Under the agreements, the companies have agreed to deposit funds totalling $US57.5 million into escrow accounts to secure the right to negotiate definitive agreements for the interest in Elk, the LNG project and LNG supply.

The agreements are contingent upon confirmation of the Elk gas reservoir through successful drilling and testing of the Elk-2 well, which is currently being drilled.

"We have a preliminary understanding with both parties, including terms, and the next step is to negotiate definitive agreements," InterOil chief executive Phil Mulacek said in a statement.

"We expect to conclude the negotiations and have final agreements documenting the terms and conditions over the next several months."

Clarion Finanz has agreed to advance $15 million for the option to acquire a 2.5% interest in Elk while the industry partner, who InterOil says has extensive LNG experience, has agreed to deposit $42.5 million in escrow for the option to purchase a 5% interest in Elk, a 5% interest in the LNG project and rights to a portion of the LNG supply.

In the event that final agreements are not signed, the deposited and escrowed funds will be refunded.