InterOil (IOC) Seen as 'Too Cheap to Ignore'; Goldman Sachs Upgrades to Buy

(Updated - January 21, 2016 10:38 AM EST)

Goldman Sachs upgraded InterOil (NYSE: IOC) from Neutral to Buy with a price target of $37.50, suggesting upside of 68%. Analyst Mark Wiseman said the stock was "too cheap to ignore."

The analyst explained, "While oil & gas/LNG markets are oversupplied (weighing on SMID E&Ps), we believe InterOil has a strategic position in PNG gas (with long dated LNG export potential, and hence M&A appeal) and the balance sheet/cashflow to endure – the stock now looks too cheap to ignore, in our view. Recent field drilling results were favorable and should support a sizable resource certification payment mid-2016 (GSe US$715mn for 7.5Tcf). We see 90%-183% risked upside in bull scenarios (9Tcf) vs. -16% to 22% risked downside/upside in bear scenarios (6Tcf)."

Wiseman said the key task for InterOil is commercializing its 36.5% stake in the Elk--Antelope gas field in PNG, and he noted several catalysts including appraisal drilling at Antelope in 1Q, resource certification in mid-2016, and certification payments from Total SA in 3Q.

For an analyst ratings summary and ratings history on InterOil click here. For more ratings news on InterOil click here.

Shares of InterOil closed at $22.37 yesterday.

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