On Monday, we reported an analyst’s contention that energy exploration company InterOil (IOC) had lied to Wall Street in a 2008 investor presentation.In the presentation, InterOil described reservoir rock at a drilling site as having “proven thickness, porosity and deliverability” that made it “a world-class reservoir…” The company then went on to describe this reservoir as extending several thousand feet deep.
This characterization was important: Having a reservoir of a certain quality and size was critical to the likelihood of the company actually discovering a significant amount of recoverable gas and oil.
The InterOil sceptic said this claim was bogus. He cited the company’s own geologists as referring to the same reservoir as “challenging” to classify and having much smaller dimensions. Thus, the analyst concluded, the company was lying to Wall Street.
Shortly after we published the analyst’s report, several InterOil defenders immediately said that the analyst was comparing apples and oranges. The company’s geologist had been talking about a drilling site called “Elk,” the defenders said. The company’s presentation, meanwhile, was describing a much more promising site called “Antelope.” The company’s presentation had accurately described Antelope, the InterOil defenders said, so the InterOil sceptic was wrong.
We checked the presention, which was not clear on which site the company had been referring to. The InterOil sceptic soon responded, saying that that there was NO WAY the company could have been describing Antelope, because InterOil had not yet drilled far enough into Antelope to determine the dimensions of the reservoir. The analyst sent us a drilling report to prove this.
So who’s right? The InterOil sceptic, who believes that the company misrepresented the size and quality of the Elk rock reservoir? Or the InterOil bulls, who believe the company was describing the Antelope reservoir?
Neither, says a company defender familiar with InterOil’s take on this issue.
In the investor presentation, the company defender says, Interoil was NOT describing Antelope. But nor was it describing the smaller “Elk 1” drilling site that its geologist had been referring to in 2007, when he described a site with much smaller dimensions.
In fact, the company defender says, the presentation was referring to “Elk 2“, a second Elk drilling site. The Elk 2 well, the defender says, was drilled to a depth sufficient to support the company’s claim in the investor presentation. The Elk 2 well was, in one respect, a failure: It produced water, not oil or gas. But it also, the company defender says, revealed a rock reservoir of the size that the company described–one that supported the descriptions of “proven thickness, porosity and deliverability” and “world-class reservoir…”
So there you have it.
The InterOil bulls were wrong: The company was not referring to Antelope.
And how about the InterOil sceptic? Does the sceptic think the company’s description in the investor presentation accurately describe the reservoir rock at Elk 2?
See Also: Is InterOil Just A Gigantic Fraud?
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