InterOil Makes Gas Discovery at Elk #1

InterOil Corporation has made a gas and gas liquids discovery at ELK #1 in Papua New Guinea. The well flowed wet gas at 2,000 psi at an estimated 30 to 50 MMCFPD for approximately 30 minutes during a gas kick before the well could be shut in. A drill stem test conducted on June 24, 2006 demonstrated a wet gas flow at surface and a surface pressure on the casing of 3,150 psi, indicating a bottom hole pressure of approximately 3,700 psi. The calculated absolute open flow of the well based on the drill stem test was 150 MMCFPD.

While information from the well to date is positive, the data and the current interpretation are provisional and subject to confirmation after further drilling and testing. The company intends to continue to drill this well in order to evaluate the potential commercial nature of the reservoir. Due to the pressures being encountered in this well, the company is currently evaluating its options for continuing to drill this well.

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. InterOil is working to develop a LNG facility in Papua New Guinea.