Dear Fellow Shareholders:
As you know, I am the founder and former Chairman and CEO of InterOil Corporation (“InterOil” or, the “Company”). Petroleum Independent & Exploration, LLC and I (the “Concerned InterOil Shareholders” or “we”), together with other shareholders concerned about InterOil’s future and representing in total approximately 7.5% of the outstanding common shares of the Company, requisitioned a special meeting of shareholders (the “Requisition”) under the Business Corporations Act (Yukon) (the corporate statute governing InterOil) in March 2016 seeking to improve the corporate governance of InterOil.
On May 19, 2016, the current board of directors of InterOil announced that InterOil had entered into an arrangement agreement with Oil Search Limited (“OSH”), pursuant to which OSH proposes to acquire 100% of InterOil (the “OSH/TOTAL Proposal”). In our view, the OSH/TOTAL Proposal vastly undervalues InterOil by about $4 billion, based on our resource estimates supported by independent third party certifiers, and further illustrates both the lack of alignment of the current board of directors (the “Board”) with InterOil shareholders and its apparent inability to evaluate and negotiate transactions that are accretive to shareholder value. For these reasons, we oppose the OSH/TOTAL Proposal in its current form and we demand a better transaction than the OSH/TOTAL Proposal as currently structured.
Following my retirement from the Company as CEO in April 2013, InterOil’s share price declined by $60 prior to the announcement of the OSH/TOTAL Proposal. We believe that the current Board has failed InterOil’s shareholders in critical ways that have led to the substantial destruction of shareholder value we have all suffered. We believe that the OSH/TOTAL Proposal, if completed, will represent yet another egregious example of shareholder value destruction by the current Board and management of InterOil.
The OSH/TOTAL Proposal materially undervalues InterOil because of financial and structural flaws of the offer made by OSH to InterOil shareholders.
Under the OSH/TOTAL Proposal, for each share of InterOil common stock (“Share”) OSH will provide InterOil shareholders with 8.05 shares of OSH common stock plus a contingent value right (a “CVR”) entitling the holder to a contingent cash payment that is linked to the volume of 2C hydrocarbon gas resource certified to be contained in the Elk-Antelope fields. Each CVR will deliver approximately $6.05 per Share for each 1 tcfe above 6.2 tcfe gross certified 2C resource in the Elk-Antelope fields, and will be paid in cash upon completion of the certification process.