The plaintiffs, who had bought a modular oil refinery that was subsequently sold to a subsidiary of InterOil, had alleged that their money was used to buy a reformer - used to convert oil into unleaded petrol - and the paperwork forged to benefit a family member of InterOil chief executive officer Phil Mulacek.

InterOil said the plaintiffs sought damages which could have exceeded $125 million.

Under the agreement, InterOil will issue 199,667 shares worth a total of $12 million to the plaintiffs to settle the lawsuit.

The settlement is subject to court approval, which if granted would result in the shares being issued in October.