oil facilities, colombia · interoil e&p asa q4 report, 26 february 2015, page 2 interoil...

Report for the fourth quarter 2014 26 February 2015

INTEROIL EXPLORATION

AND PRODUCTION ASA

Kronpr i nsensgate 17

0251 Oslo , NORW AY

WWW .INTEROIL .NO

[email protected]

Oil facilities, Colombia

INTEROIL E&P ASA Q4 REPORT, 26 February 2015, PAGE 2

Interoil Exploration and Production ASA

Q4 2014

Interoil recorded an EBITDAx (EBITDA adjusted for exploration expenses) from continuing operations of USD 1,2 million

in Q4 2014 (Q4 2013: 10.6 million) on operating revenues of USD 8.1 million (Q4 2013: USD 11.6 million) producing net

income from continuing operations of USD 4,7 million. The decrease in revenues and EBITDAx primarily results from the

fall in the oil price and production and the recognition of one off income in 2013. Net loss from discontinued operations

(Peru) amounted to USD 0.1 million, giving a comprehensive net income of USD 4,5 million.

Restructuring

As reported in the stock exchange notice 27 October 2014 and in the Company’s Q3 financial report, Interoil was facing

financial and strategic challenges. The Company was suffering from a heavy debt burden that was undermining its ability

to support initiatives, which would protect and potentially increase the value of the Interoil’s assets.

On 23 December 2014 the Board announced a comprehensive restructuring (the “Restructuring”) proposal to improve its

strategic position in Latin America, mitigate the Company’s liquidity constraints and strengthen its balance sheet and this

was completed on 20 January 2015.

The Restructuring involved an equity issue directed towards Andes Energia Plc (“Andes”) and the restructuring of exist-

ing Company debt.

The new equity was raised by way of a private placement of new shares for NOK 36.3 million, pursuant to which Andes

subscribed for 330,000,000 shares in Interoil at NOK 0.11 per share. The old NOK 310 million bond and the USD 6.2

million debt due to Proseis AG was replaced with a new USD 32 million bond loan. The Restructuring resulted in Interoil

reducing its debt by approximately NOK 120 million.

As part of the Restructuring, holders of the old NOK 310 million bonds accepted 65,000,000 new shares in Interoil in part

settlement of the bond, equivalent to approximately 10 per cent of the shares outstanding after Restructuring. Following

the Restructuring, Andes holds 51 per cent of the outstanding share capital.

Andes is a Latin American company, active in exploration, development and production of conventional and unconven-

tional oil and gas resources. The Company is listed on the AIM London Stock Exchange and Buenos Aires Stock Ex-

change with a market cap of approximately GBP 135 million.

Sale of Peruvian business

In November 2014 Interoil transferred ownership of its Peruvian operations to United Oilfield Colombia Inc. The transac-

tion allowed Interoil to discontinue its business in Peru in an orderly fashion without any material impact on its liquidity or

financial position. As previously communicated, Interoil would not be qualified to continue as an operator in Peru or be

able to repatriate any additional cash from Peru, and the business therefore did not represent any value for the company.

In this financial report, the Peruvian business is reported as discontinued business (see note 4).

Colombia

Following the sale in Peru, all Interoil’s exploration and production assets are in Colombia. Key assets include the Puli-C

and Altair producing fields and the LLA-47 license, all in prolific onshore hydrocarbon provinces in the country. In De-

cember the Puli-C field produced around 1,550 barrels of oil equivalents per day net to Interoil, but requires new invest-

ments to maintain output at current levels. The LLA-47 license is expected to hold well above 30 million barrels in recov-

erable reserves and represents a significant value driver for the company.

P&L Highlights

The Peruvian operations were sold 19 November 2014, and the Peru business is carved out as discontinued operations

and appear on one line with its after tax contribution (see note 4). Consequently, apart from this contribution, only the

Colombian and Norwegian operations are reported in the P&L..

Quarterly revenues fell 30% year-on-year, reflecting a 15% decline in production and 29% decrease in realized oil price.

Interoil generated an EBITDAx (EBITDA adjusted for exploration expenses), of USD 1,2 million for the quarter, down

from USD 10,6 million in Q4 2013.

Depreciation amounted to USD 0,5 million in Q4 down from USD 2,2 million one year prior.


As a result, Interoil recorded an operating profit of USD 0,1 for the quarter (USD 5,0 million in Q4 2013).

Helped by positive net financials due to FX gains of USD, after-tax profit from continued operations amounted to USD 4,7

million, while Peru (discontinued operations) showed a net loss of USD 0 million for the quarter, giving a total comprehensive

net income of USD 4,5 million.

For the first twelve months of 2014, Interoil recorded an EBITDAx of USD 19,0 million from continuing operations, exploration

expenses of USD 13,2 million and a net loss of USD 0,5 million. Peru (discontinued operations) had a net contribution of USD

6,4 million, giving a comprehensive net income of USD 5,8 million.

Balance Sheet and Equity

The balance sheet relates to the continuing operations in Colombia and Norway. Due to the sale, Peru are carved out from

the balance sheet and classified as assets held for sale in the 2013 comparatives.

The non-current assets of USD 44,8 mill relate to fixed assets in Colombia. Interoil had USD 17,3million in cash at the end of

the quarter, of which USD 6,5 million were restricted. Restricted cash related to the bond loan was USD 1,7 million, while the

rest mainly relates to cash collateral for guarantees in Colombia.

As of 31st December, the book equity was negative USD 4,9 million.

Interoil’s current liabilities of USD 69,5 million relates to current interest bearing liabilities of USD 60,5 and trade and other

payables/provisions of USD 9 million. The bond loan of USD 40,8 million, the debt to Proseis AG of USD 5,7 million and the

secured bank loan in Colombia of USD 11,3 million is all classified as current. No default has been declared, but due to tech-

nical breaches, the classification is in accordance with IFRS(see note 8).

In addition to the interest-bearing debt outlined above, Interoil also has off-balance sheet commitments relating to required

work programs on its exploration licenses, that have to be partly pre-funded in the form of bank guarantees. As of today the

company is compliance with the license terms for LLA-47. Another USD 10,5 million guarantee will have to be posted by the

end of April. Regarding the Cor-6 license, Interoil is in discussions to find a satisfactory solution.

Cash flow

The Company generated operating cash flows of USD 3,2 million year to date, negatively affected by USD 13,2 million in ex-

ploration expenses.

Cash flow from investments amounted to USD 0 for the year, on the back of a reversal of past capex in Colombia of USD 1,4

million, offset by USD 1,4 million in capex relating to the operational improvement projects in Colombia.

Financing cash flows are negative USD 2,3 year to date, reflecting interest payments of USD 6,7 million offset by an increase

in interest-bearing debt of USD 4,4. Net cash flow was USD 0,9 million positive for the period.

Outlook

We believe that Andes becoming the majority shareholder of IOX, will provide the Company with management and technical

capabilities and experience already established in the region, which combined with IOX’s existing operational base and per-

sonnel will contribute to accelerating the development of the Company’s acreage in Colombia.

Working with Andes has already enabled us to provide the National Agency of Hydrocarbons in Colombia (Agencia Nacional

de Hidrocarburos or ANH) with the required guarantee of USD 7.2 million for the LLA-47 license without posting cash collat-

eral. Interoil is now in full compliance with the terms of this license.

An additional USD 10.5 million guarantee for LLA-47 is required by the end of April 2015. Interoil is working with a number of

banks and expects that the guarantee will be in place in due time.

In relation to the Cor-6 license terms, Interoil is still in discussions with ANH regarding the technical aspects of the block, and

is working to find a solution satisfactory to both parties.

Oslo, 26 February 2015

The Board of Directors of Interoil Exploration and Production ASA

Condensed Consolidated Interim

Financial Information

26 February 2015


AND PRODUCTION ASA

Kronpr i nsensgate 17

0251 Oslo , NORW AY

WWW .INTEROIL .NO

[email protected]


Consolidated Interim statement of comprehensive income

Amounts in USD 1 000 Note

For the 3 months period ended 31

December 2014


December 2013

For the 12months period ended 31

December 2014


December 2013 *)

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Sales 5 8 113 11 620 41 344 44 020

Cost of goods sold ex depreciation 6 -4 365 -3 226 -14 352 -12 706

Depreciation 6 -549 -2 246 -4 920 -4 607

Gross profit 3 199 6 148 22 072 26 707

Exploration cost expensed -647 -3 349 -13 163 -3 930

Administrative expense -2 831 -2 764 -8 997 -11 464

Other income / (expense) 247 4 951 972 8 601

Result from operating activities -32 4 986 884 19 914

Finance income 7 7 435 1 048 12 412 8 320

Finance cost 7 -2 347 -2 586 -12 195 -14 321

Finance income/ (expense) – net 5 088 -1 538 217 -6 001

Profit / (loss) before income tax 5 056 3 448 1 101 13 913

Income tax expense -394 -57 -1 621 -8 940

Profit / (loss) from continuing operations 4 662 3 391 -520 4 973

Profit/ (loss) for the period from discontinued operations

4 -66 3 148 6 440 14 147

Profit / (loss) 4 596 6 539 5 920 19 120

Other comprehensive income/ (loss) -88 -116 -88 -116

Other comprehensive income for the peri-od, net of tax

-88 -116 -88 -116

Total comprehensive income for the peri-od, net of tax

4 508 6 423 5 832 19 004

Attributable to:

Equity holders of the parent 4 508 6 423 5 832 19 004

4 508 6 423 5 832 19 004

Earnings per share (expressed in USD)

– basic and diluted – total 0,02 0,04 0,02 0,10

– basic and diluted – continuing operations 0,02 0,02 0,00 0,03

The notes on pages 9 to 18 are an integral part of this condensed consolidated financial statements.

*) Restated – operations in Peru are presented as discontinued- see note 4.


Consolidated interim statement of financial positions


As of 31 December 2014

As of 31 December 2013

(Unaudited) (Audited)

ASSETS Non-current assets Property, plant and equipment 44 073 49 382

Deferred income tax assets 751 618

Total non-current assets 44 824 50 000

Current assets Inventories 575 297

Prepaid taxes 2 047 0

Trade and other receivables 2 438 6 945

Cash and cash equivalents 17 336 7 219

Total current assets 22 396 14 461

Assets classified as held for sale 20 511

TOTAL ASSETS 67 220 84 972

EQUITY Share capital and share premium 123 901 123 901

Other paid-in equity 2 476 2 192

Retained earnings -131 234 -137 066

Total equity -4 857 -10 973

LIABILITIES

Non-current liabilities Borrowings 8 0 54 977

Retirement benefit obligation 150 81

Provisions for other liabilities and charges 2 437 1 762

Total non-current liabilities 2 587 56 820

Current liabilities Current interest-bearing liabilities 8 60 503 10 467

Trade and other payables 7 896 10 688

Income tax liabilities 0 2 660

Provisions for other liabilities and charges 1 091 848

Total current liabilities 69 490 24 663

Liabilities directly associated with assets held for sale 14 462

TOTAL LIABILITIES 72 077 95 945

TOTAL EQUITY AND LIABILITIES 67 220 84 972

The notes on pages 9 to 18 are an integral part of this condensed consolidated financial information


Consolidated interim statement of changes in equity

For the period from 1 January 2013 to 30 December 2014 Share capital and

share premium

Other paid-in

equity

Retained

earnings Total equity

Amounts in USD 1 000

(Audited)

Balance at 31 December 2012 90 985 1 742 -156 069 -63 342

Issue of share capital, cash increase 34 993 0 0 34 993

Share issuance cost -2 077 0 0 -2 077

Share options 0 450 0 450

Total comprehensive income for the period – continuing operations 0 0 4 857 4 857

Total comprehensive income for the period – discontin-ued operations

0 0 14 147 14 147


(Unaudited)

Share options 0 284 0 284

Total comprehensive income for the period – continuing operations 0 0 -608 -608

Total comprehensive income for the period – discontin-ued operations

0 0 6 440 6 440



The notes on pages 9 to 18 are an integral part of this condensed consolidated financial information

Consolidated interim cash flow statement


For the 12 months

period ended 31 December 2014

For the 12 months

period ended 31 December 2013

Cash generated from operations (Unaudited) (Audited)

Comprehensive income for the period – continuing operations -608 4 857

Comprehensive income for the period – discontinued operations 6 440 14 147

Total comprehensive income of the period 5 832 19 004

Income tax expense 7 327 19 999

Depreciation, amortization and impairment 5 009 7 231

Amortization of debt issuance cost 7 602 567

Fee regarding tax claim bond loan 0 -385

Share based payment/Change in retirement benefit obligation 354 598

Interest income 7 -26 -15

Interest expense 7 8 404 9 682 Unrealized exchange gain / (loss) from revaluation of long term borrowings -10 078 -5 472

Gain from sale PP&E 0 294

(Gain) / loss on disposal of subsidiary 3 670 0

Changes in assets & liabilities

Inventories 703 -458

Financial assets and liabilities at FVtPL 0 -4 393

Trade and other receivables 3 989 -1 757

Trade and other payables and provision and other liabilities -8 781 -13 303

Taxes paid -13 788 -20 650

Net cash generated from operating activities 3 217 10 942

Cash flows from investing activities

Interest received 26 15

Investments in exploration, production and other assets -9 -18 192

Net cash used in investing activities 17 -18 177

Cash flows from financing activities

Interest paid -6 676 -9 682

Repayment of borrowings -10 895 -18 342

Proceeds from new loans 15 269 8 545

Proceeds from issuance of ordinary shares 0 32 916

Net cash used in financing activities -2 302 13 437

Net change in cash and cash equivalents 932 6 201

Cash and cash equivalents at beginning of the period 16 404 10 203

Cash and cash equivalents at end of the period 17 336 16 404

Whereof cash and cash equivalents, non-restricted 10 887 11 575

Whereof cash and cash equivalents, restricted 6 449 4 829


Note 1. Corporate information

Interoil Exploration and Production ASA (“the Company”) and its subsidiaries (together ‘the Group’ or Interoil) is an upstream oil exploration and

production company focused on South America. The company is an operator of several production and exploration assets in Colombia.

The Company is a Norwegian Public limited liability company incorporated and domiciled in Norway. The Company is listed on the Oslo Stock

Exchange. The Company is registered in the Register of Business Enterprises with organisation number 988 247 006. The Company’s registered

office is Kronprinsensgate 17, 0251 Oslo, Norway.

The condensed consolidated interim financial information for the period ended 31 December 2014 included the company and its subsidiaries. This

condensed consolidated interim financial information has been authorised for issue by the Board of Directors on 26 February 2015

Note 2. Accounting policies

Interoil’s condensed consolidated interim financial information is prepared in accordance with IAS 34, Interim Financial Reporting in the context of

the International Financial Reporting Standards (IFRS) as adopted by the European Union.

The same accounting policies and methods of computation, except from those disclosed below, are followed as compared with the financial state-

ments for the year ending December 31, 2013, and this condensed consolidated interim financial information should therefore be read together with

the consolidated financial statements for the year ended December 31, 2013 prepared in accordance with IFRS as adopted by the European

Union. IFRS 8 and IAS 33 have been applied as the Company is listed on the Oslo Stock Exchange.

With effect from 1 January 2014 Interoil adopted certain revised and amended accounting standards and improvements to IFRSs as further out-

lined in the Significant accounting principles note disclosure to Interoil's financial statements for 2013. None of these revised standards or amend-

ments have significantly impacted the condensed interim financial information for the twelve months of 2014, nor have there been any other signifi-

cant changes in accounting policies compared to the annual financial statements.

The condensed interim financial information provide, in the opinion of management, a fair presentation of the financial position, results of opera-

tions and cash flows for the dates and periods covered. Interim period results are not necessarily indicative of results of operations or cash flows for

an annual period.

The condensed interim financial information is unaudited.


For the 3 months period ended 31 December 2014

Note 3. Segment information


Colombia Norway

Unall./

Elim.

Group

(continuing

business)

Total Revenue 8 113 0 0 8 113

Cost of goods sold ex depr -4 365 0 0 -4 365

Depreciation -549 0 0 -549

Gross profit 3 199 0 0 3 199

Exploration cost expensed -647 0 0 -647

Administrative expense -1 568 -1 263 0 -2 831

Other income / (expenses) 247 0 0 247

Result from operating activities 1 231 -1 263 0 -32

Finance income 925 6 636 -126 7 435

Finance costs -1 009 -1 465 126 -2 347

Profit / (loss) before income tax 1 147 3 909 0 5 056

Income tax expense -394 0 0 -394

Profit / (loss) for the period 753 3 909 0 4 662

Other comprehensive income 0 -88 0 -88

Total comprehensive income for the period, net of tax

753 3 821 0 4 574


Colombia Other Unall. /

Elimin.

Group

(continuing

business)

Total Revenue 11 620 0 0 11 620

Cost of goods sold ex depreciation -3 226 0 0 -3 226

Depreciation -2 246 0 0 -2 246

Gross profit 6 148 0 0 6 148

Exploration cost expensed -3 349 0 0 -3 349

Administrative expense -904 -1 860 0 -2 764

Other income / (expenses) 674 4 277 0 4 951

Result from operating activities 2 569 2 417 0 4 986

Finance income 672 498 -122 1 048

Finance costs -724 -1 972 110 -2 586

Profit / (loss) before income tax 2 517 943 -12 3 448

Income tax expense -57 0 0 -57

Profit / (loss) for the period 2 460 943 -12 3 391



2 460 827 -12 3 275




Colombia Norway Unall. /

Elimin.

Group

(continuing

business)

Total Revenue 41 344 0 0 41 344

Cost of goods sold ex depreciation -14 352 0 0 -14 352


Gross profit 22 072 0 0 22 072



Other income / (expenses) 972 0 0 972

Result from operating activities 5 220 -4 336 0 884

Finance income 2 606 11 241 -1 435 12 412

Finance costs -3 996 -9 634 1 435 -12 195

Profit / (loss) before income tax 3 830 -2 729 0 1 101

Income tax expense -1 621 0 0 -1 621

Profit / (loss) for the period 2 209 -2 729 0 -520



2 209 -2 817 0 -608


Colombia Other Unall. /

Elimin.

Group

(continuing

business)

Total Revenue 43 643 377 0 44 020

Cost of goods sold -12 638 -68 0 -12 706


Gross profit 26 398 309 0 26 707



Other income / (expenses) 4 324 4 277 0 8 601

Result from operating activities 23 132 -3 218 0 19 914

Finance income 3 993 5 236 -910 8 320

Finance costs -4 118 -11 113 910 -14 321

Profit / (loss) before income tax 23 007 -9 094 0 13 913

Income tax expense

-8 940 0 0 -8 940

Profit / (loss) for the period 14 067 -9 094 0 4 973



14 067 -9 210 0 4 857




Note 4. Discontinued operations

The ownership in Interoil Exploration and Production Latin America AS, which was the owner of the operating companies Interoil Peru S.A and North

Oil Services SA, was transferred to United Oilfield Inc.(UOC) 19 November 2014.

UOC subscribed for new shares in LATAM in a private placement, and acquired the remaining shares through a share purchase agreement. The

consideration was USD 1. In addition, UOC also assumed the debtor position of an intercompany debt of USD 2 million that Interoil had towards

LATAM.

Profit of USD 6,4 million from discontinued operations has been recognised in the consolidated income statement for the year.

Interoil will still have an exposure to a parent company guarantee issued to secure certain work obligations under the license agreements for blocks

III and IV. These are secured under a back-to-back arrangement with UOC.

Further, Interoil and LATAM will both continue to be parties to litigation against PetroCarbon Investment SA, which is described further in Note 28 of

the annual report for 2013. Litigation proceedings are ongoing and on 31 October 2014, Interoil received a writ of defense from PetroCarbon Invest-

ment SA.

LATAM is also involved in a tax case related to LATAM’s tax obligations in Norway. Although not expected to have any cash effects, these tax issues

may have an impact on IOX in that carried forward tax losses could be reduced. The company will manage this case and cover the costs of advisors

involved.



For the period

1 October to

19 November 2014

For the 3 months period ended

31 December 2013

For the period

1 January to

19 November 2014


31 December 2013

(Unaudited) (Unaudited) (Unaudited) (Unaudited)

Sales 4 699 13 349 36 643 53 355

Cost of goods sold ex depreciation -2 187 -4 395 -13 739 -15 682

Depreciation -6 -819 13 -2 299

Gross profit 2 506 8 135 22 917 35 374

Exploration cost expensed 0 0 0 0

Administrative expense -795 -1 833 -4 576 -6 168

Other income / (expense) -16 -1 148 998 -2 812

Gain/(loss) on sale of subsidiary -3 115 0 -6 211 0

Result from operating activities -1 419 5 154 13 129 26 394

Finance income 26 183 383 1 039

Finance cost -150 -244 -1 365 -2 227

Finance income/ (expense) – net -124 -61 -982 -1 188

Profit / (loss) before income tax -1 543 5 093 12 146 25 206

Income tax expense 1 477 -1 945 -5 706 -11 059

Profit / (loss) -66 3 148 6 440 14 147

Other comprehensive income 0 0 0 0

Other comprehensive income for the period, net of tax

0 0 0 0


-66 3 148 6 440 14 147

Attributable to:

Equity holders of the parent -66 3 148 6 440 14 147

-66 3 148 6 440 14 147

Earnings per share (expressed in USD)

–basic and diluted–discontinued operations 0 0.02 0.02 0.07

Consolidated Interim statement of comprehensive income – discontinued operations


Note 5. Sales and royalty

Note 6. Cost of goods sold



31 December 2014


31 December 2013


31 December 2014


31 December 2013

Sale of oil

Sale of oil – before royalty 6 775 10 436 37 546 38 760

Royalty -548 -993 -3 121 -3 267

Sale of oil – net 6 227 9 443 34 425 35 493

Sale of gas 822 830 3 249 2 848

Sale of services 1 064 1 346 3 670 5 678

Total sales 8 113 11 620 41 344 44 020



31 December 2014


31 December 2013


31 December 2014


31 December 2013

Cost of goods sold

Lifting costs 4 150 3 264 14 206 12 022

Changes in inventory 215 -37 146 617

Other cost of goods sold 0 -1 0 67

Total cost of goods sold 4 365 3 226 14 352 12 706

Depreciation 549 2 246 4 920 4 607

Lifting costs, specifications:

Field production costs 1 710 1 727 7 784 6 449

Tariffs and transportation 647 289 2 469 2 036

Insurance 83 66 259 235

Production costs external consultants 448 437 565 1 138

Well services and work overs 1 153 640 2 377 1 731

Repairs and maintenance of installa-tions/equipment 109 104 752 432

Other production (lifting) costs 0 1 0 1

Total lifting costs 4 150 3 264 14 206 12 022


Note 8. Borrowings

Note 7. Finance income and cost



December 2014


December 2013

For the 12months period ended 31

December 2014


December 2013 *)

Interest income 12 1 26 15

Realized/unrealized exchange rate 7 198 1 047 12 161 8 305

Unrealized gains on oil swaps 225 0 225 0

Total financial income 7 435 1 048 12 412 8 320

Interest expenses 2 432 2 139 8 404 9 682

Amortisation of debt issue cost 140 146 602 567

Realized/unrealized exchange rate 262 204 2 768 2 463

Realized loss on oil swaps 0 0 0 909

Other financial expenses -487 97 421 700

Total financial expenses 2 347 2 586 12 195 14 321

Finance income/ (expenses) – net 5 088 -1 538 2 17 -6 001

The maturity of the Group’s borrowings is as follows


As of 31 December 2014 As of 31 December 2013

Non-current

Bond loan denominated NOK 0 48 892 Other non-current interest bearing liabilities 0 6 086 Total non-current interest-bearing liabilities 0 54 977 Current

Bond loan denominated NOK 40 753 0 Liabilities to financial institutions 14 069 10 452 Other non-current interest bearing liabilities 5 681 15 Total current interest-bearing liabilities 60 503 10 467 Total interest-bearing liabilities

60 503 65 444

Amounts in USD 1000

As of 31 December 2014 As of 31 December 2013

0-12 months 60 503 10 467

Between 1 and 2 years 0 0

Between 2 and 5 years 0 54 977

Over 5 years 0 0

Total borrowings 60 503 65 444


Main covenants

The main financial covenants related to the Bond loan are as follows:

Secured/Unsecured debt and leasing Peru/Colombia < USD 20 million

Breach of covenants

In January 2015 the bondholders approved a restructuring proposal, where a portion of the loan was converted into equity and a portion

was converted into a new bond loan. See subsequent events, note 9.

The payment of the coupon on 14 December 2014 was deferred until 16 Marc 2015 with the payment of an additional 5% per annum.

Whilst no event of default was declared for as a consequence of the technical breaches and due to existence of cross default clauses, the

debt the NOK 310 million bond loan has in accordance with IFRS been classified as current.


Bond Loan at issue date, 14 September 2010 50 617

Borrowing costs (fees and legal expenses) -4 966 Amortisation of debt issue cost 3 794 Revaluation of the loan -8 693

Balance at 31 December 2014 40 753

The bond loan recognised in the statement of financial position is calculated as follows:

Colpatria loan USD 15 million

On 3 April 2014 the Group entered into a USD 15 million loan agreement with Banco Colpatria Cayman Inc. The new loan bears an interest of LIBOR +

4.5 % per annum payable quarterly. The new loan matures in February 2016, and will be repaid in quarterly instalments ending on maturity date.

The Banco Colpatria loan is recognised in the statement of financial position at 31 December 2014 under short term debt with USD 11.3 million.

The main financial covenants related to the USD 15 million Colpatria loan are as follows:

Senior Debt / EBITDA < 1.25x

Debt Service Coverage ratio > 2.0x

Total Liabilities / Total Net Worth < 1.5x

Bond Loan NOK 310 million

The Group issued a 3.5 year Senior Secured Bond Loan with a total loan amount of NOK 310 million on 14 September 2010. The Bond Loan would initially mature on 14 March 2014, but is extended to 14 March 2016 – or earlier (see below). The Bond Loan shall be repaid at the final maturity date at 100 % of par value, plus accrued and unpaid interest. The bonds have a nominal value of NOK 500,000, and carry a fixed rate interest of 15.00 % pay-able quarterly in arrears. The effective interest rate on the loan for Q4 2014 was 17.86%.

In addition, a new call structure was implemented, whereby Interoil can redeem the loan, in whole or in part, as follows:

a) from 14 September 2012 to14 March 2015, at a price equal to 105.00 % plus accrued interest on redeemed amount; and

b) from 14 March 2015 to the final Maturity Date at a price equal to 101.00 %, plus accrued interest on redeemed amount.

Interoil Colombia has not meet the debt service coverage ratio covenant. The company has been informed by Colpatria that no default will be declared

Unsecured debt USD 2.8 million

The Colombian branch has short term unsecured debt raised through Banco de Occidente.

Proseis debt

Other non-current interest bearing liabilities includes USD 5.7 million related to the final payment to Intreroil E&P Switzerland AS acquired in 2006. The

loan matures on 14 March 2016. Interest of Swiss Libor +4% per annum payable on maturity.


Note 9. Subsequent events

On 20 January 2015 the shareholders and bondholders approved the proposed restructuring of the Company which included the issuance of a total of 395

million new shares, the conversion of a portion of the current bond (“Bond”) to equity and the remaining outstanding portion of the Bond and a debt relating

to Proseis AG (“Proseis Debt”) into a new USD 32 million bond with new terms.

The new equity was be raised by way of a private placement of new shares for NOK 36.3 million, whereby Andes Energia plc (“Andes”) subscribed for 330

million shares in Interoil at NOK 0.11 per share. Andes is a Latin American company, active in exploration, development and production of conventional and

unconventional oil and gas resources. The company is listed on the AIM London Stock Exchange and Buenos Aires Stock Exchange with a market cap of

approximately GBP 135 million. Following the private placement and approval of the restructuring as set out below, Andes holds 51 per cent of the outstand-

ing share capital.

The debt restructuring resulted in Interoil reducing its debt by approximately NOK 120 million. The NOK 310 million Bond and the USD 5,7 million Proseis Debt were replaced with a new USD 32 million bond (the “New Bond”). As part of the restructuring, existing bondholders agreed to convert part of the Bond to 65 million new shares in Interoil, equivalent to approximately 10 per cent of the shares outstanding after the private placement.

The main terms of the New Bond are:

Currency USD

The aggregate amount of the new bond is USD 32 million

Coupon 6% per annum

Maturity date in 2020

Option to satisfy coupon payments in the first 2 years by issuing New Bonds

As a result of the restructuring new directors and management have been appointed.

The Board of Directors has the following composition.

Mr. Ricardo Nicolas Mallo Huergo

Mr. Alejandro Jotayan

Mr. Matthieu Milandri

Mr. Jose Francisco Chalela

Ms. Dolores Rivas

Ms. Maria Rosa Siles Moreno

Ms. Mimi Berdal

The new management include:

Mr. Alejandro Jotayan – CEO

Mr. Nigel Duxbury – General Manager ("daglig leder" as defined in the Norwegian Public Limited Liabilities Act section 6-2)

Mr. Pablo Arias – CFO

The change in management will release a severance payment to former management of USD 1 million.

On 29 January 2015 Interoil announced that it had provided the National Agency of Hydrocarbons in Colombia (Agencia Nacional de Hidrocarburos or ANH) with the required guarantee of USD 7.2 million without posting cash collateral. Interoil is now in full compliance with the terms of the LLA-47 license.


Note 10. Production and sales of oil in barrels

Production and sales for the 3 months

ending 31 December 2014 31 December 2013

Colombia Peru Total Colombia Peru Total

Sale of oil in barrels – net

Sale of oil, barrels 88 987 56 765 145 752 98 727 121 748 220 475

Total sale in barrels – net 88 987 56 765 145 752 98 727 121 748 220 475

Sale of gas in barrels – net

Sale of gas, barrels 46 013 0 46 013 45 387 0 45 387

Total sale in barrels – net 46 013 0 46 013 45 387 0 45 387

Production in barrels – net

Working interest, barrels 98 340 112 507 210 847 125 984 240 754 366 738

Working interest, gas (boe) 49 159 0 49 159 49 333 0 49 333

Royalty -11 013 -55 625 -66 638 -14 034 -119 001 -133 035

Total production in barrels – net of royalty 136 486 56 882 193 368 161 283 121 753 283 036

Production and sales for the 12 months

ending 31 December 2014 31 December 2013

Colombia Peru Total Colombia Peru Total

Sale of oil in barrels – net

Sale of oil, barrels 387 888 362 806 750 694 372 024 489 436 861 460

Total sale in barrels – net 387 888 362 806 750 694 372 024 489 436 861 460

Sale of gas in barrels – net

Sale of gas, barrels 180 662 180 662 155 816 155 816

Total sale in barrels – net 180 662 0 180 662 155 816 0 155 816

Production in barrels – net

Working interest, barrels 437 685 717 616 1 155 301 413 775 968 637 1 382 412

Working interest, gas (boe) 193 015 193 015 169 370 169 370

Royalty -47 368 -354 531 -401 899 -46 660 -479 189 -525 849

Total production in barrels – net of royalty 583 332 363 085 946 417 536 485 489 448 1 025 933



AND PRODUCTION ASA

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