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comsec research and reccommendation

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    INP2 6/11/08

    Innamincka Petroleum (INP) - Better than it appears, but not clear

    Last Traded: $0.25 Market Cap: $77m Sector: Materials

    BUY / OUT PERFORM Valuation: $1.78

    On 30 October, INP filed its September quarterly report.

    INP operations

    * INP has been trucking oil to Brisbane while it has had issues with its receipt at STO's Moomba operations. The cost penalty is about $5/bbl.

    * Flax 1 and Flax 3 have continued to produce, and are now at just over 300bbl/day.

    * Flax 2 has completed its work-over, the pipe has been built to tie in, hydrostatic has been completed and it is expected to be producing and on-line by 7 November

    * Flax 4 is ready and will use the pipe from Flax 2.

    * Flax 5 is being de-watered, but the drill rig doing the bailing out is not well suited to
    the task, as the most suitable rig is currently engaged, and so it is taking a longtime.

    * Testing of Flax East will take place after Flax 5 has been tested for the oil flows from each sand.

    INP progress

    INP presently has many issues for which it working towards answers, but at present,
    there is an overwhelming number of issues to work through and the path is not clear.
    These are detailed in the body of this note.

    Investment view

    The current share price gives a market cap for INP of $A 77m.
    There is significant uncertainty on any valuation of INP. However, INP has enough cash plus it is generating enough cash to grow its operations.

    Accordingly, CommSec retains its BUY / OUT PERFORM recommendation

    I bought some today and hold with hope.
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