NEW YORK (TheStreet) -- InterOil (IOC) fell sharply on Friday after shares resumed trading following its announcement it would sell a 61.3% stake in its Papua New Guinean natural-gas fields to Total SA (TOT).
Total's acquisition, worth as much as $3.6 billion, will address development and expansion of the Elk-Antelope site's reserves with payment pending appraisal drilling and certification. The French oiler will pay $613 million upfront. Additional payments will be made upon completion of its appraisal and whether its estimates of between 5.4 trillion and 9 trillion cubic feet of gas can be farmed.
Investors fled the stock en masse triggering a waterfall of selling once trading resumed in the afternoon. The accepted cause was that a maximum $3.6 billion valuation was seen as too little for the undeveloped Elk-Antelope site, believed to potentially hold the largest natural-gas depository in Asia. Until a full valuation can be determined by 2016, investors who stick with the stock will stomach more than a year's uncertainty over exactly how much InterOil will benefit.
In a conference call which lacked much further clarity, InterOil CEO Dr. Michael Hessian told investors the company wouldn't know an actual figure on the deal "until we do the appraisal of price of wells in the ground."
Adding to any confusion as to exactly what the agreement entails, Total released a separate statement noting its 61.3% stake could be reduced if it found a "strategic partner" willing to take a 19.3% interest. This detail was not included in InterOil's statement.