Shares in the company had on June 29 dropped $C5.39 ($US5.07) to $C20.47, down from its record close of $C47.06 on June 25.

“I believe that, like a lot of things on Wall Street, there’s a tendency for things to go too high then fall too low,” Reuters quoted InterOil spokesman David Larson as saying.

“I think this is a bit of an overreaction on InterOil given that the well has not been finalised.”

The company added that its lenders Merrill Lynch and Pacific LNG Operations had reiterated their commitment to the project following confirmation of a large gas column in the Elk structure.

It confirmed that the natural gas column in the structure extended to over 2300 feet.

InterOil chief executive Phil Mulacek said the shares began dropping the day after a meeting with investors, which followed InterOil’s annual meeting on June 25.

He added that the meeting might have resulted in a rumour that the company might issue additional shares to raise funds to pay for its planned liquefied natural gas facility in PNG.

“We’re not out here issuing stock. The meeting was a follow-up to our [annual meeting], not that we are doing a placement. We’ve heard those rumours as well.”

The company has drilled Elk-2 to a depth of 2647m and will continue to core, drill and test prospective intervals in the Puri and Mendi limestone formations as planned.

Following the acquisition of a core in the Mendi limestone, the well will be drilled to total depth at the base of the limestone, where full evaluation will be performed, including wireline logs, rotary sidewall cores, VSP and additional drill stem tests.

Elk-2 is about 4.7 kilometres northwest of the Elk-1 discovery, which InterOil is confident will underpin a LNG joint venture between itself, global merchant bank Merrill Lynch and Clarion Finance.