"I believe if InterOil really was able to make a deal, it would just do it! Other oil and gas companies, and even companies in other sectors, don't need to make such a big public spectacle every time they are trying to sell an asset or partner up with another company. Usually you never even hear rumors of a buyout or partnership, it just happens unexpectedly. InterOil, however, always provides the sizzle, but to this day, the steak has never arrived.
On January 23rd, IOC stock was tumbling and I believe the management felt it had to do something to reverse the drop. Intraday, it had fallen over 10% at one point. Management then made an announcement the morning of January 24th that InterOil will close the bidding process on February 28th, and then choose a partner in the first week of March. This announcement was out of the blue and a surprise to everyone. There is no fundamental reason why InterOil had to tell this to the public. Management could have just privately told it to the potential partners that were bidding on the gas wells. But desperate times call for desperate measures, and this announcement succeeded in creating a rebound in the stock. Unfortunately for long term shareholders, I don't think anything solid will come of this.
When researching stocks, I often go on message boards to get the point of view of other investors. A few days ago, I was reading the IOC Yahoo message board. On it I read a reposted quote from hedge fund manager Whitney Tilson that said:
This is a company that has NO RESERVES - not proven, probable or even possible; just a 'contingent resource estimate' from a firm that InterOil paid, after shopping among firms - and has NEVER delivered on its countless promises of huge natural resource finds in over 200 press releases over more than 10 years. Sure, there's gas there - this isn't Bre-X - but we think there's only a tiny fraction of what IOC claims.
--- Whitney Tilson
I agree with Tilson's statement. It's also interesting that he mentioned Bre-X, which ironically has many things in common with InterOil.
Is InterOil Another Bre-X?
If you don't know the story of Bre-X, you can read about it on Wikipedia here. It's a fascinating story. In summary, Bre-X was a Canadian company in the 1990s that claimed to own a huge gold deposit in Busang, Indonesia. Bre-X bought the land in 1993, and in 1995 announced a large amount of gold had been discovered. Originally a penny stock, Bre-X reached its peak market capitalization of over CAD $6 billion in 1996. However, in 1997 the gold samples were exposed as being a fraud, and the stock collapsed. Bre-X eventually went bankrupt and the stock went to zero.
While InterOil hasn't been proven yet to be a fraud, investors should be wary. The company's delays, relentless promotional activity, and unreliability over the past decade make it look very shady......."
Sentiment: Strong Sell
The statement that other companies don't advertise their sale process is completely untrue and shows a complete lack of understanding about oil and gas transactions. Many banks have entire divisions devoted to oil and gas M&A and they regularly advertise these deals with oil and gas investors. How naive Gelvert is. Good grief.
Just for example, here is a recent (last week) excerpt from a story whose headline is
ConocoPhillips may shop LNG stakes
ConocoPhillips has said it is seeking a buyer for 50% of a large portion of its Canadian oil sands holdings, assets that could eventually produce more than half a million barrels a day.
Conoco also has 50% interest in the Surmont, Foster Creek and Christina Lake oil sands projects in Alberta.
"It's a mix of stuff we have and it appeals to buyers in different ways, Lance said in an interview.
The planned oil sands stake sale is part of the company's effort to reduce exposure to higher cost projects to free up funds for shale development, Lance told analysts attending the company's analyst meeting in New York.
I could find many, many more which illustrate the idiocy of Adam Gelvert's statement, but why bother. Shorts don't want to be confused with FACTS.
You're forgetting how involved the PNG government is involved with the approval process. PNG is not like the USA. And besides, unless you're invested in IOC, I don't think anyone really knows about this pending deal and hardly reaches "spectacle" status.
The PNG Governement is one of the most corrupt governments on Planet Earth. Go Google the Transparency International Report on them and see where they rank in the Corruption Index right down there with Uganda.
Sentiment: Strong Sell