
| | | |
| | | |
| | |
Current assets: | |
| | | |
| | | |
| | |
Cash and cash equivalents | |
| 118,077,110 | | |
| 393,405,198 | | |
| 442,376,124 | |
Cash restricted | |
| 7,964,702 | | |
| 7,959,859 | | |
| 7,958,740 | |
Trade and other receivables (note 5) | |
| 602,817,890 | | |
| 566,362,745 | | |
| 577,336,495 | |
Other current assets | |
| 2,235,366 | | |
| 2,742,316 | | |
| 1,679,453 | |
Prepaid expenses | |
| 865,177 | | |
| 2,312,626 | | |
| 2,232,298 | |
Total current assets | |
| 731,960,245 | | |
| 972,782,744 | | |
| 1,031,583,110 | |
Non-current assets: | |
| | | |
| | | |
| | |
Cash restricted | |
| 235,538 | | |
| 341,274 | | |
| 360,346 | |
Plant and equipment | |
| 9,843,500 | | |
| 12,263,365 | | |
| 13,229,769 | |
Exploration and evaluation assets (note 6) | |
| 460,183,610 | | |
| 325,041,973 | | |
| 245,046,062 | |
Other non-current receivables | |
| 29,700,534 | | |
| 29,700,534 | | |
| 29,700,534 | |
Investments accounted for using the equity method | |
| - | | |
| - | | |
| 17,531,908 | |
Total non-current assets | |
| 499,963,182 | | |
| 367,347,146 | | |
| 305,868,619 | |
Total assets | |
| 1,231,923,427 | | |
| 1,340,129,890 | | |
| 1,337,451,729 | |
Liabilities and shareholders' equity | |
| | | |
| | | |
| | |
Current liabilities: | |
| | | |
| | | |
| | |
Trade and other payables | |
| 179,881,533 | | |
| 139,716,105 | | |
| 74,274,968 | |
Income tax payable | |
| 1,890,166 | | |
| 1,809,742 | | |
| 1,706,853 | |
Indirect participation interest | |
| 7,449,409 | | |
| 7,449,409 | | |
| 7,449,409 | |
2.75% convertible notes liability | |
| 69,535,121 | | |
| 66,501,994 | | |
| - | |
Total current liabilities | |
| 258,756,229 | | |
| 215,477,250 | | |
| 83,431,230 | |
Non-current liabilities: | |
| | | |
| | | |
| | |
2.75% convertible notes liability | |
| - | | |
| - | | |
| 65,520,643 | |
Other non-current liabilities | |
| 96,000,000 | | |
| 96,000,000 | | |
| 96,000,000 | |
Total non-current liabilities | |
| 96,000,000 | | |
| 96,000,000 | | |
| 161,520,643 | |
Total liabilities | |
| 354,756,229 | | |
| 311,477,250 | | |
| 244,951,873 | |
Equity: | |
| | | |
| | | |
| | |
Equity attributable to owners of InterOil Corporation: | |
| | | |
| | | |
| | |
Share capital (note 8) | |
| 999,701,798 | | |
| 991,693,780 | | |
| 991,312,197 | |
Authorized - unlimited | |
| | | |
| | | |
| | |
Issued and outstanding - 49,560,160 | |
| | | |
| | | |
| | |
(Dec 31, 2014 - 49,414,801) | |
| | | |
| | | |
| | |
(Sep 30, 2014 - 49,404,087) | |
| | | |
| | | |
| | |
2.75% convertible notes | |
| 14,297,627 | | |
| 14,297,627 | | |
| 14,297,627 | |
Contributed surplus | |
| 16,903,110 | | |
| 18,270,837 | | |
| 18,293,198 | |
Accumulated (deficit)/earnings | |
| (153,735,337 | ) | |
| 4,390,396 | | |
| 68,596,834 | |
Total equity attributable to owners of InterOil Corporation | |
| 877,167,198 | | |
| 1,028,652,640 | | |
| 1,092,499,856 | |
Total liabilities and equity | |
| 1,231,923,427 | | |
| 1,340,129,890 | | |
| 1,337,451,729 | |
See accompanying notes to the condensed consolidated interim
financial statements
Condensed Consolidated Interim Financial Statements INTEROIL CORPORATION 1 |
InterOil Corporation
Consolidated Income Statements
(Unaudited, Expressed in United States dollars) |
|
| |
Quarter ended | | |
Nine months ended | |
| |
September 30, | | |
September 30, | | |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
| |
| | |
| | |
| | |
| |
Revenue | |
| | | |
| | | |
| | | |
| | |
Interest revenue (note 9) | |
| 11,243,704 | | |
| 8,799,206 | | |
| 8,379,741 | | |
| 17,204,673 | |
Other revenue | |
| 578,070 | | |
| 1,949,843 | | |
| 3,013,423 | | |
| 9,136,412 | |
| |
| 11,821,774 | | |
| 10,749,049 | | |
| 11,393,164 | | |
| 26,341,085 | |
| |
| | | |
| | | |
| | | |
| | |
Administrative and general expenses | |
| (6,102,878 | ) | |
| (7,661,327 | ) | |
| (19,761,872 | ) | |
| (28,116,573 | ) |
Legal and professional fees | |
| 414,534 | | |
| (4,841,002 | ) | |
| (2,345,224 | ) | |
| (10,582,791 | ) |
Exploration costs, excluding exploration impairment (note 6) | |
| (27,172,202 | ) | |
| (6,962,414 | ) | |
| (54,143,596 | ) | |
| (21,509,301 | ) |
Exploration impairment (note 6) | |
| (78,235,581 | ) | |
| - | | |
| (78,235,581 | ) | |
| - | |
Finance costs (note 10) | |
| (3,430,019 | ) | |
| (4,250,369 | ) | |
| (14,996,751 | ) | |
| (26,571,648 | ) |
Depreciation and amortization | |
| (118,359 | ) | |
| (922,468 | ) | |
| (373,171 | ) | |
| (3,271,979 | ) |
Gain on conveyance of exploration and evaluation assets (note 6) | |
| - | | |
| - | | |
| - | | |
| 340,540,011 | |
Foreign exchange (losses)/gains | |
| (645,996 | ) | |
| (527,575 | ) | |
| 871,586 | | |
| 4,542,340 | |
Share of net loss of joint venture partnership accounted for using the equity method | |
| - | | |
| (7,442 | ) | |
| - | | |
| (25,930 | ) |
| |
| (115,290,501 | ) | |
| (25,172,597 | ) | |
| (168,984,609 | ) | |
| 255,004,129 | |
(Loss)/profit from continuing operations before income taxes | |
| (103,468,727 | ) | |
| (14,423,548 | ) | |
| (157,591,445 | ) | |
| 281,345,214 | |
| |
| | | |
| | | |
| | | |
| | |
Income taxes | |
| | | |
| | | |
| | | |
| | |
Current tax (expense)/benefit | |
| (256,498 | ) | |
| 145,680 | | |
| (534,288 | ) | |
| (349,648 | ) |
Deferred tax expense | |
| - | | |
| (344,540 | ) | |
| - | | |
| (557,406 | ) |
| |
| (256,498 | ) | |
| (198,860 | ) | |
| (534,288 | ) | |
| (907,054 | ) |
| |
| | | |
| | | |
| | | |
| | |
(Loss)/profit for the period from continuing operations | |
| (103,725,225 | ) | |
| (14,622,408 | ) | |
| (158,125,733 | ) | |
| 280,438,160 | |
| |
| | | |
| | | |
| | | |
| | |
(Loss)/profit for the period from discontinued operations, net of tax (attibutable to owners of InterOil Corporation) (note 4) | |
| - | | |
| (2,308,134 | ) | |
| - | | |
| 73,533,577 | |
(Loss)/profit for the period | |
| (103,725,225 | ) | |
| (16,930,542 | ) | |
| (158,125,733 | ) | |
| 353,971,737 | |
| |
| | | |
| | | |
| | | |
| | |
(Loss)/profit is attributable to: | |
| | | |
| | | |
| | | |
| | |
Owners of InterOil Corporation | |
| (103,725,225 | ) | |
| (16,930,542 | ) | |
| (158,125,733 | ) | |
| 353,971,737 | |
| |
| (103,725,225 | ) | |
| (16,930,542 | ) | |
| (158,125,733 | ) | |
| 353,971,737 | |
| |
| | | |
| | | |
| | | |
| | |
(Loss)/earnings per share from continuing and discontinued operations attributable to owners of InterOil Corporation during the period | |
| | | |
| | | |
| | | |
| | |
Basic (loss)/earnings per share | |
| | | |
| | | |
| | | |
| | |
From continuing operations | |
| (2.09 | ) | |
| (0.29 | ) | |
| (3.19 | ) | |
| 5.64 | |
From discontinued operations | |
| - | | |
| (0.05 | ) | |
| - | | |
| 1.48 | |
From (loss)/profit for the period | |
| (2.09 | ) | |
| (0.34 | ) | |
| (3.19 | ) | |
| 7.12 | |
Diluted (loss)/earnings per share | |
| | | |
| | | |
| | | |
| | |
From continuing operations | |
| (2.09 | ) | |
| (0.29 | ) | |
| (3.19 | ) | |
| 5.64 | |
From discontinued operations | |
| - | | |
| (0.05 | ) | |
| - | | |
| 1.48 | |
From (loss)/profit for the period | |
| (2.09 | ) | |
| (0.34 | ) | |
| (3.19 | ) | |
| 7.12 | |
Weighted average number of common shares outstanding | |
| | | |
| | | |
| | | |
| | |
Basic (Expressed in number of common shares) | |
| 49,549,590 | | |
| 49,640,548 | | |
| 49,501,962 | | |
| 49,689,299 | |
Diluted (Expressed in number of common shares) | |
| 49,549,590 | | |
| 49,640,548 | | |
| 49,501,962 | | |
| 49,756,021 | |
See accompanying notes to the condensed consolidated interim
financial statements
Condensed Consolidated Interim Financial Statements INTEROIL CORPORATION 2 |
InterOil Corporation
Consolidated Statements of Comprehensive Income
(Unaudited, Expressed in United States dollars) |
|
| |
Quarter ended | | |
Nine months ended | |
| |
September 30, | | |
September 30, | | |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
| |
| | |
| | |
| | |
| |
(Loss)/profit for the period | |
| (103,725,225 | ) | |
| (16,930,542 | ) | |
| (158,125,733 | ) | |
| 353,971,737 | |
| |
| | | |
| | | |
| | | |
| | |
Other comprehensive loss: | |
| | | |
| | | |
| | | |
| | |
Items that may be reclassified to profit or loss: | |
| | | |
| | | |
| | | |
| | |
Exchange loss on translation of foreign operations, net of tax | |
| - | | |
| - | | |
| - | | |
| (3,141,715 | ) |
Reclassification of exchange gains on previously held foreign operations, net of tax | |
| - | | |
| - | | |
| - | | |
| (1,400,198 | ) |
Other comprehensive loss for the period, net of tax | |
| - | | |
| - | | |
| - | | |
| (4,541,913 | ) |
Total comprehensive (loss)/income for the period | |
| (103,725,225 | ) | |
| (16,930,542 | ) | |
| (158,125,733 | ) | |
| 349,429,824 | |
| |
| | | |
| | | |
| | | |
| | |
Total comprehensive (loss)/income for the period is attributable to: | |
| | | |
| | | |
| | | |
| | |
Owners of InterOil Corporation | |
| (103,725,225 | ) | |
| (16,930,542 | ) | |
| (158,125,733 | ) | |
| 349,429,824 | |
| |
| (103,725,225 | ) | |
| (16,930,542 | ) | |
| (158,125,733 | ) | |
| 349,429,824 | |
See accompanying notes to the condensed consolidated interim
financial statements
Condensed Consolidated Interim Financial Statements INTEROIL CORPORATION 3 |
InterOil Corporation
Consolidated Statements of Changes in Equity
(Unaudited, Expressed in United States dollars) |
|
| |
Nine months ended | |
| |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | |
Transactions with owners as owners: | |
$ | | |
$ | |
Share capital | |
| | | |
| | |
At beginning of period | |
| 991,693,780 | | |
| 953,882,273 | |
Issue of capital stock | |
| 8,008,018 | | |
| 52,050,716 | |
Share buyback | |
| - | | |
| (14,620,792 | ) |
At end of period | |
| 999,701,798 | | |
| 991,312,197 | |
2.75% convertible notes | |
| | | |
| | |
At beginning and end of period | |
| 14,297,627 | | |
| 14,297,627 | |
Contributed surplus | |
| | | |
| | |
At beginning of period | |
| 18,270,837 | | |
| 26,418,658 | |
Fair value of options and restricted stock transferred to share capital | |
| (8,304,333 | ) | |
| (8,943,008 | ) |
Stock compensation expense | |
| 6,936,606 | | |
| 8,895,206 | |
Share buyback | |
| - | | |
| (8,077,658 | ) |
At end of period | |
| 16,903,110 | | |
| 18,293,198 | |
Accumulated Other Comprehensive Income | |
| | | |
| | |
Foreign currency translation reserve | |
| | | |
| | |
At beginning of period | |
| - | | |
| 4,541,913 | |
Foreign currency translation movement for the period, net of tax | |
| - | | |
| (3,141,715 | ) |
Reclassification of exchange gains on previously held foreign operations, net of tax | |
| - | | |
| (1,400,198 | ) |
Foreign currency translation reserve at end of period | |
| - | | |
| - | |
Accumulated other comprehensive income at end of period | |
| - | | |
| - | |
Accumulated (deficit)/earnings | |
| | | |
| | |
At beginning of period | |
| 4,390,396 | | |
| (266,319,459 | ) |
Net (loss)/profit for the period | |
| (158,125,733 | ) | |
| 353,971,737 | |
Share buyback | |
| - | | |
| (19,055,444 | ) |
At end of period | |
| (153,735,337 | ) | |
| 68,596,834 | |
Total InterOil Corporation shareholders' equity at end of period | |
| 877,167,198 | | |
| 1,092,499,856 | |
See accompanying notes to the condensed consolidated interim
financial statements
Condensed Consolidated Interim Financial Statements INTEROIL CORPORATION 4 |
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, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
| |
| | |
| | |
| | |
| |
Cash flows generated from/(used in): | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Operating activities | |
| | | |
| | | |
| | | |
| | |
Net (loss)/profit for the period | |
| (103,725,225 | ) | |
| (16,930,542 | ) | |
| (158,125,733 | ) | |
| 353,971,737 | |
Adjustments for non-cash and non-operating transactions | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
| 118,359 | | |
| 922,468 | | |
| 373,171 | | |
| 11,917,681 | |
Deferred tax | |
| - | | |
| 371,929 | | |
| - | | |
| 1,876,959 | |
Impairment of exploration and evaluation assets | |
| 78,235,581 | | |
| - | | |
| 78,235,581 | | |
| - | |
Gain on conveyance of exploration assets | |
| - | | |
| - | | |
| - | | |
| (340,540,011 | ) |
Gain on sale of subsidiaries | |
| - | | |
| - | | |
| - | | |
| (49,537,443 | ) |
Accretion of convertible notes liability | |
| 1,026,110 | | |
| 966,869 | | |
| 3,033,129 | | |
| 2,858,015 | |
Amortization of deferred financing costs | |
| - | | |
| - | | |
| - | | |
| 8,323,575 | |
Timing difference between derivatives recognized and settled | |
| - | | |
| - | | |
| - | | |
| 373,697 | |
Stock compensation expense, including restricted stock | |
| 581,868 | | |
| 4,495,906 | | |
| 4,801,016 | | |
| 8,895,206 | |
Inventory write down | |
| - | | |
| - | | |
| - | | |
| 3,947,006 | |
Accretion of asset retirement obligation liability | |
| - | | |
| - | | |
| - | | |
| 192,282 | |
Accretion of receivable from Total S.A. (note 5) | |
| (11,015,238 | ) | |
| (8,274,886 | ) | |
| (33,053,681 | ) | |
| (16,429,289 | ) |
Adjustment to carrying amount of receivable from Total S.A. (note 5) | |
| - | | |
| - | | |
| 25,878,655 | | |
| - | |
Share of net loss of joint venture partnership accounted for using the equity method | |
| - | | |
| 7,442 | | |
| - | | |
| 25,930 | |
Unrealized foreign exchange gain | |
| - | | |
| - | | |
| - | | |
| (1,403,197 | ) |
Change in operating working capital | |
| | | |
| | | |
| | | |
| | |
Decrease/(increase) in trade and other receivables | |
| 4,939 | | |
| (986,505 | ) | |
| 238,315 | | |
| (65,618,202 | ) |
Decrease/(increase) in other current assets and prepaid expenses | |
| 262,608 | | |
| (126,955 | ) | |
| 1,954,397 | | |
| 1,626,849 | |
Decrease in inventories | |
| - | | |
| - | | |
| - | | |
| 8,275,985 | |
Increase/(decrease) in trade and other payables | |
| 17,810,702 | | |
| (31,066,964 | ) | |
| 15,539,113 | | |
| 10,338,355 | |
Net cash used in operating activities | |
| (16,700,296 | ) | |
| (50,621,238 | ) | |
| (61,126,037 | ) | |
| (60,904,865 | ) |
| |
| | | |
| | | |
| | | |
| | |
Investing activities | |
| | | |
| | | |
| | | |
| | |
Expenditure on exploration and evaluation assets net of JV contributions (note 6) | |
| (38,386,765 | ) | |
| (72,105,809 | ) | |
| (208,189,125 | ) | |
| (242,560,549 | ) |
Expenditure on plant and equipment | |
| 131,151 | | |
| (1,608,384 | ) | |
| (423,558 | ) | |
| (11,664,399 | ) |
Proceeds from disposal of plant and equipment | |
| - | | |
| - | | |
| 720,000 | | |
| - | |
Proceeds from Total for interest in PRL 15 (note 6) | |
| - | | |
| - | | |
| - | | |
| 401,338,497 | |
Decrease in restricted cash held as security on borrowings | |
| 86,610 | | |
| 17,531,294 | | |
| 100,893 | | |
| 44,895,458 | |
Proceeds from sale of subsidiaries, net of transaction costs, settlement of intercompany debt and cash and cash equivalents disposed of | |
| - | | |
| - | | |
| - | | |
| 427,985,105 | |
Change in non-operating working capital | |
| | | |
| | | |
| | | |
| | |
Decrease in trade and other receivables | |
| (33,948,107 | ) | |
| - | | |
| (33,948,107 | ) | |
| - | |
Increase in trade and other payables | |
| 14,629,045 | | |
| 23,846,110 | | |
| 27,537,846 | | |
| 48,812,213 | |
Net cash (used in)/generated from investing activities | |
| (57,488,066 | ) | |
| (32,336,789 | ) | |
| (214,202,051 | ) | |
| 668,806,325 | |
| |
| | | |
| | | |
| | | |
| | |
Financing activities | |
| | | |
| | | |
| | | |
| | |
Repayments of BSP and Westpac secured facility | |
| - | | |
| - | | |
| - | | |
| (24,780,077 | ) |
Proceeds from drawdown of Credit Suisse secured facility, net of transaction costs | |
| - | | |
| - | | |
| - | | |
| 50,000,000 | |
Repayment of Credit Suisse secured facility | |
| - | | |
| - | | |
| - | | |
| (150,000,000 | ) |
Proceeds from working capital facility | |
| - | | |
| - | | |
| - | | |
| 20,855,406 | |
Repayments of ANZ, BSP & BNP syndicated loan | |
| - | | |
| - | | |
| - | | |
| (84,000,000 | ) |
Proceeds from issue of common shares, net of transaction costs | |
| - | | |
| - | | |
| - | | |
| 2,186,690 | |
Payment on share buyback | |
| - | | |
| (41,753,894 | ) | |
| - | | |
| (41,753,894 | ) |
Net cash used in financing activities | |
| - | | |
| (41,753,894 | ) | |
| - | | |
| (227,491,875 | ) |
| |
| | | |
| | | |
| | | |
| | |
(Decrease)/increase in cash and cash equivalents | |
| (74,188,362 | ) | |
| (124,711,921 | ) | |
| (275,328,088 | ) | |
| 380,409,585 | |
Cash and cash equivalents, beginning of period | |
| 192,265,472 | | |
| 567,088,045 | | |
| 393,405,198 | | |
| 61,966,539 | |
Cash and cash equivalents, end of period | |
| 118,077,110 | | |
| 442,376,124 | | |
| 118,077,110 | | |
| 442,376,124 | |
Comprising of: | |
| | | |
| | | |
| | | |
| | |
Cash on Deposit | |
| 67,294,966 | | |
| 324,708,313 | | |
| 67,294,966 | | |
| 324,708,313 | |
Short Term Deposits | |
| 50,782,144 | | |
| 117,667,811 | | |
| 50,782,144 | | |
| 117,667,811 | |
Total cash and cash equivalents, end of period | |
| 118,077,110 | | |
| 442,376,124 | | |
| 118,077,110 | | |
| 442,376,124 | |
See accompanying notes to the condensed consolidated interim
financial statements
Condensed Consolidated Interim Financial Statements INTEROIL CORPORATION 5 |
InterOil
Corporation
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited, Expressed in United States dollars) |
|
InterOil Corporation (the "Company"
or "InterOil") is a publicly traded, independent upstream oil and gas business with a sole focus on Papua New Guinea
(“PNG”). The Company is incorporated and domiciled in Canada and was continued under the Business Corporations Act
(Yukon Territory) on August 24, 2007. The address of its registered office is 300-204 Black Street, Whitehorse, Yukon, Canada.
These condensed consolidated interim financial
statements were approved by the Directors for issue on November 10, 2015. The Board of Directors have the power to amend and reissue
the financial report.
| 2. | Significant accounting policies |
These condensed consolidated interim financial
statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as applicable
to the preparation of interim financial statements including IAS 34 – ‘Interim Financial Reporting’, and should
be read in conjunction with the annual financial statements for the year ended December 31, 2014 which have been prepared in accordance
with IFRS, as issued by the IASB.
The condensed consolidated interim financial
statements for the quarter and nine months ended September 30, 2015 have been prepared under the historical cost convention, except
for derivative financial instruments, which are measured at fair value.
The preparation of financial statements
requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process
of applying the Company’s accounting policies. Estimates and judgments are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results.
| (a) | Statement on liquidity, capital resources and capital requirements |
These condensed consolidated interim financial
statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities
in the normal course of business as they become due.
The net current assets as at September
30, 2015 amounted to $473.2 million compared to $948.2 million as at September 30, 2014. The Company has cash, cash equivalents
and cash restricted of $126.3 million as at September 30, 2015 (September 2014 - $450.7 million), of which $8.2 million is restricted
(September 2014 - $8.3 million).
The Company’s primary use of capital
resources has been for exploration and development activities. The Company has to execute exploration activities within a set timeframe
to meet the minimum license commitments in relation to the Company’s Petroleum Prospecting Licenses (“PPLs”)
and Petroleum Retention Licenses (“PRLs”). Refer to note 12 for further information on these commitments. Subject to
meeting the license commitment requirements, the Company’s capital expenditure can be accelerated or decelerated at its discretion.
Existing cash balances and available credit
facilities will be sufficient to settle debt obligations and to facilitate further necessary development of the Elk and Antelope
fields, appraisal of Triceratops field and exploration activities planned to meet our license commitment requirements. However,
oil and gas exploration and development and liquefaction are capital intensive and our business plans involve raising capital,
which depends on market conditions when we raise such capital. Additionally, our joint venture share of the costs of construction
of an LNG plant and other infrastructure associated with the proposed Papua LNG project may amount to billions of dollars and thus
exceed our existing cash balances. While the Company is confident that it will be successful in obtaining new capital on terms
that are acceptable to the Company, particularly with market volatility, no assurance can be given. Accordingly, these consolidated
financial statements have been prepared on a going concern basis in the belief that the Company will realize its assets and settle
its liabilities and commitments in the normal course of business and for at least the amounts stated, for a period not less than
one year from the date of this financial report.
The accounting policies followed in these
condensed consolidated interim financial statements are consistent with those of the previous financial year.
Condensed Consolidated Interim Financial Statements INTEROIL CORPORATION 6 |
InterOil
Corporation
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited, Expressed in United States dollars) |
|
| 2. | Significant accounting policies (cont’d) |
| (c) | New standards issued but not yet effective |
The following new standards have been issued
but are not yet effective for the financial year beginning January 1, 2015 and have not been early adopted:
| – | IFRS 9 ‘Financial Instruments’ (effective from January 1, 2018):
This addresses the classification and measurement of financial assets. The standard is not applicable until January 1,
2018 but is available for early adoption. The Company is yet to assess IFRS 9’s full impact, but does not expect any material
changes due to this standard. The Company has not yet decided to early adopt IFRS 9. |
| – | IFRS 15 ‘Revenue from contracts with customers’ (effective from January
1, 2018): The new standard is based on the principle that revenue is recognized when control of a good or service
transfers to a customer, so the notion of control replaces the existing notion of risks and rewards. The Company is evaluating
the impact of this standard. |
| 3. | Financial risk management |
The Company’s activities expose it
to a variety of financial risks: market risk, credit risk, liquidity risk and geographic risk. The Company’s overall risk
management program focuses on the unpredictability of markets and seeks to minimize potential adverse effects on the financial
performance of the Company.
Risk Management is carried out under policies
approved by the board of directors of InterOil. The Finance Department identifies, evaluates and actively mitigates financial risks
in close cooperation with the Company’s operations. The board of directors of InterOil provides written principles for overall
risk management, as well as written policies covering specific areas. The Company’s overall risk management program seeks
to minimize potential adverse effects on the Company’s financial performance.
| |
September 30, 2015 | | |
December 31, 2014 | | |
September 30, 2014 | | |
Method of |
| |
Carrying amount | | |
Fair value | | |
Carrying amount | | |
Fair value | | |
Carrying amount | | |
Fair value | | |
measurement |
| |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
$ | | |
|
Financial instruments | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Financial assets | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Loans
and receivables | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Cash and cash equivalents | |
| 118,077,110 | | |
| 118,077,110 | | |
| 393,405,198 | | |
| 393,405,198 | | |
| 442,376,124 | | |
| 442,376,124 | | |
Amortized Cost |
Cash restricted | |
| 8,200,240 | | |
| 8,200,240 | | |
| 8,301,133 | | |
| 8,301,133 | | |
| 8,319,086 | | |
| 8,319,086 | | |
Amortized Cost |
Receivables | |
| 602,817,890 | | |
| 602,817,890 | | |
| 566,362,745 | | |
| 566,362,745 | | |
| 577,336,495 | | |
| 577,336,495 | | |
Amortized Cost |
Other non-current receivable | |
| 29,700,534 | | |
| 29,700,534 | | |
| 29,700,534 | | |
| 29,700,534 | | |
| 29,700,534 | | |
| 29,700,534 | | |
Amortized Cost |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Financial liabilities | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Current
liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Accounts payable and accrued liabilities | |
| 179,881,533 | | |
| 179,881,533 | | |
| 139,716,105 | | |
| 139,716,105 | | |
| 74,274,968 | | |
| 74,274,968 | | |
Amortized Cost |
2.75% Convertible notes liability | |
| 69,535,121 | | |
| 69,535,121 | | |
| 66,501,994 | | |
| 66,501,994 | | |
| - | | |
| - | | |
Amortized Cost |
Non-current
liabilities | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
2.75% Convertible notes liability | |
| - | | |
| - | | |
| - | | |
| - | | |
| 65,520,643 | | |
| 65,520,643 | | |
Amortized Cost |
Other non-current liabilities | |
| 96,000,000 | | |
| 96,000,000 | | |
| 96,000,000 | | |
| 96,000,000 | | |
| 96,000,000 | | |
| 96,000,000 | | |
Amortized Cost |
The net fair value of cash and cash equivalents
and non-interest bearing financial assets and financial liabilities of the Company approximates their carrying amounts.
The carrying values (less impairment provision
if provided) of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The
carrying value of financial liabilities approximates their fair values which, for disclosure purposes, are estimated by discounting
the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.
All the financial assets and financial
liabilities in the above table are measured at a fair value on a non-recurring basis and are maintained at historical amortized
cost.
Condensed Consolidated Interim Financial Statements INTEROIL CORPORATION 7 |
InterOil
Corporation
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited, Expressed in United States dollars) |
|
| 4. | Discontinued operations |
On June 30, 2014, the Company entered into
share sale and purchase agreements with Puma Energy Pacific Holdings Pte Ltd. (“Puma”) for the sale of InterOil subsidiaries
that held the oil refinery and petroleum products distribution businesses, which were previously included within the Midstream
Refining and Downstream segments respectively. The results of operations for these sold businesses have been presented as discontinued
operations in the consolidated income statement for the quarter and six months ended June 30, 2014. In addition, the shipping business
which was previously included within the Corporate segment has also been classified as a discontinued operation in the consolidated
income statements for the quarter and six months ended June 30, 2014, as the activities previously being carried out by the business
have been transferred to Puma with the sale of the refining and distribution businesses.
Cash flows from these discontinued operations
have been combined with the cash flows from continuing operations in the consolidated statements of cash flows for the nine months
ended September 30, 2014.
| 5. | Trade and other receivables |
| |
September 30, | | |
December 31, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2014 | |
| |
$ | | |
$ | | |
$ | |
Trade and other receivables | |
| 54,579,405 | | |
| 21,207,984 | | |
| 11,881,102 | |
Sale proceeds receivable from Total | |
| 548,238,485 | | |
| 545,154,761 | | |
| 565,455,393 | |
Total | |
| 602,817,890 | | |
| 566,362,745 | | |
| 577,336,495 | |
Trade and other receivables mainly relates
to cash calls receivable from joint venture partners.
Refer to note 6 for details of the transaction
with Total S.A. (“Total”). The Interim Resource Payment, as defined under the share sale agreement (“Total SSA”)
with a subsidiary of Total, which is due to the Company following the interim certification, has been calculated to be $593.9 million
based on a resource estimate of 7.10 Tcfe in accordance with the resource certification mechanics found in the Total SSA and the
range of resources contemplated therein. The expected discounted value of this cash flow as at June 30, 2015 was $574.6 million.
However, during June 2015, the Company adjusted the expected cash flow timing of the Interim Resource Payment from December 2015
to June 2016 to accommodate the drilling of Antelope-4 and Antelope-6. The Company recalculated the carrying amount of the receivable
by computing the present value of estimated future cash flows at the original effective interest rate and the adjustment has been
recognized in profit or loss. The Company recalculated the carrying amount of the receivable as at June 30, 2015 to be $548.7 million,
with the resulting adjustment of $25.9 million being recognized in the income statement during the quarter ended June 30, 2015.
The Company has recognized $33.1 million
as a result of unwinding the discount on the receivable as interest income during the nine months ended September 30, 2015. In
addition, this receivable has been reduced by $4.1 million during the nine months ended September 30, 2015, which represents a
portion of the carry received from Total for development activities undertaken over PRL 15, which is to be offset against the Interim
Resource Payment when due. The following table shows the movement in the receivable during the period.
| |
September 30, | | |
December 31, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2014 | |
| |
$ | | |
$ | | |
$ | |
Balance at beginning of period | |
| 545,154,761 | | |
| - | | |
| - | |
Initial recognition of receivable from Total | |
| - | | |
| 551,892,942 | | |
| 551,892,942 | |
Interest accretion income on receivable from Total | |
| 33,053,681 | | |
| 24,826,440 | | |
| 16,429,290 | |
Adjustment due to change in timing of estimated cash flows | |
| (25,878,655 | ) | |
| (24,206,783 | ) | |
| - | |
less amounts to be deducted for Total carry of appraisal costs | |
| (4,091,302 | ) | |
| (7,357,838 | ) | |
| (2,866,839 | ) |
Balance at end of period | |
| 548,238,485 | | |
| 545,154,761 | | |
| 565,455,393 | |
Condensed Consolidated Interim Financial Statements INTEROIL CORPORATION 8 |
InterOil
Corporation
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited, Expressed in United States dollars) |
|
| 6. | Exploration and evaluation assets |
Costs of exploration and evaluation assets
which are not subject to depletion are as follows:
| |
September 30, | | |
December 31, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2014 | |
| |
$ | | |
$ | | |
$ | |
Infrastructure and drilling and construction equipment | |
| 2,588,871 | | |
| 1,759,251 | | |
| 5,276,697 | |
Drilling consumables and spares | |
| 26,196,496 | | |
| 32,659,831 | | |
| 33,976,255 | |
Petroleum Retention License drilling programs (Unproved) | |
| 251,705,781 | | |
| 83,939,901 | | |
| 60,379,985 | |
Petroleum Prospecting License drilling programs (Unproved) | |
| 179,692,462 | | |
| 206,682,990 | | |
| 145,413,125 | |
Gross Capitalized Costs | |
| 460,183,610 | | |
| 325,041,973 | | |
| 245,046,062 | |
Accumulated depletion and amortization | |
| | | |
| | | |
| | |
Unproved oil and gas properties | |
| - | | |
| - | | |
| - | |
Proved oil and gas properties | |
| - | | |
| - | | |
| - | |
Net Capitalized Costs | |
| 460,183,610 | | |
| 325,041,973 | | |
| 245,046,062 | |
The majority of the costs capitalized under
‘Petroleum Retention License drilling programs’ above relates to the exploration and development expenditure on the
Elk, Antelope and Triceratops fields. The majority of the costs capitalized under ‘Petroleum Prospecting License drilling
programs (Unproved)’ above relates to the exploratory drilling costs relating to Bobcat-1 and Raptor-1 wells. On August 12,
2015, the Company advised the market that the Wahoo-1 sidetrack operations had not intersected a carbonate reservoir and it intended
to plug and abandon the well. As a result, during the quarter ended September 30, 2015, the Company expensed $78.2 million of costs
relating to the Wahoo exploration costs within ‘Exploration impairment’ in the Consolidated Income Statement.
The following table discloses a breakdown
of the exploration and evaluation costs incurred for the periods ended:
| |
Nine months ended | | |
Year ended | | |
Nine months ended | |
| |
September 30, | | |
December 31, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2014 | |
| |
$ | | |
$ | | |
$ | |
Opening balance | |
| 325,041,973 | | |
| 584,807,023 | | |
| 584,807,023 | |
Property Acquisition Costs | |
| - | | |
| - | | |
| - | |
Exploration Costs | |
| 33,828,804 | | |
| 256,562,981 | | |
| 181,719,587 | |
Development Costs - Operator | |
| 273,037,246 | | |
| 194,291,826 | | |
| 118,346,697 | |
Development Costs - Non-Operator (1) | |
| 19,002,577 | | |
| - | | |
| - | |
Add: Premium paid on indirect participating interest buyback transactions | |
| - | | |
| 41,525,728 | | |
| 41,525,728 | |
Less: Indirect participating interest conveyance accounting offset against properties | |
| - | | |
| (12,097,363 | ) | |
| (12,097,363 | ) |
Less: Total conveyance accounting offset against properties | |
| - | | |
| (611,939,426 | ) | |
| (611,939,426 | ) |
Less: Costs recovered through cash calls from joint venture partners | |
| (190,726,990 | ) | |
| (128,108,796 | ) | |
| (57,316,184 | ) |
Total Costs capitalized | |
| 135,141,637 | | |
| (259,765,050 | ) | |
| (339,760,961 | ) |
Closing balance | |
| 460,183,610 | | |
| 325,041,973 | | |
| 245,046,062 | |
Charged to expense | |
| | | |
| | | |
| | |
Exploration impairment | |
| 78,235,581 | | |
| - | | |
| - | |
Exploration costs, excluding exploration impairment | |
| 54,143,596 | | |
| 34,529,478 | | |
| 21,509,301 | |
Total charged to expense | |
| 132,379,177 | | |
| 34,529,478 | | |
| 21,509,301 | |
Exploration and Evaluation Assets Net Additions (capitalized and expensed) | |
| 267,520,814 | | |
| (225,235,572 | ) | |
| (318,251,660 | ) |
(1) Operatorship of the PRL 15 joint venture
was transferred to Total SSA on August 1, 2015.
Condensed Consolidated Interim Financial Statements INTEROIL CORPORATION 9 |
InterOil
Corporation
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited, Expressed in United States dollars) |
|
| 6. | Exploration and evaluation assets (cont’d) |
Total Sale and Purchase Agreement
for PRL 15:
On March 26, 2014, the Company signed and
closed the Total SSA, under which Total acquired through the purchase of all of the shares in a wholly owned subsidiary of InterOil,
a gross 40.1275% interest in PRL 15, which contains the Elk and Antelope gas fields. InterOil received $401.3 million for closing
the transaction, and became entitled to receive $73.3 million on a final investment decision for the Papua LNG project, and $65.5
million on the first LNG cargo from the project. In addition to these fixed amounts, Total is obliged to make variable payments
for gas amounts in PRL 15 that are in excess of 3.5 Tcfe, based on certification by two independent certifiers following the drilling
of up to three appraisal wells to be drilled in PRL 15. The gas resource payment for amounts greater than 5.4 Tcfe will be paid
at certification, with the payment for amounts greater than 3.5 Tcfe but less than 5.4 Tcfe being due on a final investment decision.
The conveyance accounting for the sale of property under the Total SSA was accounted for in the prior year quarter ended March
31, 2014.
Gross and Net Cash Expenditure on
exploration and evaluation assets:
The following table discloses a breakdown
of the net cash expenditure on exploration and evaluation assets as disclosed in the consolidated statements of cash flows for
the periods ended:
| |
Quarter ended | | |
Nine months ended | |
| |
September 30, | | |
September 30, | | |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
Expenditure on exploration and evaluation assets | |
| (108,982,533 | ) | |
| (107,804,261 | ) | |
| (400,509,568 | ) | |
| (301,807,153 | ) |
Proceeds from joint venture cash calls | |
| 70,595,768 | | |
| 35,698,452 | | |
| 192,320,443 | | |
| 59,246,604 | |
Net expenditure on exploration and evaluation assets | |
| (38,386,765 | ) | |
| (72,105,809 | ) | |
| (208,189,125 | ) | |
| (242,560,549 | ) |
| 7. | Secured and unsecured loans |
Credit Suisse led Syndicated Secured
Loan Facility
On June 17, 2014, the Company entered into
a $300.0 million syndicated, senior secured capital expenditure facility through a consortium of banks led by Credit Suisse AG
(“Credit Suisse”). The facility is supported by the participating lenders Commonwealth Bank of Australia (“CBA”),
Australia and New Zealand Banking Group (PNG) Limited (“ANZ”), UBS A.G. (“UBS”) , Macquarie Group Limited
(“Macquarie”), Bank of South Pacific Limited (“BSP”), Westpac Bank PNG Limited (“Westpac”)),
The Bank of Tokyo-Mitsubishi UFJ (“MUFJ”) and Societe Generale S.A. (“SocGen”). The facility has an annual
interest rate of LIBOR plus 5% and matures at the end of 2016.
No draw downs have been made under the
facility as at September 30, 2015. As at September 30, 2015, the Company was in compliance with the applicable debt covenants,
which include a defined calculation for gearing not to exceed 60% at any time, a requirement that the equity does not fall below
$500.0 million at any time, and agreed expenditure limits tested for the six months period ending March 31 and September 30 each
year.
During the nine months ended September
30, 2015, the total interest expense under this facility included in finance costs was nil (September 2014 - $4.3 million). In
addition, financing costs relating to this facility of $10.5 million (of which $4.9 million relates to the refinancing completed
in March 2015) were expensed during the nine months ended September 30, 2015 (September 2014 - $14.9 million).
Condensed Consolidated Interim Financial Statements INTEROIL CORPORATION 10 |
InterOil
Corporation
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited, Expressed in United States dollars) |
|
| 8. | Share capital and reserves |
The authorized share capital of the Company
consists of an unlimited number of common shares with no par value and an unlimited number of preferred shares, of which 1,035,554
series A preferred shares are authorized. Each common share entitles the holder to one vote.
Common shares - Changes to
issued share capital were as follows:
| |
Number of shares | | |
$ | |
| |
| | |
| |
January 1, 2014 | |
| 49,217,242 | | |
| 953,882,273 | |
| |
| | | |
| | |
Shares issued on exercise of options under Stock Incentive Plan | |
| 127,400 | | |
| 3,623,272 | |
Shares issued on vesting of restricted stock units under Stock Incentive Plan | |
| 111,505 | | |
| 7,283,299 | |
Shares issued on buyback of IPI interest in PRL 15 | |
| 688,654 | | |
| 41,525,728 | |
Shares buyback | |
| (730,000 | ) | |
| (14,620,792 | ) |
| |
| | | |
| | |
December 31, 2014 | |
| 49,414,801 | | |
| 991,693,780 | |
| |
| | | |
| | |
Shares issued on vesting of restricted stock units under Stock Incentive Plan | |
| 145,359 | | |
| 8,008,018 | |
| |
| | | |
| | |
September 30, 2015 | |
| 49,560,160 | | |
| 999,701,798 | |
Preferred shares - No preferred
shares are issued, or were issued at any time during the nine months ended September 30, 2015 (September 2014 – nil).
| |
Quarter ended | | |
Nine months ended | |
| |
September 30, | | |
September 30, | | |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
| |
| | | |
| | | |
| | | |
| | |
Interest income on short term deposits | |
| 228,466 | | |
| 524,318 | | |
| 1,204,715 | | |
| 775,383 | |
Interest accretion income on receivable from Total (note 5) | |
| 11,015,238 | | |
| 8,274,888 | | |
| 33,053,681 | | |
| 16,429,290 | |
Adjustment due to change in timing of estimated cash flows on receivable from Total (note 5) | |
| - | | |
| - | | |
| (25,878,655 | ) | |
| - | |
Interest revenue | |
| 11,243,704 | | |
| 8,799,206 | | |
| 8,379,741 | | |
| 17,204,673 | |
| |
Quarter ended | | |
Nine months ended | |
| |
September 30, | | |
September 30, | | |
September 30, | | |
September 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
$ | | |
$ | | |
$ | | |
$ | |
| |
| | | |
| | | |
| | | |
| | |
Interest expense on Credit Suisse Secured Loan | |
| - | | |
| - | | |
| - | | |
| 4,303,388 | |
Interest expense on Westpac and BSP Secured Loan | |
| - | | |
| - | | |
| - | | |
| 1,341,127 | |
Interest expense on Convertible Notes | |
| 481,236 | | |
| 481,236 | | |
| 1,443,709 | | |
| 1,443,709 | |
Interest accretion on Convertible Notes | |
| 1,026,110 | | |
| 966,870 | | |
| 3,033,129 | | |
| 2,858,016 | |
Financing fees on Credit Suisse Secured Loan | |
| 1,916,667 | | |
| 2,325,003 | | |
| 10,513,907 | | |
| 14,897,371 | |
Financing fees on Westpac and BSP Secured Loan | |
| - | | |
| 3,703 | | |
| - | | |
| 1,172,534 | |
Other finance costs | |
| 6,006 | | |
| 473,557 | | |
| 6,006 | | |
| 555,503 | |
Finance costs | |
| 3,430,019 | | |
| 4,250,369 | | |
| 14,996,751 | | |
| 26,571,648 | |
Condensed Consolidated Interim Financial Statements INTEROIL CORPORATION 11 |
InterOil Corporation
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited, Expressed in United States dollars) |
|
| 11. | Earnings/(loss) per share |
Conversion options, convertible notes,
stock options and restricted stock units totaling 1,137,209 common shares at prices ranging from $32.77 to $95.63 were outstanding
as at September 30, 2015.
| |
Number of shares | | |
Number of shares | |
Potential dilutive instruments outstanding | |
| September 30, 2015 | | |
| September 30, 2014 | |
Employee stock options | |
| 210,000 | | |
| 210,000 | |
Employee Restricted Stock | |
| 195,205 | | |
| 124,971 | |
2.75% Convertible notes | |
| 732,004 | | |
| 732,004 | |
Total stock options/shares outstanding | |
| 1,137,209 | | |
| 1,066,975 | |
| 12. | Commitments and contingencies |
(a) Exploration and debt commitments
Payments due by period contractual obligations
are as follows:
| |
Total | | |
Less than 1 year | | |
1-2 years | | |
2-3 years | | |
3-4 years | | |
4-5 years | | |
More than 5 years | |
| |
'000 | | |
'000 | | |
'000 | | |
'000 | | |
'000 | | |
'000 | | |
'000 | |
Petroleum prospecting and retention licenses | |
| 381,521 | | |
| 9,105 | | |
| - | | |
| 176,866 | | |
| 250 | | |
| 195,300 | | |
| - | |
Convertible notes obligations | |
| 70,319 | | |
| 70,319 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| 451,840 | | |
| 79,424 | | |
| - | | |
| 176,866 | | |
| 250 | | |
| 195,300 | | |
| - | |
The PPL and PRL amounts represent the Company’s
commitments on these licenses as at September 30, 2015. On March 6, 2014, the Company’s applications for new petroleum prospecting
licenses were approved with PPL 474 replacing PPL 236, PPL 475 replacing PPL 237, and PPL 476 and PPL 477 replacing PPL 238 and
included new license commitments. The new commitments require the Company to spend an additional $351.9 million over the remainder
of their six-year terms.
Further, the terms of grant of PRL 39 requires
the Company to spend $29.6 million on the license area by the end of 2018.
(b) Contingencies:
From time to time the Company is involved
in various claims and litigation arising in the course of its business. While the outcome of these matters is uncertain and there
can be no assurance that such matters will be resolved in the Company’s favor, the Company does not currently believe that
the outcome of adverse decisions in any pending or threatened proceedings or any amount which it may be required to pay by reason
thereof would have a material adverse impact on its financial position, results of operations or liquidity.
Subsequent to the quarter end, the Company
received notification from Pacific Exploration and Production Corporation (“PRE”) of their intention to withdraw from
further participation in PRL 39. In August 2015, the Company had also received notification from PRE of their intention to withdraw
from further participating in PPL 475. In accordance with the Farm-In Agreement dated July 27, 2012 between the Company and PRE,
the Company is required to refund to PRE $96.0 million in monthly installments commencing in the month subsequent to our receipt
of any net cash proceeds from commercial sale of product from PRL 15, although the $96.0 million must be repaid in full within
6 years of receiving the notification. The Company has a receivable of $29.7 million which is refundable from Pacific LNG Operations
Ltd and other indirect participating interest holders if PRE exercised its option to terminate the Farm-In Agreement, under the
same terms as the amount refundable to PRE. Subsequent to PRE’s withdrawal, the Company’s interest in the Triceratops
discovery is 78.1114%, and in PRL 39 (excluding the Triceratops discovery) is 100% (94.25% assuming PNG Drilling Ventures Limited
("PNGDV") will elect to exercise their option to participate at their 5.75% interest election). The Company’s interest
in the Raptor discovery is 79.1114%, and in PPL 475 (excluding the Raptor discovery) is 100% (94.25% assuming PNGDV will elect
to exercise their option to participate at their 5.75% interest election).
Condensed Consolidated Interim Financial Statements INTEROIL CORPORATION 12 |
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