InterOil Spuds Elk-1 Exploration Well in Papua New Guinea

InterOil reports that drilling has commenced at the Elk-1 exploration well in Papua New Guinea. The Elk well is located in Petroleum Prospecting License 238 and is targeting the Miocene Puri fractured limestone and the Eocene Mendi limestone.

The Elk-1 well is being drilled into a culmination identified by airborne gravity and confirmed by a 74 mile (119 kilometer) 2D seismic survey concluded in August 2005. InterOil plans to drill the well to a measured depth of approximately 10,000 feet (3,000 meters). Drilling to the target depth and logging the well is expected to take between 70 and 90 days. The well will be drilled vertically and will attempt to intersect the Puri limestone near its crest at approximately 4,000 feet (1,200 meters).

The Company's new rig, InterOil Rig #2, is being used to drill the Elk-1 well. The Elk-1 well will be the third well in InterOil's eight well drilling program relating to its US$125 million drilling fund for exploration purposes announced early 2005.

InterOil is developing a vertically integrated energy company whose primary focus is Papua New Guinea and the surrounding region. Its assets comprise an oil refinery, upstream petroleum exploration licenses, and retail and commercial distribution assets. The majority of the refined products from InterOil's refinery are secured by off-take contracts with Shell and InterOil's wholly-owned subsidiary, InterOil Products Limited. BP Singapore is InterOil's agent for crude oil supplied to the refinery. InterOil is also undertaking an extensive petroleum exploration program within its eight million acre license area located in Papua New Guinea.