INTEROIL CORP.: (IOC) $17.70 Up $1.16.... Here's yet another huge short squeeze that may be in the making. A drilling report is due out soon and many pros are predicting positive results which could make IOC the mother of all short squeezes. An astounding 11.5 million shares are short which represents 50% of the float. IterOil Corp. (http://www.interoil.com) is a Canadian-based oil and gas company with operations in Papua New Guinea . InterOil is building a fully Integrated energy business, with three distinct components: upstream, midstream, and downstream. The company operates PNG's only commercial refinery and owns a network of retail and wholesale distribution outlets, while pursuing an exploration program on an area of 8.8 million acres. MDO first picked up on InterOil a couple of years ago after reading an article by Jim Cramer titled "InterOil Has Better Second Impression." Here follows the article.....
By James J. Cramer, RealMoney.com Columnist... Sometimes newspaper stories have the wrong impact. Today's Wall Street Journal has a "tracking the numbers" article about what seems to be some fly-by-night Canadian oil energy company named InterOil (IOC:Amex) . The article quotes a bunch of very reasonable-sounding analysts blasting away at the darned thing. InterOil seems to be going up on nothing. Worse, its oil is in New Guinea . Canada . New Guinea . Wait a second, are we dealing with an oil Bre-X, that colossal scandal of the previous decade? So I couldn't resist. I always am on the lookout for scams, and I did the news retrieval thing and sure enough, I discovered something that not only called into question the thesis of the article, but that actually made me want to buy the darned stock on weakness. Five days ago, this company raised $125 million -- U.S. dollars! -- for a 25% stake in the New Guinea exploration program. If the prospect hits big, you get common stock. That's hard cash. It's hard cash that values the properties at $500 million -- four times that $125 million. The whole company's worth a billion bucks. It's got oil, refinery and commercial interests worth tens of millions besides that. And its partner is the Royal Dutch (RD:NYSE ADR) -owned Shell; what's fly-by-night about that? None of these details were mentioned in the article. But what is quoted is also telling. Wilf Gobert, some fellow from a Calgary , Canada , brokerage house, says "We think the stock is being touted in advance of actual drilling performance." What isn't mentioned is that Gobert has a sell on it with a price target of $19. He needs it to go down! I don't know how the most salient fact -- the new valuation -- got left out of the article. But when I add that to the fact that a tremendous amount of the float is short -- more than 6% of the freely traded shares -- I think that maybe, just maybe, InterOil's for me!"
TECHNICALLY SPEAKING, IOC has traded to a recent 52-week low of $16.76. The 52-week high is $44.25. A close of $19.00 will be a technical breakout, likely taking the stock to the mid- to high-$20's in the near-term, but with 50% of the float short, this one could develop into a rocket ship to the upside. We would be buyers here with a stop two points lower than current price levels. Option speculators may want to take a look at the June 20 call options (IOCFD), currently priced at $3.70.
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