Election delays affect InterOil’s downgrade shares

INTEROIL, under heavy pressure following PNG election delays, saw its InterOil Corp shares getting a hammering early last Thursday after long-time bull Pavel Molchanov at Raymond James flipped on the stock and downgraded it.
Molchanov took his rating from “outperform” to “market perform” citing a vote by Papua New Guinea’s parliament to postpone the country’s general election by six months.
He noted that this was entirely beyond the company’s control and management could not be held responsible.
Nonetheless, it was a major setback.
The analyst said he was “stunned by this news” because this had never happened before in PNG’s history.
He cited three specific consequences that could be negative for InterOil:
n    Given management’s prior insistence that the election would be a catalyst for getting LNG project approval from the government, this appears to create an additional six-month delay until the final investment decision;
    The explicit threat of economic sanctions from Australia (and perhaps other countries too) could scare away prospective partners; and    Third, and most importantly, the da­mage to PNG’s reputation as a stable, democratic country could be severe, and at a minimum it raises the relevance of “country risk” in how investors perceive the InterOil story.
Molchanov also removed his A$80 price target and was taking a wait-and-see approach.
Despite this, his proved NAV estimate remains A$103 per share, and he saw no reason to change it at this time.
Shares of InterOil Corp were down 11% to A$49.49 following the election delays and downgrade.