##### 



InterOil CorporationAnnual Information FormFor the Year Ended December 31, 2006
March 30, 2007
    
    (INTEROIL LOGO)
 TABLE OF CONTENTS
 General
    
    
    1Non-Gaap Measures
    
    
    2Legal Notice  Forward-Looking Statements
    
    
    3Corporate Structure
    
    
    4General Development Of The Business
    
    
    7Business Strategy
    
    
    11Description Of Our Business
    
    
    14Exploration And Production
    
    
    14Liquefaction, Refining And Marketing
    
    
    19Wholesale And Retail Distribution
    
    
    23Community Relations, Safety And The Environment
    
    
    25Risk Factors
    
    
    27Dividends
    
    
    33Description Of Our Capital Structure
    
    
    34Market For Our Securities
    
    
    34Directors And Officers
    
    
    36Board Committees
    
    
    39Interests Of Management And Others In Material Transaction
    
    
    39Legal Proceedings
    
    
    40Material Contracts
    
    
    40Transfer Agent And Registrar
    
    
    43Additional Information
    
    
    44Glossary Of Terms
    
    
    45
 
 GENERAL
   Annual Information Form INTEROIL CORPORATION




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##### Table of Contents



NON-GAAP MEASURES
  Quarters ended
    
    2006(2),(3)
    
    2005 (adjusted)(1),(2)($ thousands) (unaudited)
    
    Dec 31
    
    Sep 30
    
    Jun 30
    
    Mar 31
    
    Dec 31
    
    Sep 30
    
    Jun 30
    
    Mar 31Earnings before interest,
taxes, depreciation and
amortization
    
    
    6,541
    
    
    
    1,140
    
    
    
    (10,257
    )
    
    
    (9,105
    )
    
    
    (5,566
    )
    
    
    3,486
    
    
    
    (6,856
    )
    
    
    (5,858
    )Upstream
    
    
    (1,051
    )
    
    
    (1,337
    )
    
    
    (2,262
    )
    
    
    (2,227
    )
    
    
    (2,362
    )
    
    
    (1,655
    )
    
    
    (2,615
    )
    
    
    (1,603
    )Midstream  Refining and
Marketing
    
    
    9,144
    
    
    
    1,674
    
    
    
    (8,188
    )
    
    
    (5,230
    )
    
    
    (6,333
    )
    
    
    6,070
    
    
    
    (6,796
    )
    
    
    (3,405
    )Midstream  Liquefaction
    
    
    (396
    )
    
    
    (298
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Downstream
    
    
    1,143
    
    
    
    1,954
    
    
    
    3,559
    
    
    
    (326
    )
    
    
    3,963
    
    
    
    2,522
    
    
    
    2,550
    
    
    
    584Corporate & Consolidated
    
    
    (2,299
    )
    
    
    (853
    )
    
    
    (3,366
    )
    
    
    (1,322
    )
    
    
    (834
    )
    
    
    (3,451
    )
    
    
    5
    
    
    
    (1,434
    )Subtract:Interest expense
    
    
    5,649
    
    
    
    5,349
    
    
    
    3,609
    
    
    
    2,666
    
    
    
    2,989
    
    
    
    2,455
    
    
    
    2,996
    
    
    
    2,547Upstream
    
    
    2
    
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    (6
    )
    
    
    2
    
    
    
    2
    
    
    
    2Midstream  Refining
and Marketing
    
    
    2,479
    
    
    
    3,329
    
    
    
    2,731
    
    
    
    2,342
    
    
    
    2,756
    
    
    
    2,320
    
    
    
    2,735
    
    
    
    2,351Midstream  Liquefaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Downstream
    
    
    37
    
    
    
    38
    
    
    
    39
    
    
    
    38
    
    
    
    44
    
    
    
    42
    
    
    
    140
    
    
    
    Corporate & Consolidated
    
    
    3,131
    
    
    
    1,981
    
    
    
    838
    
    
    
    285
    
    
    
    195
    
    
    
    91
    
    
    
    119
    
    
    
    194Income taxes &
non-controlling interest
    
    
    1,049
    
    
    
    244
    
    
    
    1,031
    
    
    
    (245
    )
    
    
    910
    
    
    
    1,000
    
    
    
    301
    
    
    
    253Upstream
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Midstream  Refining
and Marketing
    
    
    42
    
    
    
    (46
    )
    
    
    (137
    )
    
    
    (118
    )
    
    
    (129
    )
    
    
    19
    
    
    
    (333
    )
    
    
    81Midstream  Liquefaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Downstream
    
    
    996
    
    
    
    416
    
    
    
    1,005
    
    
    
    (144
    )
    
    
    1,062
    
    
    
    965
    
    
    
    570
    
    
    
    159Corporate & Consolidated
    
    
    11
    
    
    
    (126
    )
    
    
    163
    
    
    
    17
    
    
    
    (23
    )
    
    
    16
    
    
    
    64
    
    
    
    13Depreciation & amortization
    
    
    3,554
    
    
    
    3,100
    
    
    
    2,862
    
    
    
    2,837
    
    
    
    2,700
    
    
    
    2,943
    
    
    
    2,699
    
    
    
    2,695Upstream
    
    
    233
    
    
    
    202
    
    
    
    173
    
    
    
    198
    
    
    
    96
    
    
    
    213
    
    
    
    2
    
    
    
    3Midstream  Refining
and Marketing
    
    
    2,805
    
    
    
    2,700
    
    
    
    2,626
    
    
    
    2,598
    
    
    
    2,662
    
    
    
    2,663
    
    
    
    2,641
    
    
    
    2,632Midstream  Liquefaction
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Downstream
    
    
    537
    
    
    
    222
    
    
    
    89
    
    
    
    62
    
    
    
    55
    
    
    
    55
    
    
    
    51
    
    
    
    43Corporate & Consolidated
    
    
    (21
    )
    
    
    (24
    )
    
    
    (26
    )
    
    
    (21
    )
    
    
    (113
    )
    
    
    12
    
    
    
    5
    
    
    
    17
 Annual Information Form INTEROIL CORPORATION




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##### Table of Contents



Quarters ended
    
    2006(2),(3)
    
    2005 (adjusted)(1),(2)($ thousands) (unaudited)
    
    Dec 31
    
    Sep 30
    
    Jun 30
    
    Mar 31
    
    Dec 31
    
    Sep 30
    
    Jun 30
    
    Mar 31Net income (loss) per
segment(1)
    
    
    (3,711
    )
    
    
    (7,553
    )
    
    
    (17,759
    )
    
    
    (14,363
    )
    
    
    (12,165
    )
    
    
    (2,912
    )
    
    
    (12,852
    )
    
    
    (11,353
    )Upstream
    
    
    (1,286
    )
    
    
    (1,540
    )
    
    
    (2,436
    )
    
    
    (2,426
    )
    
    
    (2,452
    )
    
    
    (1,870
    )
    
    
    (2,619
    )
    
    
    (1,608
    )Midstream  Refining
and Marketing
    
    
    3,818
    
    
    
    (4,309
    )
    
    
    (13,408
    )
    
    
    (10,052
    )
    
    
    (11,622
    )
    
    
    1,068
    
    
    
    (11,839
    )
    
    
    (8,469
    )Midstream  Liquefaction
    
    
    (396
    )
    
    
    (298
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Downstream
    
    
    (427
    )
    
    
    1,278
    
    
    
    2,426
    
    
    
    (282
    )
    
    
    2,802
    
    
    
    1,460
    
    
    
    1,789
    
    
    
    382Corporate & Consolidated
    
    
    (5,420
    )
    
    
    (2,684
    )
    
    
    (4,341
    )
    
    
    (1,603
    )
    
    
    (893
    )
    
    
    (3,570
    )
    
    
    (183
    )
    
    
    (1,658
    )
  
 (1)
    
    Our comparative quarterly results for all quarters during 2005 and 2006 have been represented
to confirm with the presentation adopted at December 31, 2006. Previously, interest revenue
and non-controlling interest were allocated to the corporate segment. Amounts associated with
these line items are now included in each operating segments result.(2)
    
    Our September 2006 quarterly results have been represented to separate out our
Midstream-Liquefaction segment from the Midstream Refining and Marketing segment. 
 LEGAL NOTICE  FORWARD-LOOKING STATEMENTS
 This AIF contains forward-looking statements as defined in U.S. federal and Canadian
securities laws. Such statements are generally identifiable by the terminology used, such as
may, plans, believes, expects, anticipates, intends, estimates, forecasts,
budgets, targets or other similar wording suggesting future outcomes or statements regarding an
outlook. All statements, other than statements of historical fact, included in or incorporated by
reference in this AIF are forward-looking statements. Forward-looking statements include, without
limitation, statements regarding our plans for expanding our business segments, business strategy,
contingent liabilities, environmental matters, and plans and objectives for future operations,
future capital and other expenditures. By its very nature, such forward-looking information
requires InterOil to make assumptions that may not materialize or that may not be accurate.
 Each forward-looking statement reflects our current view of future events and is subject to known
and unknown risks, uncertainties and other factors that could cause our actual results to differ
materially from any results expressed or implied by our forward-looking statements. These risks
and uncertainties include, but are not limited to; the exploration and production, the refining and
the distribution businesses are competitive; our refinery has not operated at full capacity for an
extended period of time and our profitability may be materially affected if it is not able to do
so; if we are not able to market all of our refinerys output, we will not be able to operate our
refinery at its full capacity and our financial condition and results of operations may be
materially adversely affected; if our refining margins do not meet our expectations and our
refinery operations are not profitable; we may be required to write down the value of our refinery;
our refinery financial condition may be materially adversely affected if we are unable to obtain
crude feedstocks for our refinery; our refining operations expose us to risks, some of which are
not insured; our hedging activities may incur losses; we may not be successful in our exploration
for oil and gas; if we are unable to renew our petroleum licenses with the Papua New Guinea
government, we may be required to discontinue our exploration activities in Papua New Guinea; our
investments in Papua New Guinea are subject to political, legal and economic risks that could
materially adversely affect their value; new legislative, administrative or judicial actions that
constrain licenses and permits from various government authorities may have a material affect on
the companys operations; weather and unforeseen operating hazards may impact our operating
activities; our significant debt levels and our debt covenants may limit our future flexibility in
obtaining additional financing; our ability to recruit and retain qualified personnel may have a
material adverse effect on our operating results and stock price; Petroleum Independent and
Exploration Corporation can affect our raising of capital through the issuance of common shares or
securities convertible into common shares; compliance with and changes in environmental laws could
adversely affect our performance; you may be unable to enforce your legal rights against us;
changing regulations regarding corporate governance and public disclosure could cause additional
expenses and failure to comply may adversely affect our reputation
 Annual Information Form INTEROIL CORPORATION




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##### Table of Contents



and the value of our securities; and the risks described under the heading Risk Factors in our
Annual Information Form.
 Although we believe that the assumptions underlying our forward-looking statements are reasonable,
any of the assumptions could be inaccurate, and, therefore, we cannot assure you that the
forward-looking statements included in this AIF will prove to be accurate. In light of the
significant uncertainties inherent in our forward-looking statements, the inclusion of such
information should not be regarded as a representation by us or any other person that our
objectives and plans will be achieved. Some of these and other risks and uncertainties that could
cause actual results to differ materially from such forward-looking statements are more fully
described under the heading Risk Factors.
 Readers are cautioned that the foregoing list of important factors affecting forward-looking
information is not exhaustive. Furthermore, the forward-looking information contained in this
quarterly report is made as of the date of this report and, except as required by applicable law,
InterOil does not undertake any obligation to update publicly or to revise any of the included
forward-looking information, whether as a result of new information, future events or otherwise.
The forward-looking information contained in this report is expressly qualified by this cautionary
statement.
 We currently have no production or reserves as defined in Canadian National Instrument 51-101
Standards of Disclosure for Oil and Gas Activities. All information contained in this AIF
regarding resources are references to undiscovered resources under Canadian National Instrument
51-101, whether stated or not.
 
 CORPORATE STRUCTURE
 Business Corporations Act
 Our registered office
    
    Our corporate officein Canada is located at:
    
    in Australia is located at:Brunswick House
    
    Level 1, 60-92 Cook Street10th Floor, 44 Chipman Hill
    
    Portsmith, QLD 4870,Saint John, NB E2L 4S6
    
    Australia
  Segments
    
    Objective
    
    Entity ShadingUpstream
    
    Exploration and ProductionMidstream
    
    Liquefaction, Refining and MarketingDownstream
    
    Wholesale and Retail DistributionCorporate
    
    Corporate and Consolidations
  Annual Information Form INTEROIL CORPORATION




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Upstream  Exploration and Production
  Midstream  Liquefaction, Refining and Marketing
   Annual Information Form INTEROIL CORPORATION




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Downstream  Wholesale and Retail Distribution
   Annual Information Form INTEROIL CORPORATION




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GENERAL DEVELOPMENT OF THE BUSINESS
 Three Year History
  2006
  Upstream
   Midstream
   
 Annual Information Form INTEROIL CORPORATION




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##### Table of Contents



Downstream
   Financing
  ü
    
    In May 2006, InterOil entered into a secured credit agreement for $130.0 million. The loan
is divided into two tranches. Tranche 1, which represents $100.0 million of the facility, was
available for drawdown from the time the agreement was signed. Tranche 2 drawdown was dependent
upon milestones being reached with relation to the prospective building of a liquefied natural
gas processing facility in Papua New Guinea. The full balance of the loan is repayable in May
2008. The interest rate payable on the loan is 4% from May 2006 and ending in March 2007.
Between March 2007 and the end of the facility, the interest rate will be 10% unless a definitive
Project Agreement is executed by InterOil and the lenders on or before March 2007. If the
Project Agreement is delivered on or before March 2007, the interest rate will continue to be 4%
for the full life of the loan. The loan was fully drawn down as at December 31, 2006.ü
    
    In May 2006, we repaid $25.0 million in unsecured borrowings (see January 2005 financing
transactions under our, unsecured term loan facility, below).ü
    
    In May 2006, we entered into an agreement to amend the terms of the original PNG Drilling
Ventures Limited, Agreement, whereby, PNG Drilling Ventures Limited converted their interest
under the agreement into 575,575 InterOil common shares and also retained a 6.75% interest in the
next four wells (the first of which is Elk-1) to be drilled by InterOil. PNG Drilling Ventures
also has the right to participate in the 16 wells that follow the first four mentioned above up
to an interest of 5.75% by contributing their share of costs.ü
    
    In August 2006, the credit limit under the BNP facility entered into in 2004 was increased
to $170.0 million. The credit limit is comprised of a $130.0 million facility to provide letters
of credit and short term loans to finance the purchase of crude cargoes and bank guarantees to
facilitate hedging and a $40.0 million facility that allows us to discount eligible U.S. dollar
receivables and fully cash back loans under the first facility.ü
    
    In December 2006, we renegotiated the terms of the OPIC secured loan where the half yearly
principle payment due in December 2006 and June 2007 of $4.5 million each, have been deferred
until December 31, 2007 and interest previously due on December 31, 2006 and June 30, 2007 were
deferred until September 30, 2007. The normal repayment of interest and principal will
recommence on September 30, 2007 and December 31, 2007, respectively.
 Management Team
  ü
    
    Effective July 1, 2006, Dr Jack Hamilton was appointed as President of InterOil.ü
    
    On August 3, 2006, InterOil announced that Tom S. Donovan, Chief Financial Officer of
InterOil had completed his employment agreement on July 31, 2006.
 Annual Information Form INTEROIL CORPORATION




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##### Table of Contents



ü
    
    On August 30, 2006, InterOil announced that William J. Jasper III was appointed as President
and Chief Operating Officer of InterOil. At this time, it was agreed that Christian Vinson, the
former Chief Operating Officer, would focus on corporate development and government relations in
Papua New Guinea and Dr. Jack Hamilton, the former President, was nominated by InterOil to serve
as Chief Executive Officer of the recently formed PNG LNG Inc., which is the vehicle used to
develop the proposed LNG facility adjacent to the InterOil refinery in Papua New Guinea.ü
    
    On October 1, 2006, Dr. Michael Folie retired as a director of InterOil for personal reasons.ü
    
    On October 26, 2006, Collin F Visaggio was appointed as Chief Financial Officer of InterOil.ü
    
    On December 29, 2006, Don R. Hansen was appointed as an independent director of InterOil and
also agreed to serve as a member of the Audit and Compensation Committees of InterOils board of
directors.
 2005
 Upstream
  Midstream
  
 Financing
  ü
    
    In January 2005, we entered into a $20.0 million
unsecured term loan facility. The interest rate on this loan
is 5%. In July 2005, we increased the availability under this
loan facility to $25.0 million. Borrowings under this
facility are due 15 months after all funds are disbursed. As
of December 31, 2005, $3.5 million remained available for
future borrowings under this facility. (See May, 2006 for
information regarding repayment of this loan)
 Annual Information Form INTEROIL CORPORATION




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##### Table of Contents



ü
    
    In February 2005, we entered into an amended and restated
indirect participation agreement with institutional accredited
investors in which the investors paid us a total of $125.0
million and we agreed to drill eight exploration wells in
Papua New Guinea. See Indirect Participation Interest
Agreements.ü
    
    In August 2005, the secured revolving crude import
facility with BNP Paribus initially entered into in March
2004, was increased to $150.0 million. At December 31, 2005,
$44.0 million remained available for use.ü
    
    As of December 31, 2005, PNG Drilling Ventures Limited
had converted $2.5 million of their investment into 141,545 of
our common shares pursuant to an indirect participation
interest agreement. See Indirect Participation Interest
Agreement.
 2004
 Upstream
  Midstream
  Downstream
  
 Financing
  ü
    
    In March 2004, we received an additional $3.2 million from PNG Drilling Ventures
Limited for our second indirect interest participation agreement program. This,
together with funds received in 2003, made the total contribution under the drilling
participation agreement with PNG Drilling Ventures $12.2 million.
 Annual Information Form INTEROIL CORPORATION




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##### Table of Contents



ü
    
    In May 2004, PNG Energy Investors converted their $7.7 million indirect participation
interest into 683,140 common shares of InterOil.ü
    
    In July 2004, our common shares commenced trading on the Toronto Stock Exchange.ü
    
    In September 2004, our common shares commenced trading on the American Stock Exchange.ü
    
    In the third quarter of 2004, we issued $45.0 million in 8.875% senior convertible
debentures due 2009 that were subsequently converted into 2.4 million common shares. We
also issued warrants to acquire 359,415 common shares at a price of $21.91. The warrants
have a five year term. As of December 31, 2006, warrants to purchase 340,247 common shares
remained outstanding.
 
 BUSINESS STRATEGY
  Capitalize On and Expand the Existing Business Assets
    Annual Information Form INTEROIL CORPORATION




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Target Acquisitions and Growth Opportunities in Papua New Guinea and the Surrounding Area
    Position InterOil for Long-Term Oil and Gas Business Success
    Annual Information Form INTEROIL CORPORATION




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Summary of Strategic Priorities
  StrategicPriorities
    
    2006 Progress
    
    2007 InitiativesCapitalize on and
Expand on the
Existing Business
Assets
    
    ü Completed refinery optimization
project, which included the
installation of new generators powered
by low sulfur waxy residue and
modifications of the furnaces and
boilers to improve reliability and
reduce fuel costs.
ü Secured a contract to provide InterOil
Power Fuel to Papua New Guineas
Moitaka Power Station.
    
    ü Evaluate feasibility of improvements,
modifications and additional equipment to
improve flexibility and profitability of the
refinery.
ü Continue to seek out potential markets for
InterOil Power Fuel and distillate export
opportunities to increase contribution to
fixed costs.
ü Cost reduction program targeting 10%
reduction.Target Acquisitions
and Growth
Opportunities in
Papua New Guinea and
the Surrounding Area
    
    ü Finalized the terms of acquisition for
Shell Papua New Guineas distribution
network. The Shell Papua New Guinea
business was transferred to InterOil on
October 1.
ü Examined other potential downstream
growth opportunities.
ü Progressed discussions for liquefied
natural gas opportunity in Papua New
Guinea with government and other
potential partners.
    
    ü Pursue opportunities to purchase a business
or assets in the business of distributing
fuel to the aviation sector.
ü Pursue other potential downstream growth
opportunities.
ü Sign a project agreement relating to the LNG
opportunity in Papua New Guinea and begin
taking steps to advance project.
ü Finalize investment decision and development
plans for LNG project.Position InterOil
for Long-Term Oil
and Gas Business
Success
    
    ü Made potential gas and condensate
discovery at Elk location on existing
Petroleum Prospecting License 238.
ü Conducted seismic and airborne gravity
and magnetic surveys on licenses to
expand knowledge base of existing
prospects and to identify new prospects.
    
    ü Obtain further information about the Elk
structure by drilling the Elk-2 appraisal
well and conducting 100 miles of appraisal
seismic.
ü Conduct detailed 2D seismic surveys over the
Elk discovery and lead on-trend with the Elk
discovery that have been identified from
seismic data and airborne gravity/magnetic
surveys acquired by the company to date.
 Annual Information Form INTEROIL CORPORATION




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DESCRIPTION OF OUR BUSINESS
 Overview
  Segments
    
    OperationsUpstream
    
    Exploration and Production  Explores and appraises
potential oil and gas bearing structures in Papua New
Guinea with a view to commercializing discoveries.Midstream
    
    Liquefaction, Refining and Marketing  Markets the
refined products it produces in Papua New Guinea both
domestically and for export. Since early 2006, our
business plan and operating strategy has evolved to
include as a business objective, the development of an
onshore liquefied natural gas processing facility in Papua
New Guinea.Downstream
    
    Wholesale and Retail Distribution  Distributes
refined products in Papua New Guinea on a wholesale and
retail basis.Corporate
    
    Corporate and Consolidations  Engages in business
development and improvement, common services and
management, financing and treasury, government and
investor relations. Common and integrated costs are
recovered from business segments on an equitable driver
basis. Our corporate segment results also include
consolidation adjustments.
  
 EXPLORATION AND PRODUCTION
   Petroleum License Details
   Annual Information Form INTEROIL CORPORATION




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Petroleum Prospecting License 236
  Petroleum Prospecting License 237
  Petroleum Prospecting License 238
  Petroleum Prospecting License 244
  Annual Information Form INTEROIL CORPORATION




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Petroleum Retention License 4
  Petroleum Retention License 5
  2006 Exploration Activities
    Annual Information Form INTEROIL CORPORATION




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Oil and Gas Wells
  Working Interest in Non Producing Gas Wells
 Location
    
    Gross
    
    NetPapua New Guinea
    
    5
    
    3
 Properties with No Attributed Reserves
  Undeveloped Acres
 Location
    
    Gross
    
    NetPapua New Guinea
    
    
    8,981,232
    
    
    
    8,223,614Total
    
    
    8,981,232
    
    
    
    8,223,614
 Abandonment and Reclamation
  Costs Incurred
  Expenditure
    
    Amount ($ millions)Property Acquisition Costs
    
    
    0.3Proved Properties
    
    
    Undeveloped Properties
    
    
    0.3Exploration Costs
    
    
    48.2Development Costs
    
    
    Total Expenditure
    
    
    48.5
 Tax Horizon
  Exploration and Development Activities
  Annual Information Form INTEROIL CORPORATION




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Undeveloped Wells
 Type
    
    Gross
    
    NetOil
    
    
    
    
    
    
    Gas
    
    
    1
    
    
    
    0.68Service
    
    
    
    
    
    
    Dry
    
    
    
    
    
    
    Total
    
    
    1
    
    
    
    0.68
 Indirect Participation Agreements
    Strategic Priorities
  StrategicPriorities
    
    2006 Progress
    
    2007 InitiativesTarget
Acquisitions and
Growth
Opportunities in
Papua New Guinea
and the Surrounding
Area
    
    ü Acquired
additional interest
in PRL 4 and PRL 5
during the year.
    
    ü Evaluate productive potential of the
Stanley gas discovery in PRL 4
ü Drill Elevala-2 appraisal well in PRL
5
ü Complete evaluation of prospectivity
of PPL 244.
ü Participate in the Papua New Guinea
offshore bid round
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##### Table of Contents



StrategicPriorities
    
    2006 Progress
    
    2007 InitiativesPosition
InterOil for
Long-Term Oil and Gas
Business Success
    
    ü Natural gas
and condensate
discovery at Elk
location on existing
PPL 238.
ü Conducted
seismic and airborne
gravity and magnetic
surveys on licenses
to expand knowledge
base of existing
leads and prospects
and to identify new
leads and prospects.ü Modified
InterOils Rig 2 to
enable drilling into
similar reservoir
conditions
encountered in Elk-1.
    
    ü Further
define the Elk
structure and
reservoir by drilling
the Elk-2 appraisal
well and conducting
100 miles of
appraisal seismic.
ü Conduct
detailed 2D seismic
surveys over the Elk
discovery and Big
Horn structure
on-trend with the Elk
discovery.
ü Drill
Antelope-1 new
structure south of
Elk.
ü Prove up
sufficient gas
reserves to support
the construction of a
pipeline and
liquefaction plant in
Papua New Guinea.
 
 LIQUEFACTION, REFINING AND MARKETING
 Refining and Marketing
  Refinery Optimization
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Facilities and Major Subcontractors
    Crude Supply and Throughput
   Marketing
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Competition
   Trading and Risk Management
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Liquefaction
  Strategic Priorities
  StrategicPriorities
    
    2006 Progress
    
    2007 GoalsCapitalize and Expand
on the Existing
Business Assets
    
    ü Completed
refinery optimization
project to improve
product slate,
improve reliability
and reduce fuel
costs.
ü Completed
InterOil Power Fuel
project at Moitaka
Power Station. The
downstream business
won a tender to
provide IPF to
Moitaka supplied out
of the refinery.ü Continued
with crude
optimization
initiatives.
    
    ü Evaluate
feasibility of
improvements,
modifications and
additional equipment
to improve
flexibility and
profitability of the
refinery
ü Continue to
seek out potential
markets for InterOil
Power Fuel
ü Seek
profitable distillate
export opportunities
to increase
contribution to fixed
costs
ü Cost
reduction program
targeting 10%
reduction.Target Acquisitions
and Growth
Opportunities in
Papua New Guinea
    
    ü Commenced
consultation with key
stakeholders to
discuss ways to
stimulate local
demand from the
refinery
ü Progressed
discussions for LNG
opportunity in Papua
New Guinea with
government and other
potential partners.
    
    ü Achieve
growth in local
demand for products
from the refinery
ü Sign
shareholder agreement
and project agreement
relating to the
proposed LNG plant.
ü Complete
basis of design and
commence front end
engineering design.
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##### Table of Contents



StrategicPriorities
    
    2006 Progress
    
    2007 GoalsPosition InterOil for
Long-Term Oil and Gas
Business Success
    
    ü Improved
refinery
profitability to
almost a breakeven
position in second
half of 2006.
    
    ü Maintain the
positive momentum
achieved in third and
fourth quarter 2006
and achieve a
profitable outcome
for 2007
 
 WHOLESALE AND RETAIL DISTRIBUTION
  Supply of Products
    Retail Distribution
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##### Table of Contents



Wholesale Distribution
  Competition
  Customers
  Strategic Priorities
  StrategicPriorities
    
    2006 Progress
    
    2007 GoalsCapitalize and Expand
on the Existing
Business Assets
    
    ü Secured a
contract to provide
IPF to Papua New
Guineas Moitaka
Power Station.
ü Completed the
construction of a 2
million liter diesel
storage tank at our
terminal in the
province of East
Sepik, to augment
storage availability
at that location.
    
    ü Further
integrate Shell
distribution assets
into the existing
InterOil business to
capitalize on cost
efficiencies and
operational
synergies.
ü Continue to
seek out potential
markets for InterOil
Power Fuel.
ü To carry out
full retail network
plan and rationalize
or expand the retail
network as a resultTarget Acquisitions
and Growth
Opportunities in
Papua New Guinea
    
    ü Finalized the
terms of acquisition
for Shell Papua New
Guineas distribution
network. The Shell
Papua New Guinea
business was
transferred to
InterOil on October
1.
ü Examined
other potential
downstream growth
opportunities.
    
    ü Pursue
acquisition
opportunities in the
aviation distribution
business.
ü Pursue other
potential downstream
growth opportunities.
ü To target new
mining ventures
currently in the
start up phase in
Papua New Guinea.
ü To complete a
5-year strategic plan
to identify future
growth within the
surrounding region.
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##### Table of Contents



COMMUNITY RELATIONS, SAFETY AND THE ENVIRONMENT
  Environment
  ü
    
    Emissions of substances into, and pollution and contamination of, the atmosphere, waters
and land;ü
    
    Production, use, handling, storage, transportation and disposal of waste, hazardous
substances and dangerous goods;ü
    
    Conservation of natural resources;ü
    
    The protection of threatened and endangered flora and fauna; andü
    
    The health and safety of people.
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Community Relations
  ü
    
    Managing the expectations and demands of benefit streams perceived as a result of the
establishment of the refinery;ü
    
    Managing expectations of community assistance programs to community institutions, and;ü
    
    To manage land acquisition related compensation claims, demands and payments;
      ü
    
    Comply with all applicable laws, regulations and standards and where laws do not exist
adopt and apply standards that reflect the companys commitment to socially and
environmentally responsible behaviors.ü
    
    Maintain close liaison with the Department of Petroleum and Energy and all relevant
Government departments to ensure that InterOil complies with all government legislation and
regulations relevant to its activities in Papua New Guinea.ü
    
    Providing a safe and healthy working environment for all employees and contractors, and
establishing emergency response procedures that allow personnel to respond promptly and
effectively.ü
    
    Establishing community development assistance programs to enhance and improve the
standard of health and education.ü
    
    Pursuing socially responsible community relations initiatives that reflect the
communitys needs, enhance our reputation and recognize the importance of the culture,
heritage and traditional rights of the communities in which we operate.ü
    
    Understanding the traditional and contemporary culture, beliefs and social dynamics of
locals in all project areas with particular reference to land matters, in order to better
manage socio-economic changes in oil and gas exploration and in our refinery operations in
Papua New Guinea.ü
    
    Ensuring community affairs issues are a major focus in the planning, management and
delivery of our activities, while ensuring that our health, safety and environment
operating procedures are adhered to in every task performed;
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##### Table of Contents



ü
    
    Communicating with employees, contractors, partners, government and the local project
impacted communities in a transparent, open and proactive manner;ü
    
    Providing cultural awareness information and training to our employees and contractors
at all levels;ü
    
    Ensuring compliance with all applicable industrial relations legislation and procedures
in all employment arrangements with our contractors and sub-contractors; andü
    
    Providing business development advice and support to appropriate, representative and
sustainable community owned enterprises where they have the capability to provide cost
effective and competent services.
 
 RISK FACTORS
  The exploration and production, the refining and the distribution businesses are competitive.
   ü
    
    Our access to the capital necessary to drill wells and acquire properties;ü
    
    Our ability to acquire and analyze seismic, geological and other information relating to a property;
 ü
    
    Our ability to retain the personnel necessary to properly evaluate seismic and
other information relating to a property;ü
    
    The development of, and our ability to access, transportation systems to bring
future production to the market, and the costs of such transportation systems;ü
    
    The standards we establish for the minimum projected return on an investment of our capital; andü
    
    The availability of alternate fuel sources.
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Our refinery has not operated at full capacity for an extended period of time and our
profitability may be materially negatively affected if it is not able to do so.
  If we are not able to market all of our refinerys output, we will not be able to operate our
refinery at its full capacity and our financial condition and results of operations may be
materially adversely affected.
    If our refining margins do not meet our expectations, we may be required to write down the
value of our refinery.
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##### Table of Contents



ü
    
    Our revenues, cash flows and earnings;ü
    
    Our ability to attract capital to finance our operations, and the cost of such capital;ü
    
    The value of our oil properties;ü
    
    The profit or loss we incur in refining petroleum products; andü
    
    The profit or loss we incur in exploring for and developing reserves.
 Our refinerys financial condition may be materially adversely affected if we are unable to
obtain crude feedstocks for our refinery.
   Our refining operations expose us to risks, not all of which are insured.
  Our hedging activities may result in losses.
  Annual Information Form INTEROIL CORPORATION




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##### Table of Contents



ü
    
    If the amount of refined products produced is less than expected or is not produced or sold during the planned
time period;ü
    
    If the other party to the hedging contract defaults on its contract obligations; orü
    
    If there is a change in the expected differential between the underlying price in the hedging agreement and
actual prices received.
  We may not be successful in our exploration for oil and gas.
    If we are unable to renew our petroleum licenses with the Papua New Guinea government, we may
be required to discontinue our exploration activities in Papua New Guinea.
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Our investments in Papua New Guinea are subject to political, legal and economic risks that
could materially adversely affect their value.
    New legislative, administrative or judicial actions that constrain licenses and permits from
various government authorities may have a material adverse affect on the companies operations.
  Weather and unforeseen operating hazards may adversely impact our operating activities.
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Our significant debt levels and our debt covenants may limit our future flexibility in
obtaining additional financing.
  ü
    
    A portion of our cash flow will be used to pay interest and principal on our debt and will not be available for other
purposes;ü
    
    Our OPIC loan agreement, secured loan agreement and BNP credit facility contain financial tests which we must satisfy
in order to avoid a default under such credit facilities; andü
    
    Our ability to obtain additional financing for capital expenditures and other purposes may be limited.
  Our ability to recruit and retain qualified personnel may have a material adverse effect on
our operating results and stock price.
  Petroleum Independent and Exploration Corporation can affect our raising of capital through
the issuance of common shares or securities convertible into common shares.
  Compliance with and changes in environmental laws could adversely affect our performance.
  Annual Information Form INTEROIL CORPORATION




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You may be unable to enforce your legal rights against us.
  Changing regulations regarding corporate governance and public disclosure could cause
additional expenses and failure to comply may adversely affect our reputation and the value of our
securities.
    
 DIVIDENDS
  Annual Information Form INTEROIL CORPORATION




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##### Table of Contents



DESCRIPTION OF OUR CAPITAL STRUCTURE
   Business Corporations Act
 
 MARKET FOR OUR SECURITIES
  Toronto Stock Exchange (TSX:IOL) in Canadian Dollars
 Month
    
    High
    
    Low
    
    VolumeJanuary
    
    $
    31.30
    
    
    $
    18.75
    
    
    
    771,500February
    
    $
    20.53
    
    
    $
    18.30
    
    
    
    481,100March
    
    $
    19.83
    
    
    $
    14.70
    
    
    
    504,500April
    
    $
    17.97
    
    
    $
    15.10
    
    
    
    261,000May
    
    $
    18.95
    
    
    $
    13.55
    
    
    
    371,500June
    
    $
    22.95
    
    
    $
    14.37
    
    
    
    316,800July
    
    $
    22.75
    
    
    $
    19.31
    
    
    
    109,700August
    
    $
    21.99
    
    
    $
    13.32
    
    
    
    339,900September
    
    $
    21.76
    
    
    $
    16.22
    
    
    
    187,400October
    
    $
    21.75
    
    
    $
    17.30
    
    
    
    459,800November
    
    $
    34.99
    
    
    $
    20.56
    
    
    
    1,430,400December
    
    $
    35.41
    
    
    $
    29.44
    
    
    
    441,900Total
    
    
    
    
    
    
    
    
    
    
    5,675,500
 Annual Information Form INTEROIL CORPORATION




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##### Table of Contents



American Stock Exchange (AMEX:IOC) in United States Dollars
 Month
    
    High
    
    Low
    
    VolumeJanuary
    
    $
    26.41
    
    
    $
    16.00
    
    
    
    7,592,100February
    
    $
    18.75
    
    
    $
    15.80
    
    
    
    3,655,900March
    
    $
    17.50
    
    
    $
    12.64
    
    
    
    6,285,700April
    
    $
    15.82
    
    
    $
    13.05
    
    
    
    3,348,200May
    
    $
    17.26
    
    
    $
    12.75
    
    
    
    5,848,000June
    
    $
    20.54
    
    
    $
    12.96
    
    
    
    6,014,200July
    
    $
    20.14
    
    
    $
    16.70
    
    
    
    3,976,600August
    
    $
    19.46
    
    
    $
    12.14
    
    
    
    7,848,000September
    
    $
    19.50
    
    
    $
    14.50
    
    
    
    5,553,700October
    
    $
    19.59
    
    
    $
    15.20
    
    
    
    1,000,500November
    
    $
    30.80
    
    
    $
    18.05
    
    
    
    21,506,200December
    
    $
    30.50
    
    
    $
    26.12
    
    
    
    10,009,700Total
    
    
    
    
    
    
    
    
    
    
    92,638,800
 Prior Sales
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##### Table of Contents



DIRECTORS AND OFFICERS
  Directors and Officers
 Name
    
    Address
    
    Position
    
    Date of AppointmentPhil E. Mulacek
    
    The Woodlands, TX, USA
    
    Chairman, CEO, & Director
    
    May 29, 1997Christian M. Vinson
    
    The Woodlands, TX,USA
    
    Vice President of Corporate Development and Government Affairs, & Director
    
    May 29, 1997Gaylen J. Byker
    
    Grand Rapids, MI, USA
    
    Director(1)
    
    May 29, 1997Roger N. Grundy
    
    Matlock Derbyshire, UK
    
    Director
    
    May 29, 1997Donald R. Hansen
    
    Calgary, AB, Canada
    
    Director(2)
    
    December 29, 2006Edward N. Speal
    
    Toronto, ON, Canada
    
    Director(3)
    
    June 25, 2003Anesti Dermedgoglou
    
    Cairns, QLD, Australia
    
    Vice President of Investor Relations
    
    June 3, 2002Peter Diezmann
    
    Lae, Papua New Guinea
    
    General Manager  Wholesale and Retail Distribution
    
    March 1, 2005Gerry Gilbert
    
    Cairns, QLD, Australia
    
    General Manager  Exploration and Production
    
    July 1, 2005William J. Jasper III
    
    Cairns, QLD, Australia
    
    President and Chief Operating Officer
    
    August 30, 2006Anthony Poon
    
    Sydney, NSW, Australia
    
    General Manager  Supply and Trading
    
    October 1, 2005Collin F Visaggio
    
    Perth, WA, Australia
    
    Chief Financial Officer
    
    October 26, 2006
 
 (1)
    
    Gaylen Byker acted as Chairman of the Audit Committee, the Nominating and Corporate
Governance Committee and Compensation Committee.(2)
    
    Donald Hansen acted as a member of the Audit Committee, Compensation Committee and Nominating
and Corporate Governance Committee from the date of his appointment, December 29, 2006.(3)
    
    Edward Speal acted as a member of the Audit Committee, Compensation Committee and Nominating
and Corporate Governance Committee   Annual Information Form INTEROIL CORPORATION




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##### Table of Contents



Phil E. Mulacek
 Christian M. Vinson
 Gaylen J. Byker
 Roger N. Grundy
 Donald R. Hansen
  Annual Information Form INTEROIL CORPORATION




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Edward N. Speal
 Anesti Dermedgoglou
 Peter Diezmann
 Gerry Gilbert
 William J Jasper III
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##### Table of Contents



Anthony Poon
 Collin F Visaggio
   
 BOARD COMMITTEES
  
 INTERESTS OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTION
  ü
    
    Mr. Mulacek controls P.I.E. Group LLC and entities
controlled by Mr. Byker, also have an ownership interest in
P.I.E. Group LLC. P.I.E. Group LLC. owns 0.01% interest of
S.P.I. Exploration and Production Corporation. S.P.I.
Exploration and Production Corporation is a holding company
that owns InterOils upstream operating subsidiaries that hold
exploration licenses and conduct exploration activities in
Papua New Guinea.ü
    
    Petroleum Independent and Exploration Corporation
(P.I.E.) has a 0.02% interest of S.P. InterOil, LDC, which
is a holding company of InterOil that owns InterOils
midstream operating subsidiaries that own and operate
InterOils refinery in Papua New Guinea. Mr. Mulacek is the
President of, and has an ownership interest in, P.I.E. P.I.E.
was paid a management fee of $150,000, $150,000, and $150,410
during 2006, 2005 and 2004, respectively. This management fee
relates to Petroleum Independent and Exploration Company being
appointed the General Manager of our subsidiary, S.P.
InterOil, LDC.
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##### Table of Contents



ü
    
    P.I.E. has a 0.01% interest of S.P.I. Distribution
Limited, which is a holding company of InterOil that owns
InterOils wholesale and retail distribution operations.ü
    
    We had no loans with P.I.E. in 2006. In 2005 and 2004,
we made interest payments of $9,376, and $246,745, and loan
principal payments of $1.1 million and $2.2 million to P.I.E.
As of December 31, 2005, we had repaid all amounts that we
owed to P.I.E. The loans outstanding to P.I.E. were for
amounts loaned by lending institutions to P.I.E. These loans
were collateralized by barges legally owned by P.I.E. but
beneficially owned by us and common shares of ours owned by
P.I.E. The interest rates charged to us by P.I.E. reflected
the actual interest rates paid by P.I.E. to the lending
institutions.
  
 LEGAL PROCEEDINGS
   
 MATERIAL CONTRACTS
  Date
    
    DescriptionMay 4, 2006
    
    Credit Agreement between InterOil Corporation and
Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Clarion Finanz AGMay 4, 2006
    
    Memorandum of Understanding between InterOil
Corporation, Merrill Lynch and Clarion Finanz AGJanuary 4, 2006
    
    Purchase and Sale Agreement between InterOil Products
Limited and Shell Overseas Holdings LimitedDecember 27, 2005
    
    Code of Ethics and Business ConductAugust 12, 2005
    
    $150 Million Secured Revolving Crude Import Facility
between EP InterOil, Ltd. and BNP Paribas, Singapore
Branch. Amended August 14, 2006 and increased to $170
million.February 25, 2005
    
    Amended and Restated Indirect Participation Interest
Agreement between InterOil Corporation and the Investors
signatory theretoMay 12, 2004
    
    Amended Indirect Participation Interest Agreement
between InterOil Corporation and PNG Energy Investors,
LLCJuly 21, 2003
    
    Drilling Participation Agreement between InterOil
Corporation and PNG Drilling Ventures Limited. Amended
in May 2006March 26, 2002
    
    Engineering, Procurement and Construction Contract for
InterOil Refinery between InterOil Limited and Clough
Niugini LimitedJune 12, 2001
    
    Loan Agreement between EP InterOil, Ltd. and Overseas
Private Investment Corporation, as amended
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Date
    
    DescriptionDecember 21, 2001
    
    Crude Supply Agency and Sales Agreement between EP
InterOil, Ltd. and BP Singapore Pte LimitedMarch 23, 2001
    
    Export Marketing and Shipping Agreement between EP
InterOil, Ltd. and Shell International Eastern Trading
CompanyFebruary 6, 2001
    
    Agreement for the Sale and Purchase of Naphtha between
EP InterOil, Ltd. and Shell International Eastern
Trading CompanyMay 29, 1997
    
    Refinery State Project Agreement between InterOil
Limited, EP InterOil, Ltd. and The Independent State of
Papua New Guinea
 Credit Agreement dated May 4, 2006
     Purchase and Sale Agreement dated January 4, 2006
  Code of Ethics and Business Conduct dated December 27, 2005
  $150 Million Secured Revolving Crude Import Facility dated August 12, 2005
  Annual Information Form INTEROIL CORPORATION




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Amended and Restated Indirect Participation Interest Agreement dated February 25, 2005
  Amended Indirect Participation Interest Agreement dated May 12, 2004
 th
 Drilling Participation Agreement dated July 21, 2003
  Engineering Procurement and Construction Contract dated March 26, 2002
  OPIC Loan Agreement dated June 12, 2001
  Crude Supply Agency and Sales Agreement
  Annual Information Form INTEROIL CORPORATION




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Export Marketing and Shipping Agreement dated March 23, 2001
  Agreement for the Sale and Purchase of Naphtha dated February 6, 2001
  Refinery State Project Agreement
    
 TRANSFER AGENT AND REGISTRAR
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ADDITIONAL INFORMATION
 www.sedar.com www.interoil.com
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GLOSSARY OF TERMS
 Barrel, Bbl (petroleum)
 Condensate
 Crack spread
 EBITDA
 Feedstock
 GAAP
 IPF
 IPP
 LNG
 LPG
 LSWR
 Mark-to-market
 Naphtha
 Natural gas
 Natural gas measurements .
 
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PGK
 PPL
 PRL
 Sweet/sour crude
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Schedule A
 FORM 51-101F3
 REPORT OF MANAGEMENT AND
DIRECTORS ON OIL AND GAS DISCLOSURE
 Company
 (a)
    
    (i)
    
    proved and proved plus probable oil and gas reserves estimated as at December 31, 2006 using forecast prices and
costs; and(ii)
    
    the related estimated future net revenue; and(b)
    
    (i)
    
    proved oil and gas reserves estimated as at December 31, 2006 using constant prices and costs; and(ii)
    
    the related estimated future net revenue.
 The Company does not have any reserves as defined under National Instrument 51-101.
  (a)
    
    the content and filing with securities regulatory authorities of the other oil and gas
information;(b)
    
    the content and filing of this report.
  /s/ Phil E. Mulacek

Phil E. Mulacek, Chairman and
    
    
    
    /s/ Gaylen J. Byker

Gaylen J. Byker, DirectorChief Executive Officer/s/ Christian M. Vinson
    
    
    
    /s/ Roger N. GrundyChristian M. Vinson,
    
    
    
    Roger N. Grundy, DirectorOfficer and Director
  Annual Information Form INTEROIL CORPORATION