The Toronto-listed company's stock plunged more than 50% last week, on the back of news that initial testing of the Elk-2 appraisal well, in eastern PNG, had recorded poor gas flows.
The well was designed to delineate the size of the company's massive Elk discovery, said to contain trillions of cubic feet of gas, enough to underpin an liquefied natural gas (LNG) facility in the South Pacific nation.
The shareprice fall prompted brokerage firm Raymond James to upgrade its rating for the company from "outperform" to "strong buy", noting that it believed the market had misinterpreted the Elk drilling results and that the lower price of InterOil stock now significantly undervalued the company's exploration potential, Canada's Globe and Mail reported.
InterOil had said on July 2 that it had agreed with creditors Merrill Lynch and Clarion Finanz to extend the 4% interest rate on the company's $C130 million secured credit facility for an extra month until July 31, 2007.
This will be extended to cover the full term of the loan, which ends in May 2008, if InterOil executes an agreement on the Papua New Guinea liquefied natural gas project by the end of this month.
The company is drilling Elk-2 to a planned total depth of 3005 metres, following which it would carry out a complete evaluation including wireline logs, rotary sidewall cores, VSP and additional drill stem tests.
