InterOil Shares Got Crushed: What You Need to Know


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of InterOil (NYS: IOC) fell as much as 24% today on concerns Papua New Guinea may require the company to make major changes to its LNG project.

So what: Comments made by the country's Minister of Petroleum and Energy required a response from InterOil, who basically said its project plan meets a previous agreement. The disagreement appears to be over the project's size, which will be 2 million tons per annum (mtpa) and can be expanded to 8 mtpa. The government wants a project with production of 7.6-10.6 mtpa.

Now what: No one wants to pick a fight with a government that is an important partner, so the company must tread carefully. A larger project would obviously require much more capital expenditure than the smaller project, and be more risky for InterOil. Right now InterOil doesn't appear to be making plans to change the project, but keep an eye on this going forward because it will have a big impact on the company's cash flow.

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At the time thisarticle was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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