NZ Oil & Gas (NZO)

[Sideshow Bob]

http://www.odt.co.nz/news/business/392044/nzog-keen-extend-permits-exploration

[Sideshow Bob]

$96 mil in cash, 336 mil shares on issue = 28.5cps.

Rest of the company valued at Jack s.... (Or about 60 mil)

And that's without the 48% of Cue and the $21 mil of cash they've got.

[Balance]

$96 mil in cash, 336 mil shares on issue = 28.5cps.

Rest of the company valued at Jack s.... (Or about 60 mil)

And that's without the 48% of Cue and the $21 mil of cash they've got.

So what is the market telling us?

At one stage, cash was 70% of NZOG's sp.

Has not stopped NZO being one of the biggest dogs in the market. Sp back to where it was in 2000! 16 lost years for those who 'never' sell.

Meanwhile, as I have suggested before, switch to a company like OSH and you have outperformed this dog by over 250%.

[Balance]

https://www.nzx.com/companies/NZO/announcements/286670

Pontius Pilate leaves the scene.

He would have been remembered as a honorable, moral and caring man of integrity if he had done or tried to do the right thing by the families of the 29 dead miners.

Instead, he will always be remembered for being a gutless Pontius Pilate.

PS. A sudden short notice resignation like this always tend to point towards discord between CEO and company. Interesting times ahead for shareholders.

Here he was, just last Friday, talking up how wonderfully positioned NZOG is. Something happened over the weekend?

http://www.nbr.co.nz/article/investors-press-nzog-resume-dividends-after-return-profit-b-192311

[Sideshow Bob]

You always have to be a little cynical when leaves to pursue "other business interests", about 3 weeks after his resignation is announced. So a short time frame and must be some good business interests to leave a 700k+ pa position.

With Pike River have to look towards the board also, rather than just one individual. In such difficult and tragic situation I would have thought the response should have been led by the board.

[winner69]

Shareprice was about 70 cents when he took over

Hasn't really done that bad

[Balance]

You always have to be a little cynical when leaves to pursue "other business interests", about 3 weeks after his resignation is announced. So a short time frame and must be some good business interests to leave a 700k+ pa position.

With Pike River have to look towards the board also, rather than just one individual. In such difficult and tragic situation I would have thought the response should have been led by the board.

Agreed, SSB. But the CEO or MD of a company must also have and show moral and ethical courage, conviction and leadership when it comes to something as profoundly tragic as Pike River.

[Sideshow Bob]

Agreed, SSB. But the CEO or MD of a company must also have and show moral and ethical courage, conviction and leadership when it comes to something as profoundly tragic as Pike River.

Or maybe just for once they were just defending shareholder value.

[fabs]

So a short time frame and must be some good business interests to leave a 700k+ pa position.

Mind boggles, don't even want to speculate on the no. of reasons for him leaving.
But certainly hard to imagining any body giving him a job for even a fraction of what he got at NZO.

[Balance]

Or maybe just for once they were just defending shareholder value.


Fine timing to defend shareholder value after blowing hundreds of millions of shareholders' wealth down dry holes, misadventures and travel junkets. Shows the moral (or lack of) fiber of the individuals in NZOG.

[arjay]

So a short time frame and must be some good business interests to leave a 700k+ pa position.

Mind boggles, don't even want to speculate on the no. of reasons for him leaving.
But certainly hard to imagining any body giving him a job for even a fraction of what he got at NZO.

"to pursue other business interests" is right up there with "to spend more time with his family" as a euphemism for "resign or else".

Perhaps he's going to work in the supermarket Gordon Ward bought with his booty?

[Balance]

"to pursue other business interests" is right up there with "to spend more time with his family" as a euphemism for "resign or else".

Perhaps he's going to work in the supermarket Gordon Ward bought with his booty?

One thing one must acknowledge - Zeta seems to be getting rid of most of the dead wood and useless hanger-ons in the company.

[Carpenterjoe]

Should be a good morning, dividend hungry investors will be happy.

[trader_jackson]

I never thought they'd to it!!

Great stuff!

[trader_jackson]

Surely a double digit share price increase is on the way today?

Fairly solid, given the circumstances, by the brief looks of things

[Sideshow Bob]

Jeepers, didn't expect that!

Actually a triple figure increase in share price TJ - $0.02 ;)

[BIRMANBOY]

Well until last year the dividends had been reasonable. But nice to see a re-instatement. Help me get over TTK:eek2:

2008 0.10
2009 0.05
2010 0.05
2011 0.02
2012 0.06
2013 0.06
2014 0.06
2015 wheels fall off
2008 0.10.02
$0.06
$0.06
$0.06
$0.00

[tim23]

Nice bonus - gee its even silenced the knockers...!

[fabs]

Nice bonus - gee its even silenced the knockers...!


Well most of the knockers ( myself incl. ) have long ago recommend this, rather than seeing it just going to the management like a gravy-train.
For they have been collecting heaps sitting on there hands for a long time without growing or producing any wealth for the co. other than what was given to them by previous players.
While the O/P is in the doldrums, IT IS RALLY THE ABSENCE OF ACTION BY THE PRESENT LOT, over a long period that the S/P rests where it is.
It remains to be seen whether management will revert back or continue with a more pro growth policy in the future.
They been Hibernating for nearly 10 years now and fully Rested & Hungry for Action.
HERE IS HOPING.

[Balance]

Nice bonus - gee its even silenced the knockers...!

Ah, the moldy crumbs from the top table!

NZO pays $14m of dividend after blowing $62m of shareholders funds in the last two years on 'asset impairment' - $26.6m of loss in Cue Energy.

"The loss attributable to the company’s shareholders was $29.8 million, reflecting the significant loss for the year in Cue Energy Resources".

And when did the bright boys in NZO take over Cue? March 2015!

Could have just bought oil futures and they would have done better. :D

[tim23]

Silence for a few days at least...

[digger]

Ah, the moldy crumbs from the top table!

NZO pays $14m of dividend after blowing $62m of shareholders funds in the last two years on 'asset impairment' - $26.6m of loss in Cue Energy.

"The loss attributable to the company’s shareholders was $29.8 million, reflecting the significant loss for the year in Cue Energy Resources".

And when did the bright boys in NZO take over Cue? March 2015!

Could have just bought oil futures and they would have done better. :D

That is a dividend of about 9%. Still if you want to be a knocker you can look around the world at other oil companies and easily see that in this climate 9% is about average.

[Balance]

That is a dividend of about 9%. Still if you want to be a knocker you can look around the world at other oil companies and easily see that in this climate 9% is about average.

Point is that NZO has been losing money now for 2 years, is effectively paying back capital (after saying it will focus on growth opportunities), has no clear operational strategy save for making bad investments with the bright boys from Zeta.

Incidentally, the bright boys bought into NZO thinking it was undervalued so TR must be laughing like a well fed kookaburra from across the ditch, having effectively sold his shares to them.

[Balance]

Zeta is one of NZOG's board members investment vehicle, so he appears to be playing both sides.
This time it is Cue, but what is his end game for NZOG?

He's the tail wagging the flea ridden NZOG dog


Writing was on the wall - conflict of interest? NZO used to bail out Zeta?

No wonder the institutions stay well clear of this dog.

[Banksie]

They are looking to speed up the buy back: https://www.nzx.com/companies/NZO/announcements/288143

[arjay]

That is a dividend of about 9%. Still if you want to be a knocker you can look around the world at other oil companies and easily see that in this climate 9% is about average.

More than that if the benefit from the imputation credits is factored in. Although knockers would argue that the shares are over-priced because if they were lower they'd represent a better dividend yield.

[arjay]

Just read through the tender document. Seems an overly complex way to do things. Why not just stand in the market at 55c until they get what they need? If they dont make it then why do they think they'll get there using a complex tender approach. Cant get excited myself - today's SP plus the prospect of the dividend + imputs sounds as good as their offer sans dividend.

[fish]

Just read through the tender document. Seems an overly complex way to do things. Why not just stand in the market at 55c until they get what they need? If they dont make it then why do they think they'll get there using a complex tender approach. Cant get excited myself - today's SP plus the prospect of the dividend + imputs sounds as good as their offer sans dividend.

I suspect they are hoping the tender price will be less than 55 cents.
Nobody knows but if everyone is thinking like you and me the tender price will be 55cents.
I wonder what digger is thinking as he holds even more than me

[Joshuatree]

With 10 min to go re 238,000 shares bought back. Big fail atp.
Stand in the Market – On-market buyback in NZO (https://www.nzx.com/companies/NZO/announcements/289129)

[freddagg]

With 10 min to go re 238,000 shares bought back. Big fail atp.
Stand in the Market – On-market buyback in NZO (https://www.nzx.com/companies/NZO/announcements/289129)

Need to look at NZOX, 16.7 mill bought. Agree that it's a big fail though

[Joshuatree]

thanks fred

[Rabbi]

16,740,429 at a cost of 9 million

Only of benefit to shareholders if the SP stays up. Expensive anti-dilution exercise at best.

[neopoleII]

slapping another 1 cent to the divi might have pushed the SP up a bit more and benefited all share holders more.

[trader_jackson]

Got the annual report in the mail today, quite interesting comparing 'the final pages' to last year...
One thing I was slightly surprised at was to see the New Zealand Superannuation Fund Nominees Limited (NZ super?) had increased their stake by around 10%, from 10.3m to 11.7m

Good to see directors remuneration decreased, although doesn't look like management are feeling the effects of dwindling reserves and oil prices... Employees remuneration over 100k increased from 21 to 23 people...

Appreciate any other thoughts, of course.

[fabs]

RE;Share-Trader's

Good to see directors remuneration decreased, although doesn't look like management are feeling the effects of dwindling reserves and oil prices... Employees remuneration over 100k increased from 21 to 23 people...

Well with one overpaid spin doctor having cashed up and left with having contributed zilch to growth of the Co. over his tenure.
Only time will tell whether the 4 Roosters being payed now over $ 8000.00 per week plus exp. are any better.
To be fair to them hardly can do worse, or can they???

[arjay]

RE;Share-Trader's

Only time will tell whether the 4 Roosters being payed now over $ 8000.00 per week plus exp. are any better.
To be fair to them hardly can do worse, or can they???

I'm sure the Roosters will be crowing when OPEC's decision to tighten production translates into higher oil prices.

[fabs]

I'm sure the Roosters will be crowing when OPEC's decision to tighten production translates into higher oil prices.

Probably will not crowing in public, but may increase take home loot by 50% plus, to what the previous CEO got.

[Balance]

Pike River on Prime TV coming up soon.

"It was no accident, it was murder."

[trader_jackson]

https://www.nzx.com/companies/NZO/announcements/292745

Wow.... so where to now?

[blackcap]

Thats 52 cents per share.....

Time to wind op the company?

[Marilyn Munroe]

Time to wind op the company?

Couldn't agree more. NZOG is now nothing more than a pertoleum mining tenement with tbe pretentions of being an explorer and the overhead of a listed company.

The likelyhood of an outside partner farming in to help drill their Canterbury Basin prospects are remote given that this is likely a gas play in a frontier province facing uncertain market demand.

Tui should be floged off to a yeild chasing pension fund.

Pan Pacific Petroleum is a busted flush.

Boop boop de do
Marilyn

[trader_jackson]

I have decided to sell my very small stake at 64 cents... just get out as there is no huge upside anymore

[Joshuatree]

$100 mill divided by re 318 mill shares = 31cps to be returned.Nice

[tim23]

The $168 mill exceeds yesterday's market cap so add $100 mill cash plus Tui Cue PPP easy get to a share price of 90c plus so I'm holding believe plenty of value left.

[BIRMANBOY]

Seems rather ironic that several months ago they were buying back their shares on market and actively promoting that....whatever it was 50 cents or so. And now ...its just co-incidental I know and I am just a cynical prat and shouldn't be even thinking 'manipulation" and inside knowledge...but there you go.

[tim23]

I did see in NBR recently company associated with Cushings took 5% stake in NZO clearly they saw value will be quickly rewarded. Good on company fir trying to unlock value to shareholders.

[dolor]

First good decision the board has made in about 10 years. Perhaps there are even more to come!

[fish]

I am sure you are right.
These deals just arent made overnight.
I am feeling really sore about it-if it had been made known a few weeks ago I would have not sold into the 55 cent offer.
Are there any legal remedies or do they just get away with it?

[notie]

I am sure you are right.
These deals just arent made overnight.
I am feeling really sore about it-if it had been made known a few weeks ago I would have not sold into the 55 cent offer.
Are there any legal remedies or do they just get away with it?

Well NZOG will have to have a special AGM to get this deal approved.

Looks like Duncan Saville has pushed for this so he can cash up and get out.

So several months NZOG were talking up Kupe and saying they saw a lot of value in it and the were really going to focus on getting it developed.

Question I would ask is why sell when the oil price is low. Sure much of the revenue from Kupe is gas, but condensate and oil has the potential to add significantly to the economics on this project.

Now the sudden change and they are out! If they do sell this, then with Tui being abandoned in 2018-22 it will leave nzog with no producing asset.

One of the rationales for the sale is to free up money to buy other assets, but to date NZOG has only purchased some marginal land in Indonesia, so do you really trust these guys to buy some new assets?

Maybe selling Kupe and winding the NZOG up (which is effect what this is) might be the best course for the long suffering shareholders

[fish]

I don't trust most people these days-the majority appear to be only interested in whats in it for them.
At the moment the future looks bleak for oil-which is why I sold 1.5 million shares into the offer.
But strange things happened during the offer-nearly 1/2 the sells pulled out just before close.
Why?
was there some sort of manipulation

[Snoopy]

I am sure you are right.
These deals just arent made overnight.
I am feeling really sore about it-if it had been made known a few weeks ago I would have not sold into the 55 cent offer.
Are there any legal remedies or do they just get away with it?

If blackcap values the NZO 15% Kupe stake at 52cps, and the share price was about that before the sale announcement, then I am annoyed that I did not buy some NZO myself. Pay for Kupe and 'get the rest of the company for free' is the kind of deal I seek out. But then commodity investing is a new frontier to me. So I wasn't on the look out for it and didn't see it.

I stumbled into Kupe through my investment in Genesis Energy. I did all my Kupe valuations. And it would have been a small stretch to take the Genesis Energy held valuation of Kupe and translate that across to what the NZO stake was worth, in terms of cents per NZO share. But I didn't, and the horse has bolted.

If I read correctly, it was Genesis who made the offer to buy out NZO at a 'price too good to refuse'. I am not sure any outsider, or even NZO insider, could have predicted that. As a Genesis shareholder my impression was that Genesis were moving towards big scale solar arrays, not oil and gas! Big surprise all around is all I can say.

Don't beat yourself up over the deal fish. There is no back room deal here that I can see.

SNOOPY

[arjay]

Mixed feelings on this one - seems like they're selling the golden goose. We've come a long way since the much vaunted 'three pillars' of Pike, Tui and Kupe. The three legged stool is about to become a bread board.

[fish]

If blackcap values the NZO 15% Kupe stake at 52cps, and the share price was about that before the sale announcement, then I am annoyed that I did not buy some NZO myself. Pay for Kupe and 'get the rest of the company for free' is the kind of deal I seek out. But then commodity investing is a new frontier to me. So I wasn't on the look out for it and didn't see it.

I stumbled into Kupe through my investment in Genesis Energy. I did all my Kupe valuations. And it would have been a small stretch to take the Genesis Energy held valuation of Kupe and translate that across to what the NZO stake was worth, in terms of cents per NZO share. But I didn't, and the horse has bolted.

If I read correctly, it was Genesis who made the offer to buy out NZO at a 'price too good to refuse'. I am not sure any outsider, or even NZO insider, could have predicted that. As a Genesis shareholder my impression was that Genesis were moving towards big scale solar arrays, not oil and gas! Big surprise all around is all I can say.

Don't beat yourself up over the deal fish. There is no back room deal here that I can see.

SNOOPY

Thanks snoopy
I actually still hold a more modest amount of NZO so am not unhappy.I sold because I held too many and didnt feel the sp was going anywhere for a long time .
Probably you right and nzo didnt see this coming so I have nothing to feel bad about

[tim23]

This is a classic asset strip perhaps Sir Rons MVT might be eyeing up expect share price to firm if deal approved I mean theres going to be about 80c cash so why not pay 60c for that?

[fish]

This is a classic asset strip perhaps Sir Rons MVT might be eyeing up expect share price to firm if deal approved I mean theres going to be about 80c cash so why not pay 60c for that?


Digger-I hope you are keeping well.I did send you a PM a couple of months ago.

I am sure we all value your insight

[digger]

Digger-I hope you are keeping well.I did send you a PM a couple of months ago.

I am sure we all value your insight

Hi Fish and others.

In very short I have no insight. I am as lost as everyone else as to what or why you would sell the farm. Some things might make since if that is how the management see it. Like are they eyeing up another buy that is selling for dirt. Maybe asset stripping as the sum is less than the whole--which it is in this case. But my first reaction was one of horror as what is left. Also I continue to believe and supported by what the director have told me that KUPE is bigger than we think. I will at this stage vote against it until I am satisified that it is a good deal and will not just be the road to winding up the company. Like what are we going to spend the rest of this money on?

Cheers for now

[blackcap]

Hi Fish and others.

In very short I have no insight. I am as lost as everyone else as to what or why you would sell the farm. Some things might make since if that is how the management see it. Like are they eyeing up another buy that is selling for dirt. Maybe asset stripping as the sum is less than the whole--which it is in this case. But my first reaction was one of horror as what is left. Also I continue to believe and supported by what the director have told me that KUPE is bigger than we think. I will at this stage vote against it until I am satisified that it is a good deal and will not just be the road to winding up the company. Like what are we going to spend the rest of this money on?

Cheers for now

Zeta want the cash?

[dolor]

What about taking out the rest of CUE who need cash and an operating partner for their west Australian gas project?

[tim23]

Cushings have just loaded up on some more why not when the value is so plain to see? I'm expecting market to rerate to cash equivalent once Kupe sale approved so should pass 70c and some in my opinion.

[barleeni]

My 2 cents:

- NZO have cash equivalent on hand of something like $90million
- NZO have reached an agreement to sell its Kupe stake at $168million
- NZO paid a dividend to the tune of $14million in October
- NZO spent $9million on a share buyback in September
- NZO may sell Kupe, which represents half their assets / income

And yet company market cap. is presently $196 million? What am I missing?

[sideline]

My 2 cents:

- NZO have cash equivalent on hand of something like $90million
- NZO have reached an agreement to sell its Kupe stake at $168million
- NZO paid a dividend to the tune of $14million in October
- NZO spent $9million on a share buyback in September
- NZO may sell Kupe, which represents half their assets / income

And yet company market cap. is presently $196 million? What am I missing?

Have you considered the restoration liability of the Tui field? When operations there cease the subsea
wells will need to be made secure and all subsea installations dismantled. My memory is hazy there, but i think
it was a very seizable sum that is being accrued there in the books of NZO as liability.
That sum has to be eventually stumped up when the work is being done.
So quite a bit of the cash you are counting there might not be available for shelling out to shareholders.

[trader_jackson]

What worries me is that NZO plan to deploy this new found cash (from their most reliable, low cost oil well ever in NZ history, I believe) on risky mostly unproven prospects...
Might be better to simply wind up the company and pay every one 60 something cents... I know it was a surprise to many, such as Forsyth Barr, that NZO did this, given they were not that long ago talking about the extensions to life, revisions upwards, and how great it was... only to very shortly after sell it for what is a reasonable price, but certainly not great (I note GNE's share price has also risen nicely over the past few days...)

Disclosure: Sold out at 64c.. took a loss, but happy given it was a very small holding anyway.

[Lion]

My 2 cents:

- NZO have cash equivalent on hand of something like $90million
- NZO have reached an agreement to sell its Kupe stake at $168million
- NZO paid a dividend to the tune of $14million in October
- NZO spent $9million on a share buyback in September
- NZO may sell Kupe, which represents half their assets / income

And yet company market cap. is presently $196 million? What am I missing?

Sorry Barleeni, I can't see what point you are making here. Could please explain for me?

[arjay]

What worries me is that NZO plan to deploy this new found cash (from their most reliable, low cost oil well ever in NZ history, I believe) on risky mostly unproven prospects...
Might be better to simply wind up the company and pay every one 60 something cents... I know it was a surprise to many, such as Forsyth Barr, that NZO did this, given they were not that long ago talking about the extensions to life, revisions upwards, and how great it was... only to very shortly after sell it for what is a reasonable price, but certainly not great (I note GNE's share price has also risen nicely over the past few days...)

Disclosure: Sold out at 64c.. took a loss, but happy given it was a very small holding anyway.

Agree - Kupe represents bricks and mortar, however NZO's track record is one of running off and buying magic beans when they have spare cash. They haven't discovered anything worthwhile since Eric Matthews was the exploration manager over a decade ago, so I would prefer a return to the shareholder.

[Carpenterjoe]

So a dividend of circa 30 cents next year,

[digger]

So a dividend of circa 30 cents next year,

No I would think it would be return of capital so have no tax. The 31 cents will come off the SP.

[fabs]

So one must assume the S/P to be around 20cents plus after the 31cents capital return, seeing that the S/P was 50-53 c before the very generous offer????

[Carpenterjoe]

Thanks, I was thinking the tax man would have his hand out. Hopefully Cues assets produce some good news to maintain value. Still not comfortable with the sale.

[digger]

Thanks, I was thinking the tax man would have his hand out. Hopefully Cues assets produce some good news to maintain value. Still not comfortable with the sale.

Now there is where we agree. I refer to the "not comfortable with the sale"
Other than Zeta wants the money why sell your best asset. Seems on the edge of madness to me. Just hope they do have something in mind that we hear about before the vote.

[BWR]

Digger, can't but agree with "not comfortable with the sale". This is the first time I have ever seen a company "diversify away from a single exposure to a single asset" by selling its core business. How this fits with a sound business strategy I simply do not know. I think Forbar are right with their research report headed "The Beginning of the End."

[Wiremu]

Having looked at Northington's report there is an inconsistency.

5.2.2 notes that they have included tax in their calculation on a "standalone basis" at 28%, ie the maximum.

6.1 then notes that by selling Kupe, NZOG's sole source of taxable income, the company will lose ability to obtain future tax relief for: costs of decommissioning Tui; ongoing exploration expenditure; and corporate costs.

"Annualised overheads alone represent $2.4m in lost tax benefits" - and no future imputation credits.

One would think these adverse elements should be included in the valuation. Probably makes a significant difference.

[fabs]

Well as long as there is more than plenty enough funds in the Co. For healthy redundancy payments.
Maybe increases in salaries, plus the bonus for9\those hard working spin doctors to be able to take it easy repeating the well worn mantra for the last 10 years = we are a hard working team adding value to this Co.

Looks like i was about one 1 year too early predicting NZOs demise.

To be optimistic enough & hope that this incompetent bereft of any clues lot, come up with something to cheer for the S/Hs
would have to also be a Company/Industry first.

Yes some one will be getting a good deal out of it, Genesis for starters.
This would also seem to preempt any chance getting a fair price out of the left overs.

BTW:Even if all the 10000 small S/Hs vote against this, one can consider it a done deal.
WON'T EVEN PUT MY HAT ASIDE FOR A MEAL IF WRONG.

[ziggy415]

Digger, can't but agree with "not comfortable with the sale". This is the first time I have ever seen a company "diversify away from a single exposure to a single asset" by selling its core business. How this fits with a sound business strategy I simply do not know. I think Forbar are right with their research report headed "The Beginning of the End."
kisaran in indonesia is next biggy for nzo

[Sideshow Bob]

kisaran in indonesia is next biggy for nzo

To produce some cash or put on the selling block?

[Bixbite]

.
.
Does the company know the true value of its KUPE?

The following reference is from NZOG’s website (in the year of 2013):-

– the KUPE - “The Investment Decision was made in June 2006 based on a budget of NZ$980 million. The project was expanded in scope and was not immune from international industry cost pressures. The final development cost was approximately NZ$1.3 billion. NZOG’s share of the development was approximately NZ$200m.”

This is Kupe’s development cost, not including its 2P reserve.

Cheers

.

[digger]

Page 21 of the Northinton report is the most interesting mostly for what it does not say. It deals[or better still skirts around] with the quantity of the Kupe reserves. It is here that we are encouraged to believe that selling kupe for 168 million is a good deal for NZO holders. Here on page 21 and also the whole report somewhat leave you with the feeling that Genesis will be out of pocket if not straight out idiots. But I do not think so .

Now about two years ago a major director in the presents of another director told me that Kupe was not depleting anywhere near the expected rate.The talk was that kupe was getting migrating hydrocardons. In short at that time noone had a real idea of the KUPE area ,but it clearly was getting refulled from some unknown source.
So this is what the Northington report does not deal with. If we knew the exact size of the field and it was no bigger then maybe NZO selling now is not so bad,but given the continual increases and future increases that this report skirts around I continue to think it is loony. Have the directors been drug tested.

[BWR]

To quote from NZOG's 2003 Annual Report, after talking about the Kupe Central Field Area (CFA) which is what the Northington Report and NZOG's figures are based on:

"There is potential to double those reserves should the drilling of several nearby prospects in the Kupe mining permit (Stent/Denby/Marshall/Otaraoa) and other parts of the CFA prove successful. The Stent and Marshall prospects, to the south of the Kupe field, both exhibit direct hydrocarbon indications on seismic, similar to those seen over the CFA. If drilling confirms commercial viability of Stent and/or Marshall, development would involve tying back pipelines into the CFA development."

Sure time has passed since then, but with the majority partners being interested in gas and not petroleum, the valuable prospects remain untouched and not mentioned by NZOG. They were last mentioned in the 2010 Annual Report, and shown in the 2012 report maps. In selling out of Kupe NZOG loses those prospects which sit in an already owned mining permit.

[JohnPagani]

Hello Sharetraders,


There has been interesting discussion of the Kupe transaction in here.


We want everyone to have the chance to work through your questions and concerns, so we would like to invite you to join us in here for a live chat.


Our acting CEO, Andrew Jefferies, will join the thread for a live chat at 11.00AM on Wednesday.


You can submit comments in here in real time for an immediate answer or, if you prefer, you can leave your questions here in advance and Andrew will work through them.


If you want to chat over things directly or in more detail you can email enquiries@nzog.com or contact us though the www.nzog.com website. We are happy to phone you back to talk through questions and comments. And - of course - we will be pleased to welcome shareholders at the special meeting itself.


Hope to see you in here for a chat - 11 o'clock Wednesday morning, 7 December, here on the Sharetrader discussion board.


Kind regards




John Pagani
External Relations Manager
New Zealand Oil & Gas.

[neopoleII]

What I find perplexing is....
The Saudis and the USA and Canada have been in a oil producing war for several years to see who will fold first.
The POO has drastically sunk in that time frame but...... USA and Canada with their specialized extraction methods
have been able to carry on business albeit with some / many companies folding....
While the Saudis have ONLY their oil exports to run their nation.
After all these years of oil price wars....... OPEC is now changing tact and reducing production to increase the price,
this low oil price of the last few years is now over because OPEC cant afford the cash lose anymore.
and now....... NZO is selling its last golden egg.
While reading the report I noticed a graph projecting the POO into the future and the graph say the POO will be about US$70
in 10 years from now?
How did they work this out?
Most of OPEC cant survive with sub $70 ....all you have to do is read the news to see the damage done in OPEC countries.

So now at the bottom of the cycle NZO sells the golden egg.
And further reading of the report..... if they don't buy assets they might distribute more cash.....
earning 3% on cash is a lot less than Kupe income especially since the Saudis need to raise the POO.
Just my thoughts

[digger]

Of coarse a good question NeopoleII but the why sell at the bottom is just a subsection of why sell at all.Perhaps nzo think they can buy something else but it will all end up smaller if 100million is being returned to shareholders.Unless something is earmarked now they could end up seeing prices rise and be left behind. I have seen farmers do that by selling and takeing too long to get back in.But here this is wild guessing as we are given no inducation of what if anything is planned. I think it is called faith which from me is in very short supply.

[Baa_Baa]

@JohnPagani re live chat with acting CEO, Andrew Jefferies at 11.00AM on Wednesday.

Terrific initiative! It would be good to see all companies take your lead in engaging shareholders in social media settings. I hope members here take up the opportunity to ask questions.

All the best.

[skid]

Agree--thats a great opportunity for holders---I would imagine that the future potential of KUPE will be high on the agenda.

[fabs]

Agree--thats a great opportunity for holders---I would imagine that the future potential of KUPE will be high on the agenda.

While agreeing that the interests of the average S/Hs input should and would be the ideal and top priority of managements democratic process.
This company has long ago passed the point where that is the case.

So no matter what sort of spin-doctors the management trots out tomorrow, outcome is a forgone conclusion.
Only time wasting exercise, yes KUPE is regretably a goner.

[Chippie]

I must admit that Kupe was the cornerstone that gave me confidence to hold all theae years (first purchased at 28 cents along time ago). Persoannly i also thought Kupe was a high possibility for growth. Yeara ago the was talk that it could be double or triple the size with more development. So without Kupe NZO really is high risk and i will be planning my exit. Very dissapointed.

[trader_jackson]

http://www.stuff.co.nz/business/87245995/origin-energy-to-spin-out-nz-assets

Interesting update on what is also going on with other parts of Kupe

[skid]

While agreeing that the interests of the average S/Hs input should and would be the ideal and top priority of managements democratic process.
This company has long ago passed the point where that is the case.

So no matter what sort of spin-doctors the management trots out tomorrow, outcome is a forgone conclusion.
Only time wasting exercise, yes KUPE is regretably a goner.

Funny,,,I was just wondering if you Fabs,and Notie would be on board at the discussion

[skid]

I must admit that Kupe was the cornerstone that gave me confidence to hold all theae years (first purchased at 28 cents along time ago). Persoannly i also thought Kupe was a high possibility for growth. Yeara ago the was talk that it could be double or triple the size with more development. So without Kupe NZO really is high risk and i will be planning my exit. Very dissapointed.

One thing is for sure,after years of following oilers, Ive come to realize just how hard it is to find that black stuff--then add to the mix that there are lots who have heaps of the stuff who desperately need to sell it--But others want to hold back on production to keep the price up---That is a far cry from short on supply.

[fabs]

skid:
There was a invitation to one of those meetings, would be about 5 odd years ago.
Had a long chat with A. Knight as was a bit early, raised a few questions in good faith at the time mainly concerning skills and experience of the staff in particular the Geologist.
Came away very disappointed, lost lots of faith & interest with the lack of any ability with that lot, subsequent events since have amply proven justified my earlier misgivings.

Been however a cushy and easy ride for them alright.

They had another face to face meeting a couple of years ago , but got no replay to my request to attend.

Have done reasonably well with that stock over it's heydays, just yes more than a bit disappointed how this Co. that had so much going for it 10 years ago with things handed on platter to this lot has gone so awry.

In short to your question, not worth the efford to listen to any more of their spiel. one way of making a living i guess.

[digger]

http://www.stuff.co.nz/business/87245995/origin-energy-to-spin-out-nz-assets

Interesting update on what is also going on with other parts of Kupe

That is very interesting TJ. Left wondering if NZO would be taking a chunk of this new company and with less money still end up with 15% of KUPE. On the other hand each of us shareholders could do the same as individuals. So the whole of KUPE is up for grabs.Something big is going on and in a few years we littlems will be allowed in on the history lesson,but certaintly not before the vote.

[digger]

I have much on today at 11 so most likely not be around.
My only question is WHY

Is there some master plan that will make NZO better off after the sale of KUPE that for business reason we can not now be made aware of?

[fish]

I have much on today at 11 so most likely not be around.
My only question is WHY

Is there some master plan that will make NZO better off after the sale of KUPE that for business reason we can not now be made aware of?

That question needs to be asked.I am working today and wont be able to ask it.
Just what is the plan after Kupe goes?
What income will be available
What about cost saving-they have fancy headquarters I have been to in the heart of wellington-why not move somewhere a lot less expensive?

[JohnPagani]

Good morning sharetraders. Looking forward to having New Zealand Oil & Gas acting CEO Andrew Jefferies join us at 11 o'clock. Please upload your questions from now, and we will be here answering them then.

[blackcap]

Good morning sharetraders. Looking forward to having New Zealand Oil & Gas acting CEO Andrew Jefferies join us at 11 o'clock. Please upload your questions from now, and we will be here answering them then.

With the sale of Kupe has this now changed NZO from an active Oil & Gas entity to passive investor type entity? ie Tui has AWE as operator (passive role) Cue has it own board & mgmt (passive)

[JohnPagani]

Good morning sharetraders. Andrew Jefferies is now joining to answer your questions here about the sale of Kupe to Genesis and the special meeting of shareholders planned for 16 December.

[JohnPagani]

First question:


Blackcap asks -
"With the sale of Kupe has this now changed NZO from an active Oil & Gas entity to passive investor type entity? ie Tui has AWE as operator (passive role) Cue has it own board & mgmt (passive)"


Andrew says:
No, we are still committed to active oversight of our interests. We take a close interest in HSSE issues, for example. In fact we want our company to be known for this.


Our active involvement in Kupe helped to add 50 per cent to the reserve base, and therefore generated the extra value we are now able to realise.


So we see this as a good model that produces positive results for shareholders.

[JohnPagani]

Next one is from Digger, who asks, simply - why are we selling Kupe.


Andrew says:
It's a good question because we think highly of the Kupe asset. It is producing cash and we have spent the last several years working up ways to develop the field. That has resulted in some very substantial upgrades to the reserves we booked from the field.


Therefore, when Genesis approached us to buy our interest, as we were not a motivated seller we placed a much higher value on it than simply the present value of the future cashflows.


We also sought a premium reflecting the fact that it is our major asset. And we sought to crystallise the future upside from development.


The price we have achieved is a fair reflection of all this, as the independent Northington report confirms.


The share price jumped from around 50 cents to around 62 cents on the day the transaction was announced. That indicates the market believes we can gain more by selling the asset and returning cash now.


We have the opportunity to return $100 million of capital to shareholders, and to acquire new cash-producing assets at value.


So, even though we like Kupe, if we can achieve a price that is a significant premium to the market valuation for it, then we have an obligation to give our shareholders the opportunity to realise those gains.

[JohnPagani]

Digger also asks if there is a master plan that will make NZO better off after the sale of Kupe that for business reason we can not now be made aware of?


ANDREW SAYS:
The sale instantly makes the company better off - that's why we are doing it. To put it another way around - if the transaction doesn't proceed, I invite you to consider whether the share price will revert from its current level to the level it was at the day before the sale was announced.


As far as future plans - these are spelled out in the Notice of Meeting. We intend to return $100 million to shareholders, and we are continuing to screen other assets. We don't have a confirmed agreement to acquire any yet, and if we did we would have to announce it. However, I am confident there are opportunities in the market that a company like ours will be well-positioned for with the cash we will free up from this transaction.


We are applying the same skill set that achieved the 50% increase in Kupe reserves to looking at fresh assets.

[JohnPagani]

Next question is from Fish, who asks:
Just what is the plan after Kupe goes?
What income will be available
What about cost saving-they have fancy headquarters I have been to in the heart of wellington-why not move somewhere a lot less expensive?




ANDREW SAYS:
The plan after Kupe is sold is set out in the Notice of Meeting, as are the future cashflows and future financial position.


We intend to return $100 million to shareholders.


We are actively screening other assets, and we will acquire them if we can get them at value.


We are looking to get value out of our other assets - Indonesia, Cue, our exploration assets.


We are getting our costs down, and executed a major restructure of staff during the past financial year.


Our head office and exploration costs are considerably reduced compared to a year ago.


As for our office in Wellington - it's hardly full of luxury, but it does have nice views. You will be pleased to hear we are looking at new offices and I expect to move in the first half of next year.


But I will also add this: Since the start of this year, the share price is up from around 42 cents to 62 cents. That is a gain of nearly 50%. We paid out a dividend in October.


We are delivering very substantial cash returns to shareholders.

[JohnPagani]

Bixbite asks:

"Does the company know the true value of its KUPE? The following reference is from NZOG’s website (in the year of 2013):- – the KUPE - “The Investment Decision was made in June 2006 based on a budget of NZ$980 million. The project was expanded in scope and was not immune from international industry cost pressures. The final development cost was approximately NZ$1.3 billion. NZOG’s share of the development was approximately NZ$200m.”This is Kupe’s development cost, not including its 2P reserve."

Digger and BWR have also asked questions about the size if the Kupe reserves and potential upsides.




ANDREW SAYS:


We have done extensive work on Kupe over the last several years. and looked carefully at the resources available there. We identified substantial extra resources that could be available, and booked reserves upgrades of around 50% as a result.


There has been a considerable change in the oil price since Kupe commenced production in 2009 but the asset has produced a lot of cash for us.


As far as the 'true' value of Kupe - this is analysed in the Northington report in a lot of detail. The sale price is 16% above Northington's mid point range, and the price we have achieved is even above the high point of the Northington valuation. Our own valuations were at the higher end, and we have achieved a premium.


Finally, even though we do see undeveloped upside at Kupe, those resources are subject to uncertainties. For example, as Northington point out, our ability to influence any decision about whether the JV would go ahead with a development is limited and would depend on whether we could sell our gas to Genesis, and at what price. Therefore, a fair valuation has to factor in uncertainty.

[digger]

Thanks JP for your reply. So if we see lots of opportunies in the market why return 100 million. Are you saying that shareholders can do a better job at investing than NZO can. If all the money is at the companies account they should be able to bulk buy a better deal than individual shareholders. Well that is my thought but I do now not all will agree

[JP]

Why do you think Genesis is prepared to pay such a premium.

[JohnPagani]

Neopole asked:

First:
While reading the report I noticed a graph projecting the POO into the future and the graph say the POO will be about US$70 in 10 years from now?
How did they work this out?
Most of OPEC cant survive with sub $70 ....all you have to do is read the news to see the damage done in OPEC countries.


ANDREW SAYS:
We use a forward price of oil based on the Bloomberg consensus curve (we use a modified curve that removes predictions older than 180 days). This is an industry standard forecast.


You may be right that the oil price will be higher. It also may be lower. To value an asset fairly we have to make a decision on a reasonable basis, and the consensus curve provides a way to do that. A consensus curve is the average of the prediction of a range of analysts about the future price for years into the future.


The Northington Report uses a valuation method similar to this, although it uses a range of sources to forecast a forward price curve, including the Bloomberg curve. It also forecasts higher and lower cases. Those are displayed in the report on page 17, and the resulting impact of the valuation is included. The price we have achieved for Kupe is a premium even to the high case.


It's also important to remember that the present value of revenue ten years away is much less than revenue today, and consequently has a much smaller impact on the overall valuation. So a higher oil price ten years away has a small impact on valuations compared to earnings this year.

[JohnPagani]

Neopole also mentions:
"if they don't buy assets they might distribute more cash.....earning 3% on cash is a lot less than Kupe income especially since the Saudis need to raise the POO."

ANDREW SAYS:
You are right, there is not much point in us sitting on huge piles of cash. That's why we are returning $100 million to shareholders, and if we can't find an acquisition where we can earn a better return than the cash rate shareholders would be better off with the rest as well. But I am confident that we can find opportunities that will earn a productive return, as well as provide opportunities for enhancement, even after shareholders enjoy a return of $100 million.


It should be remembered that since 2012 the company has returned about $150 million to shareholders by way of dividends and capital returns. We are not sitting on unnecessarily high cash balances.

[JohnPagani]

ANDREW SAYS:
You would need to ask Genesis but from our point of view that have strategic reasons to want more of Kupe in their portfolio to do with uncertainty around uncertainties in the electricity market that could impact the gas sector.

[Queenstfarmer]

It's unlikely that the SP would return back to 50 cents if a decision to not sell Kupe occurs. OPEC have cut production and oil price is looking to hit $60 pb. With NZO's decision to put any exploration on hold for sometime.. this represents good income for the company and in retaining Kupe the future looks bright.

[JohnPagani]

Why do you think Genesis is prepared to pay such a premium.
ANDREW SAYS:
You would need to ask Genesis but from our point of view that have strategic reasons to want more of Kupe in their portfolio to do with uncertainty around uncertainties in the electricity market that could impact the gas sector.

[ados_nz]

What discount rate was applied in the net present value calculation ?

[JohnPagani]

It's unlikely that the SP would return back to 50 cents if a decision to not sell Kupe occurs. OPEC have cut production and oil price is looking to hit $60 pb. With NZO's decision to put any exploration on hold for sometime.. this represents good income for the company and in retaining Kupe the future looks bright.
Shareholders need to arrive at their own conclusion about what is likely to happen to the shareprice if the transaction does not proceed, but the markets were valuing Kupe at effectively $60-80 million prior to the transaction being announced, based on the market cap less our cash, and market value of Cue. We agree Kuep's future cashflows look bright but we can realise all those potential cashflows, including the upside, through this transaction today without the risk.

[JohnPagani]

What discount rate was applied in the net present value calculation ?
On Page 19 Northington disclosea discount rate range of 7.5 – 8.5%.

[JohnPagani]

Thanks for your questions, sharetraders. Please email us at enquiries@nzog.com if you have further questions or comments. Please remember to vote and/or attend the meeting on the 16th. Thanks again - ANDREW JEFFERIES.

[Snoopy]

On Page 19 Northington discloses discount rate range of 7.5 – 8.5%.


The reference above discloses the discount rate used in the sensitivity analysis.

From page 18.

--------

5.2.4. Required Rate of Return

We believe that an appropriate required rate of return for NZO’s interest in Kupe ranges between 7.50% and 8.50%, with a mid-point of 8.00%. Our assessment is based on comparable market evidence and considers the operational status of Kupe and NZO’s contractual arrangements with high credit quality counterparties. A summary of the key inputs to our assessment are set out in Appendix 3.5.2.5. Valuation Range and Transaction Price.

---------

If we then go to Appendix 3.

----------

Input Parameters for Required Rate of Return

Assumption Discussion

Risk Free Rate

Estimated at 2.5%, based on the current yield to maturity for 5-year NZ Government Bonds.

Market Risk Premium

7% based on a range of market based observations including the Commerce Commission’s market risk premium applied to regulated industries in New Zealand.

Asset Beta

Considering the significant portion of contracted revenue for NZO’s interest in Kupe and the credit quality of the counterparties (Genesis and Vector, who themselves have asset betas significantly below
1), we have adopted an asset beta of 0.9 for Kupe.


-----------

Generally a 'market rate of return' is based on a 'risk free rate' plus a market risk premium.

The Capital Asset Pricing Model calculates the cost of capital as follows:

(Cost of Capital) = (Risk Free Rate) + (Beta)(Equity Market Premium)

= 2.5% + 0.9 x 7% = 8.8%

That figure is above the "7.5% to 8.5%" figure suggested in the report.

Have I done something wrong? Or is the Northington Report not consistent?

SNOOPY

[arjay]

A farmer has a cow that has given lots of milk over the years and looks like its going to produce plenty more milk into the future. A couple more cows are rumoured to be lurking in the bushes behind the barn, but the farmer hasn't yet had time to go see if they're there and bring them into the herd. The farm's doing OK though - milk prices are pretty low just now but they should perk up in time. A marvelous thing happened this morning though: Fonterra offered to buy the cow from the farmer (including that worthless patch of bush behind the barn) for a price higher than what the cow's future milk production is probably worth. So the farmer sold the cow and the worthless piece of bush because it was such a bargain. He didn't really know what he would do with the money, although he'd certianly give some of it back to his family seeing as it was their money that was put up to buy the farm in the first place. With the rest, maybe buy another farm or two if they came up for sale really cheap sometime. In the mean time though he wondered what to do. He was really keen on health and safety and wanted to be remembered for such a passion, so maybe he'd buy a helmet for his quad bike. WHile he was mulling this over milk prices started to recover and Fonterra were quite happy with how their new cow was performing. And, you'll never guess what they found when they were cutting gorse down in that worthless bush they'd bought behind the barn........

[greenglass]

HaHa Arjay, I just love love that. You should try your hand at poetry. Or have you?

[greenglass]

HaHa Arjay, I just love love that. You should try your hand at poetry. Or have you?



Discl:hold

[blackcap]

Thanks Arjay, I have been trying to explain to my partner why her investment in NZOG is not a good one and what they have been doing and done.... made her read your analogy and it all made sense to her :)

[Queenstfarmer]

Agree to a point with you Arjay...however it will take more than a can of petrol and a scrub cutter to clear that Bush and then there's the risk factor to take into consideration. Finally it may cost as much as $30 mil to reinstate that worthless bush....

[Beagle]

A farmer has a cow that has given lots of milk over the years and looks like its going to produce plenty more milk into the future. A couple more cows are rumoured to be lurking in the bushes behind the barn, but the farmer hasn't yet had time to go see if they're there and bring them into the herd. The farm's doing OK though - milk prices are pretty low just now but they should perk up in time. A marvelous thing happened this morning though: Fonterra offered to buy the cow from the farmer (including that worthless patch of bush behind the barn) for a price higher than what the cow's future milk production is probably worth. So the farmer sold the cow and the worthless piece of bush because it was such a bargain. He didn't really know what he would do with the money, although he'd certianly give some of it back to his family seeing as it was their money that was put up to buy the farm in the first place. With the rest, maybe buy another farm or two if they came up for sale really cheap sometime. In the mean time though he wondered what to do. He was really keen on health and safety and wanted to be remembered for such a passion, so maybe he'd buy a helmet for his quad bike. WHile he was mulling this over milk prices started to recover and Fonterra were quite happy with how their new cow was performing. And, you'll never guess what they found when they were cutting gorse down in that worthless bush they'd bought behind the barn........

Well said...why anyone would back these guys to find a new productive farm is beyond my comprehension. The epilogue to this story will be that the farmer endlessly pontificates about what to do with the proceeds of the cow sale for so long he ends up eating more than half the proceeds up while effectively doing nothing.

[Wiremu]

Arjay, you have it in one. The only point you missed out was the report the farmer had prepared for his family to justify selling the cow, which didn't provide the real valuation because of the costs he was left with which he couldn't offset against the taxable income he had sold in the form of the cow. If we look at his farmyard orchard the report was comparing apples with lemons, not apples with apples.

[JohnPagani]

A farmer has a cow that has given lots of milk over the years and looks like its going to produce plenty more milk into the future. A couple more cows are rumoured to be lurking in the bushes behind the barn, but the farmer hasn't yet had time to go see if they're there and bring them into the herd. The farm's doing OK though - milk prices are pretty low just now but they should perk up in time. A marvelous thing happened this morning though: Fonterra offered to buy the cow from the farmer (including that worthless patch of bush behind the barn) for a price higher than what the cow's future milk production is probably worth. So the farmer sold the cow and the worthless piece of bush because it was such a bargain. He didn't really know what he would do with the money, although he'd certianly give some of it back to his family seeing as it was their money that was put up to buy the farm in the first place. With the rest, maybe buy another farm or two if they came up for sale really cheap sometime. In the mean time though he wondered what to do. He was really keen on health and safety and wanted to be remembered for such a passion, so maybe he'd buy a helmet for his quad bike. WHile he was mulling this over milk prices started to recover and Fonterra were quite happy with how their new cow was performing. And, you'll never guess what they found when they were cutting gorse down in that worthless bush they'd bought behind the barn........

The true logic of the analogy is that it assumes no time value of money, and it assumes highly uncertain outcomes are 100% certainties while simulataneously discounting that premium that is included in the price that crystallises the upside. The logic used would then result in never selling the 'cows' at any price, no matter what the offer was for them, and woulod never fairly value risk and uncertainty. Meanwhile it also ignores the potential loss of value that may occur i the transaction did not proceed. It's also incorrent to state, 'he didn't really know what he would do wit the money' The sum that the Board intends to return exceeds the market valuation of the 'cows' the day before the transaction was announced. It pays to analyse analogies clearly.

[Snoopy]

The true logic of the analogy is that it assumes no time value of money, and it assumes highly uncertain outcomes are 100% certainties while simulataneously discounting that premium that is included in the price that crystallises the upside. The logic used would then result in never selling the 'cows' at any price, no matter what the offer was for them, and would never fairly value risk and uncertainty. Meanwhile it also ignores the potential loss of value that may occur if the transaction did not proceed. It's also incorrent to state, 'he didn't really know what he would do with the money' The sum that the Board intends to return exceeds the market valuation of the 'cows' the day before the transaction was announced. It pays to analyse analogies clearly.


Quite right John. To me, the sale of those Kupe assets to Genesis looks like an excellent deal.

SNOOPY

discl: GNE shareholder

[fabs]

Quite right John. To me, the sale of those Kupe assets to Genesis looks like an excellent deal.

SNOOPY

discl: GNE shareholder

HA,HA quite right SNOOPY.

The QUESTION will be for who????

Well with that much Supposed Expertise from the people that crafted and drafted this deal [ well payed too, wink, wink! ] A DEAL in my opinion a forgone conclusion, as stated previously.

Lets wait and see what the S/P will be after all is done & dusted and what all those other Experts [ THE INVESTORS ] will rate this PUPPY .

[Wiremu]

JohnPagani - you protest really proves the point. The directors would have made their decision well prior to the Northington Appraisal Report. It's that very report which points out the weakness in the proposal, being the lack of a forecast for NZOG without Kupe - all expenses with no offsetting taxable income, and no proven success at new investment opportunities despite having the funds to do so.

[trader_jackson]

I think NZO is doing the right thing selling Kupe

Disclosure: GNE is one of my top investments ;), sold NZO at a loss @ 64c

[arjay]

JohnPagani - you protest really proves the point. The directors would have made their decision well prior to the Northington Appraisal Report. It's that very report which points out the weakness in the proposal, being the lack of a forecast for NZOG without Kupe - all expenses with no offsetting taxable income, and no proven success at new investment opportunities despite having the funds to do so.

I believe this is the problem many of us have with the proposed deal. Its not that the deal is not a good deal - it possibly is. The problem is that NZO have expressed no concrete plans as to how they will use the money to build shareholder wealth after the sale. I am reminded of a story Digger once told about a farmer he knew who sold his farm simply because someone offerred a good price for it. As I recall the story, the farmer had no plan going forward and ended up feeling pretty miserable after farm prices continued to rise and inflation ate away at his crystalised profit.

[fabs]

If there is any talent in this Co. there where at least 2 fairly reasonable periods over quite a few years now surely, to make some acquisition,s.
So to now keep on repeating the same refrain, when the O/Ps are more or less the highest for some time and looking to rise sounds ridiculous, why should it get any better or cheaper ??????

Maybe they are Psychics expecting the gas & oil prices to fall in the near future????

[Marilyn Munroe]

I have voted online against the Kupe Sale resolutions.

My reasoning is tactical. On page 14 of the notice of meeting the rights of minority shareholders who voted against the resolution are described. This class of shareholder may subject to conditions, compell NZOG to buy out their shares. According to newspaper articles Origin is also seeking to sell their stake in Kupe. Should they get a better price than NZOG for a sale announced within the notice period this class of shareholder may have an oppurtunity to trigger the buy out at a favourable price.

Boop boop de do
Marilyn

[blackcap]

I have voted online against the Kupe Sale resolutions.

My reasoning is tactical. On page 14 of the notice of meeting the rights of minority shareholders who voted against the resolution are described. This class of shareholder may subject to conditions, compell NZOG to buy out their shares. According to newspaper articles Origin is also seeking to sell their stake in Kupe. Should they get a better price than NZOG for a sale announced within the notice period this class of shareholder may have an oppurtunity to trigger the buy out at a favourable price.

Boop boop de do
Marilyn

I presume you are talking about section 110 and 111 of the Companies Act? I have invoked those sections in the past and it is a very powerful tool for minority shareholders to use. Urge others to do the same...

[fish]

I presume you are talking about section 110 and 111 of the Companies Act? I have invoked those sections in the past and it is a very powerful tool for minority shareholders to use. Urge others to do the same...

Of course.
My mind had been on other things and I havnt considered this.
Did this with TTP and ended up getting a reasonable price for my shares and costs.
Voting against could give this option.
Would you mind letting us know the latest date we can vote against?

[digger]

Voted against online yesterday. All interested get on with it as time is passing. Enough talk -action time.

[Wiremu]

Fish, "For your vote to be effective your proxy or postal vote must be received by 9:00am Wednesday, 14 December."

The same deadline will presumably apply to online voting, and by 'received by' they mean Computershare.

[blackcap]

Fish, "For your vote to be effective your proxy or postal vote must be received by 9:00am Wednesday, 14 December."

The same deadline will presumably apply to online voting, and by 'received by' they mean Computershare.

Just voted online as well and voted against. I am attending the meeting on Friday, should be interesting to say the least.

[fish]

Just voted online as well and voted against. I am attending the meeting on Friday, should be interesting to say the least.

Thanks for the heads up.
I voted against online today.
I also note Tui share sold by Awe-?tui may continue beyond 2019.
What does this value nzog share?

[Wiremu]

i can't help but think if the directors of NZOG were serious about the ongoing business of the company they would implement a $100m note issue, return $100m to shareholders, and retain Kupe.

And sell Tui!

[flyingmariner]

No vote online............................................ not that I expect it will make any difference.

[Carpenterjoe]

Yup, No for me too.

Pretty sure it will pass,

[peat]

if we can't find something to buy at value now, we should give all the money back," Finlay said.

I noticed yesterday that Knight is out of any holding now. No skin in the game..........

[Baa_Baa]

Given this result ... "The 87% vote in favour of the transaction is a very strong endorsement from shareholders,"Chairman Rodger Finlay said. "

I'm a bit surprised that so many of the views expressed here seem to be in the small minority. Thoughts?

[tim23]

Firmer at the close really feel its a breakup scenario must be worth about 90c anyone done the Maths assuming Tui deal also goes through?

[blackcap]

Firmer at the close really feel its a breakup scenario must be worth about 90c anyone done the Maths assuming Tui deal also goes through?

The thing is though tim23, what is Tui worth? They might have to pay someone to take it off their hands.....

[Snoopy]

Given this result ... "The 87% vote in favour of the transaction is a very strong endorsement from shareholders,"Chairman Rodger Finlay said. "

I'm a bit surprised that so many of the views expressed here seem to be in the small minority. Thoughts?

There are 336m NZO shares on issue. Of those, approximately 188m cast a vote. Biig institutional shareholders are more likely to vote than the average small shareholder. Bigger shareholders might be eyeing the promised capital return as a good way to get funds out of an underperforming company without crashing the share price. I think if you were shown the numbers of shareholders on a 'one man one vote' basis that voted 'for' and 'against' , then the vote would not have been anywhere near as favourable towards selling Kupe. Given that most of those who voted against were likely small shareholders, I think the claimed 'very strong shareholder endorsement' runs a bit hollow.

Of those small shareholders who voted 'for', there is an often held default position that 'managment always no best'. It takes a brave person to stick their hand up at the AGM and criticize management. It is almost equally brave to come clean with your mates at the bowling club and admit to your friends you voted against the advice of the independent report. 'Going with the flow' is the easy option that many take. I would go so far as to say that if an extra item was put on the AGM ballot paper, advising shareholders that if they lined up along the wall at the end of the meeting directors would be invited to 'kick them up the backside', that many would vote for such a resolution. In a figurative wicked sense of humour way, one might argue that this is exactly what has just happened!

SNOOPY

[tim23]

They have an offer for Tui that I assume takes that into account Blackcap?

[blackcap]

They have an offer for Tui that I assume takes that into account Blackcap?

Ok fair enough, I must have misread your post. My take is that the market valuation of NZO is pretty close to accurate where it is at the moment so I cannot see a pathway to 90 cents. Maybe I am missing something.

[tim23]

Was just adding the $168 million from Kupe plus the $100 million cash already held plus value of 50% of Cue clean exit on Tui and I reckon 90c is on the conservative side.

[fish]

Was just adding the $168 million from Kupe plus the $100 million cash already held plus value of 50% of Cue clean exit on Tui and I reckon 90c is on the conservative side.
If 90 cents is the valuation of the assets then its worth asking nzog to buy minority shareholders out-they would probably offer the sp-then independent valuation of a fair and reasonable price by an arbitrator is likely to end up with a valuation around mid-point-eg 76 cents plus costs awarded against nzog.
This is what we did with TTP.
Anyone contemplating doing so?

[fabs]

Has there been any recent explanations why it takes till any time in May, to dish out the 100 millions to share holders?
IF NOT, would like to know reason for this delay, as the deal with Genesis has been done and dusted quite some time ago?????

[peat]

Has there been any recent explanations why it takes till any time in May, to dish out the 100 millions to share holders?
IF NOT, would like to know reason for this delay, as the deal with Genesis has been done and dusted quite some time ago?????

The official line is that they are getting their lawyers and accountants to structure the payout tax effectively.
They also will get IRD approval of the repayment prior to making it so that it cannot be questioned after the event.

[Sideshow Bob]

Has been very quiet on the Western Front, and just seems to be in a bit of a holding pattern.

Even last weeks quarterly activity and cashflow reports went by without a murmur.

https://www.nzx.com/files/attachments/252182.pdf
https://www.nzx.com/companies/NZO/announcements/296153

The long gradual painful decline continues.....

[notie]

Give it 6 months and the whole thing will be closed up. The whole thing should have been put down a long time ago



Has been very quiet on the Western Front, and just seems to be in a bit of a holding pattern.

Even last weeks quarterly activity and cashflow reports went by without a murmur.

https://www.nzx.com/files/attachments/252182.pdf
https://www.nzx.com/companies/NZO/announcements/296153

The long gradual painful decline continues.....

[peat]

Has been very quiet on the Western Front, and just seems to be in a bit of a holding pattern.

Even last weeks quarterly activity and cashflow reports went by without a murmur.

https://www.nzx.com/files/attachments/252182.pdf
https://www.nzx.com/companies/NZO/announcements/296153

The long gradual painful decline continues.....

yes I read them, but they were rather interestingly closed off the day before the big deal was settled.
once you do all that there's 82c cash/share on the balance sheet ? and 97cps nta overall? currently at 63 ?
kinda surprised no one is taking them out for the cashmoney pickings.

So, their only major holder is Zeta who just went over 20% in late Sept last year
Zeta's mandate is (from their website) ""The investment aim of Zeta Resources is to maximise total returns for shareholders by identifying and investing in resource assets and companies where the underlying value is not reflected in the market price"

[blackcap]

yes I read them, but they were rather interestingly closed off the day before the big deal was settled.
once you do all that there's 82c cash/share on the balance sheet ? and 97cps nta overall? currently at 63 ?
kinda surprised no one is taking them out for the cashmoney pickings.
"[/I]

I guess the fear is that they burn a lot of cash in the interim with head office costs whilst doing nothing and getting nothing for their cash. I think its Forsyth Barr in their analysis that discount the shares by about 14 cents per share on a discounted cash flow basis for this sort of thing but that to me also seems a bit extreme... (just quoting figures from something I read a whole while back and I could be wrong here...)

[tim23]

Ripe for takeover now wind it up nice little gain to be had I reckon

[blackcap]

Ripe for takeover now wind it up nice little gain to be had I reckon

Whats the register look like? Might be hard to get Duncan's share or you mean Zeta might do the taking over?

[Vaygor1]

Whats the register look like? Might be hard to get Duncan's share or you mean Zeta might do the taking over?

Can't see Zeta in NZO's top 20. Biggest shareholder of NZO is 'JPMorgan Chase Bank NA NZ Branch - NZCSD' who hold 16.6%

I think Peat means that over 20% of Zeta Resource's portfolio is in the form of NZO shares and or bonds/options... unless Zeta operate through JP Morgan assuming they are a nominee holder for Zeta (which would surprise me a bit).

Ref http://zetaresources.limited/portfolio/

[blackcap]

Can't see Zeta in NZO's top 20. Biggest shareholder of NZO is 'JPMorgan Chase Bank NA NZ Branch - NZCSD' who hold 16.6%

I think Peat means that over 20% of Zeta Resource's portfolio is in the form of NZO shares and or bonds/options... unless Zeta operate through JP Morgan assuming they are a nominee holder for Zeta (which would surprise me a bit).

Ref http://zetaresources.limited/portfolio/

Thanks Vaygor1, I see from their Annual report that they have $82m USD of gross assets and if NZO comprise 25% of them that makes it about $28m NZD of NZO shares. At todays price that makes it about 44m shares or about 13.5% give or take a few percent either way. (the gross assets figure was from the 2016 Annual and could have changed since then) Thanks for clearing that up.

[peat]

Can't see Zeta in NZO's top 20. Biggest shareholder of NZO is 'JPMorgan Chase Bank NA NZ Branch - NZCSD' who hold 16.6%

I think Peat means that over 20% of Zeta Resource's portfolio is in the form of NZO shares and or bonds/options... unless Zeta operate through JP Morgan assuming they are a nominee holder for Zeta (which would surprise me a bit).

Ref http://zetaresources.limited/portfolio/

Yes agree that they are not listed in the 20 Top Shareholders in the latest Annual Report
But that report also says

"According to the company’s records and Substantial Product Holding Notices previously released to NZX, as at 30 June 2016, the only substantial productholder in the company was Zeta Energy Pte Ltd with a relevant interest in 67,605,896 Listed Ordinary Shares or 20.12% of the total number of Listed Ordinary Shares"

So if anyone wants to explain that apparent contradiction, I'm all ears.

[macduffy]

Don't confuse Top 20 Shareholders list with Substantial Shareholders notices. The explanation probably lies in the fact that Zeta Energy's shares are held in various nominee ( shareholder) names. The "Top 20" merely records where shares are registered.

[blackcap]

Yes agree that they are not listed in the 20 Top Shareholders in the latest Annual Report
But that report also says

"According to the company’s records and Substantial Product Holding Notices previously released to NZX, as at 30 June 2016, the only substantial productholder in the company was Zeta Energy Pte Ltd with a relevant interest in 67,605,896 Listed Ordinary Shares or 20.12% of the total number of Listed Ordinary Shares"

So if anyone wants to explain that apparent contradiction, I'm all ears.

That does not make sense either because if they got over 20% would that not have triggered a take over?

macduffy, thanks, that makes a lot of sense, a lot of different holdings all over the show... good obfuscation :)


Either way though this does make NZO a difficult take over target as there is a potential huge blocking stake.... or Zeta would have to be the one doing the takeover... how much cash do they have floating around?

[Vaygor1]

Yes agree that they are not listed in the 20 Top Shareholders in the latest Annual Report
But that report also says

"According to the company’s records and Substantial Product Holding Notices previously released to NZX, as at 30 June 2016, the only substantial productholder in the company was Zeta Energy Pte Ltd with a relevant interest in 67,605,896 Listed Ordinary Shares or 20.12% of the total number of Listed Ordinary Shares"

So if anyone wants to explain that apparent contradiction, I'm all ears.

Interesting Peat.
Seems a bit weird doesn't it. Almost as if Zeta was accidentally left off the Annual Report's top 20 shareholders list.
Zeta not holding via JP Morgan Chase Bank by the looks as they get a separate mention in the Annual Report just after your quote.

I'll look into it.
Please provide more info on this too if it comes to light. I'll do the same.

It appears it was Zeta that sold a large number of their shares (circa 15 million?) in the 40 million share NZO buyback that took place from 13-16 September last year. As such Zeta's actual holding went down by 15 million (although the 15 million could have been sold over time before the buyback I suppose) yet their percentage ownership went up due to the reduction in 40 million issues shares.
Ref https://www.nzx.com/companies/NZO/announcements/290082

Note Mr D Saville, NZO Director since November 2014 is also a director of Zeta Energy Pte Limited who is the registered holder (and a subsidiary of Zeta Resources).

Disc: Holding NZO

[blackcap]

Tui sold by NZO!!

[Vaygor1]

Don't confuse Top 20 Shareholders list with Substantial Shareholders notices. The explanation probably lies in the fact that Zeta Energy's shares are held in various nominee ( shareholder) names. The "Top 20" merely records where shares are registered.

Possibly, but I doubt it in this case MacDuffy as Zeta don't hold via the biggest on the list or so it appears (JP Morgan at 16%) and the 2nd on the list holds only 5%.
A few but not many shareholders on the top 20 are nominee entity just looking at them and the 20th shareholder (ACC) only owns 0.5%
Just seems a stretch for Zeta to get to a 21.2% holding as per their last SSH notice on 30 September. https://www.nzx.com/companies/NZO/announcements/290082

Happy to be corrected/clarified of course.

[Beagle]

I guess the fear is that they burn a lot of cash in the interim with head office costs whilst doing nothing and getting nothing for their cash. I think its Forsyth Barr in their analysis that discount the shares by about 14 cents per share on a discounted cash flow basis for this sort of thing but that to me also seems a bit extreme... (just quoting figures from something I read a whole while back and I could be wrong here...)

Fact is the company has a long and ignominious track record in that regard. Any attempt to value on a NTA or DCF basis does well to be prudent enough to fully account for that.

[Chippie]

Looks like NZO is out of the oil and gas business. Just need to sell the office then cash up?

[blackcap]

Looks like NZO is out of the oil and gas business. Just need to sell the office then cash up?

That would be great... 80 cents per share or thereabouts if they do cash up now....

[digger]

PPP has the whole story of TUI sale better explained. There they show that PPP will pay money and transfer assets. Best is that they show the 15 million of shut down cost set aside can now go back on books as profit. Well that is how I read it.
So how much did NZO set aside for closes down expenses. I can not see this figure. Anyone know or do I have to ask the company?

[blackcap]

PPP has the whole story of TUI sale better explained. There they show that PPP will pay money and transfer assets. Best is that they show the 15 million of shut down cost set aside can now go back on books as profit. Well that is how I read it.
So how much did NZO set aside for closes down expenses. I can not see this figure. Anyone know or do I have to ask the company?

There was a forbar report a while back that showed about $40m or so (or that is what I presumed it was). but if the PPP cost is $15m then extrapolating it out it would be fair to assume that the cost would be $27m.

[peat]

So how much did NZO set aside for closes down expenses.

1.548 million (for Tui) as per annual report 2016 balance sheet

8682

Makes me think of Amy Winehouse. (I dont wanna go to rehab)

[blackcap]

1.548 million (for Tui) as per annual report 2016 balance sheet

8682

Makes me think of Amy Winehouse. (I dont wanna go to rehab)

And a non-current provision of $77 million. (but I do not think this all relate to TUI because if so they have just removed a huge chunk off the "liability" side of the bal sheet.)

[peat]

And a non-current provision of $77 million. (but I do not think this all relate to TUI because if so they have just removed a huge chunk off the "liability" side of the bal sheet.)
Indeed

8683

but given the notes specifically linked the current liability with Tui I didnt mention that ;+)

[trader_jackson]

I got out at 64 cents nearly exactly 3 months ago, it was a loss, but quite happy as the share price has barely been above that since

Still watching NZO to see 'how things pan out'. What worries me is that they make no mention of returning all cash to share holders asap, rather returning some (maybe) and looking out for 'great investment opportunities'... they have sold off their best, most efficient, most well known, and most effective assets and now want to try buy something else? They had tonnes of cash a year or so ago and instead of buying up good value assets at Briscoe style sale prices... they decided to focus on a share buy back... here we are today and oil prices are stabilizing (increasing?) and they've just sold them all off, at questionable valuations... doesn't give me alot of hope they will handle this 'new found' cash terrible well, other than buy a few more friday night drinks, and maybe get a new company car or two.

[peat]

What worries me is that they make no mention of returning all cash to share holders asap, rather returning some (maybe)

The have explicitly stated they will return 100 Million to shareholders by May. 31 c/share approximately. I highly doubt they would renege on this stated commitment.

[blackcap]

.. doesn't give me alot of hope they will handle this 'new found' cash terrible well, other than buy a few more friday night drinks, and maybe get a new company car or two.

I think Zeta may well have something to say about that.....

[trader_jackson]

The have explicitly stated they will return 100 Million to shareholders by May. 31 c/share approximately. I highly doubt they would renege on this stated commitment.

What worries me is that they make no mention of returning all cash to share holders asap, rather returning some (maybe)

I probably shouldn't have included the maybe, the rest of the statement remains true.
ie they have not said they will wind up the company, and they have not hinted any details on how they plan to move forward, other than "looking for opportunities to deploy our cash by acquiring new producing assets with a preference for gas in markets we understand"... huge uncertainty, with both finalized/total cents per share return and how/if they will continue - at least, this is how I see/saw it, and hence promptly sold

Maybe they will issue a new load of shares to take on an "opportunity" (unlikely, I know, but you'd think if it was too good to pass, and they still wanted to give $100m back, then a new issue of capital could be a possibility)

[Vaygor1]

Tui sold by NZO!!
Was on the cards (with a bit of hindsight) when you read this 14-Dec-2016 article:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11766773

Wouldn't surprise me if Tamarind's Tui purchases off AWE and NZO were somehow conditional on each other.

[digger]

And a non-current provision of $77 million. (but I do not think this all relate to TUI because if so they have just removed a huge chunk off the "liability" side of the bal sheet.)

77 million is huge for sure. if not for TUI what else would they need provision for . What about cUE when it eventually winds up. PIKE and Kupe are gone. Do we have any other possible lilabilites needing covering?
So again not enought has been said about where we stand with this TUI sale.

[fabs]

[QUOTE=trader_jackson;655131][COLOR=#333333][I]What worries me is that they make no mention of returning all cash to share holders asap, rather returning some (maybe)

Hi Jackson,
could not have summarized it better, also think the MAYBE still appropriate. [ time will tell ]
What is unbelievable that it should take 5 months to sort out the return of 100 mil. in their possession since beginning of 2017 to S/Hs.
Yes i know when this Genesis deal first came up there was some uncertainty regarding tax.

So same old scenario, management more than happy to la di da along, while the easy earned money keeps rolling in

[blackcap]

And a non-current provision of $77 million. (but I do not think this all relate to TUI because if so they have just removed a huge chunk off the "liability" side of the bal sheet.)

Done some digging. Its 27.5% of USD$90 million so about $25m USD.

So paying $10m to get rid of a $30m liability seems like a pretty good deal to me.

[Vaygor1]

....they have not said they will wind up the company, and they have not hinted any details on how they plan to move forward...

I think I have figured out their next moves... a four (actually five or six) step plan:
- Divorce Cristina.
- Get their blood pressure sorted.
- Get into apparel... a label with vanity.
- Purchase 2 x sailing ships and run them ashore with spirit.

... add in a trip from Sierra Morena to Huelva possibly?

[digger]

[QUOTE=trader_jackson;655131][COLOR=#333333][I]What worries me is that they make no mention of returning all cash to share holders asap, rather returning some (maybe)

Hi Jackson,
could not have summarized it better, also think the MAYBE still appropriate. [ time will tell ]
What is unbelievable that it should take 5 months to sort out the return of 100 mil. in their possession since beginning of 2017 to S/Hs.
Yes i know when this Genesis deal first came up there was some uncertainty regarding tax.

So same old scenario, management more than happy to la di da along, while the easy earned money keeps rolling in

I voted against the sale of KUPE. To me it was obvious that it would take a long time to return this 100 million to shareholders. For those wanting the deal to go through it was better to focus shareholder attention on the 100 million than on the the almost nil likelyhood that IRD would let it go without tax. So now we will wait. Maybe NZO will later say that by event outside their control [IRD}the return would unfortunatly take a little longer than end of may 2017. But we should have all known this before the vote with the outcome being 88% against instead of 88% in favor.

[tim23]

Anyone betting on full takeover of Cue?

[Vaygor1]

Anyone betting on full takeover of Cue?
Not me. A controlling interest is all they need and they have that.

[Vaygor1]

What worries me is that they make no mention of returning all cash to share holders asap, rather returning some (maybe)

I probably shouldn't have included the maybe, the rest of the statement remains true.
ie they have not said they will wind up the company, and they have not hinted any details on how they plan to move forward, other than "looking for opportunities to deploy our cash by acquiring new producing assets with a preference for gas in markets we understand"... huge uncertainty, with both finalized/total cents per share return and how/if they will continue - at least, this is how I see/saw it, and hence promptly sold

Maybe they will issue a new load of shares to take on an "opportunity" (unlikely, I know, but you'd think if it was too good to pass, and they still wanted to give $100m back, then a new issue of capital could be a possibility)

It could well be a possibility TJ. Stranger things have happened at sea.

I noted in December 2016, the language the NZO was using in their NZX announcements was that they intended to give back the $100M.
Then in January 2017, the language changed to them stating they will give back the $100M.

So from here on in, depending on how things pan out for NZO and how much money the Directors will want or need to put into a new venture, they may well lay out to all shareholders a (soon to be finanlised and rubber stamped) deal regarding new developments and partners, and ask by way of a special resolution to keep all or some of the money. If the shareholders can see the benefits (assuming they are compelling and clear) of leaving the money in the company then the special resolution will pass.

If the above scenario is not possible (due to my naivety on this front), please let me know.

[tim23]

Theres still $168 million available once shareholders have been paid out so cash of about 60c per share. I'm picking they will go xd and recover quite a bit of the dividend quite quickly.

[fabs]

Well Digger,
i was also against it, but even if they gave out such info to S/Hs in general dont,t for a moment think the outcome would have been different, percentage wise a little may be but not overall.
I am sure the major S/Hs [ Institutions etc. ] got far more details plus future plans, to make their call.
Hope i am wrong but that's my take.
NZOs management for years now only in it for keeping money flowing into their pockets for doing little, also to stay on good terms with big investors. believe the term staying on the GRAVY TRAIN applies here.

[Vaygor1]

Gee.. dead silence on the thread despite a price-sensitive announcement today.

I think the announcement is of major significance.

https://www.nzx.com/companies/NZO/announcements/297094

[tim23]

I agree - but it doesn't suit the knockers to acknowledge this. They would rather bag the company for the process they have to work through for paying out the 100 million instead of accepting that is probably does require time.

Gee.. dead silence on the thread despite a price-sensitive announcement today.

I think the announcement is of major significance.

https://www.nzx.com/companies/NZO/announcements/297094

[Marilyn Munroe]

From the announcement;

"If all three horizons were developed simultaneously, a gas-to-shore LNG project is considered the most likely model. It could yield 8.2 tcf of raw gas, of which 4.8 tcf could be available for conversion to LNG"

Tell'm he's dreaming. Given the lead time on such projects our children will be wealthy. That's if the gas is actually there.

Boop boop de do
Marilyn

[fish]

Gee.. dead silence on the thread despite a price-sensitive announcement today.

I think the announcement is of major significance.

https://www.nzx.com/companies/NZO/announcements/297094

Potentially bigger than I ever hoped-a massive gas field with large amounts valuable condensate.
The thrill will be in the drill.
Around $20 million us per drill to this depth.
Potential returns in billions
sounds like if drill is successful unmanned platform and pipes to shore processing including lpg.
SP only moved about 2% so far

[Vaygor1]

I agree - but it doesn't suit the knockers to acknowledge this. They would rather bag the company for the process they have to work through for paying out the 100 million instead of accepting that is probably does require time.


Potentially bigger than I ever hoped-a massive gas field with large amounts valuable condensate.
The thrill will be in the drill.
Around $20 million us per drill to this depth.
Potential returns in billions
sounds like if drill is successful unmanned platform and pipes to shore processing including lpg.
SP only moved about 2% so far

I think $20 million is light.... but any-which-way, NZO have a 50% share in the Basque field with Australian Beach Energy owning the other half.
NZO Market Cap at NZ$0.65 is NZ$207 million.
Just counting the risk-free low hanging fruit in 1 only of the 3 layers, NZO is sitting on 375 million barrels of oil (forget the gas for now, which is huge).
At US$60 per barrel, however one wants to break it up, perhaps with farm-in partners/risk sharing/diluting their holding etc etc, if NZO's can make US$0.50 per barrel on their current holding of 375 million barrels, that equals NZ$255 million profit ... more than today's market cap.

This has been a long time coming and in NZO's words the negotiations are in an advanced stage.

16 Dec 2016 NZO announcement on the NZX re new CEO Andrew Jeffries.
(Ref https://www.nzx.com/companies/NZO/announcements/294485 )
"Talks are advanced with potential partners in our major deep water exploration interests off Canterbury".

17-May-2013 article about NZOG and Barque field in the Canterbury basin:
http://www.offshore-mag.com/articles/2013/05/nzog-moves-into-offshore-canterbury-basin-permit.html

30-July-2015 article about NZOG and the Barque field:
http://www.stuff.co.nz/business/industries/70676979/nzog-eyes-potentially-huge-barque-oil-and-gas-prospect

14-Oct-2016 NBR article re Barque and a brief mention of a prospect off Western Australia that BP and Cue energy bought 80% of. NZOG now owns the controlling interest in Cue.
https://www.nbr.co.nz/article/nzog-gets-permit-extension-potentially-massive-barque-prospect-b-195489


Beach Energy Website. Brief info on NZ interests incl Barque field
Beach Energy owns Beach Petroleum (NZ) Pty Limited from whom NZOG bought their 50% of the Clipper prospect (containing Barque). Other 50% is owned directly by Beach Energy:
http://www.beachenergy.com.au/irm/content/new-zealand.aspx?RID=273

Regarding part of my cryptic post last weekend:


I think I have figured out their next moves... a four (actually five or six) step plan:
- Divorce Cristina.
- Get their blood pressure sorted.
- Get into apparel... a label with vanity.
- Purchase 2 x sailing ships and run them ashore with spirit.

... add in a trip from Sierra Morena to Huelva possibly?

- Get into apparel... a label Canterbury with vanity. Basin
- Purchase 2 x sailing ships Clipper and Barsque and run them ashore Beach with spirit. Energy

... just having a bit of fun. I like crosswords. :D

Marilyn Monroe's post below makes a point that is definitely worth thinking about, however in this case I believe the timing to get this moving is a lot closer given:
- the very long lead-up time till now (over 4 years)
- NZO's very definite and recent change in focus
- the scale of this undertaking together with the fact it's election year.
- a farm-in partner (Woodside, Shell, etc) would bring in the expertise, and the cashflow.

[fish]

$ 20million US dollars per drill and maybe 5 drills equals $100 million us.
If a farm in partner buys 50%-1/2 from beach and 1/2 from nzo maybe little cost to nzo in the drilling stages
This is potentially a big field in world terms.
Profit could be in billions in best case scenario

[digger]

Well here is my thoughts on what might be going to happen. Remember it is just a figment of my imagination and maybe should be just read for light intertainment .
We know there was some thoughts about getting 100 million back to shareholders.There has never been in my mind a dog show of that all being capital return. The tax man will want their cut. After all even the NZO team said it was too good a profit to go past. profit means tax.this is the first and a given to what I think might happen.
So up to now we know that NZO has been chasing gas rather than oil and in a call I made to the company some months ago they confirmed this as well as in some of their new releases.
If the 100 million is to be taxed my thinking is that NZO might offer shareholders the choice of taking their money or reinvesting with the company at a good premium over taking the cash. Did anyone quickly see that a reinvestment under this scheme would be very advantage to Zeta who would then be able to slip past the takeover code and again lift their % shareholding
Note this is just my idle brain talking and not a recomendation to buy or sell the company.

[fabs]

Well as usual the rampers will come out of the woodwork.
On paper and depending on ones limitless imagination, one can unreservedly aggre this MAY BE a marvelous developement.
However like in previous similar occasions Hochstetter, Pike River sanity returns usualy very quick, nothing wrong with the Drill & thrill that we all are presumably in this Co for of course.
Fish to his credit is not far off with his take on his TIME LINE, coinsidering a few realety checks like Availabilety of Drilling Rig supposed to be drilling this year, wich NZOG btw.rates success at 10-20% idealy if nzo retains about 20% == drilling cost would be 30 -40 mil. [est. some years ago total 120 mil.+ } not big considering what they been sitting on at the moment for some years. Deffenitely WELCOME ACTION promised over a long time now. Good thing here is that the they can drill through the 3 Sections in one go.
If the find should be as big as claimed, developing costs could be billions.
Facture in a more than 50/50 chance of a Green led Labour govt. in for 1-2 terms with no J. Key arround, so give your Imagination free range on any time line.
Btw. Should NZOs share be indeed 250 odd barels the mil. of $ profit would take quite some time, but yes POO could of course subst.rise over such a period as an added bonus.
Some investers may very well have been aware of Yesterdays Details well bevore the voting on Kupe & Tui. There is a word for this wich at moment slipped my mind [ grin ]

[fish]

[QUOTE=fabs;656325]Well as usual the rampers will come out of the woodwork.
On paper and depending on ones limitless imagination, one can unreservedly aggre this MAY BE a marvelous developement.


Not intending to ramp-current sp is irrelevant to me as I sold most of my shareholding in the 55 cent offer and what a mistake that has turned out to be!
Just wanted to hear others thoughts.
Thanks for yours and others.
Yes this is still early stages and could be years -at least 3 and probably more before production but drill hopefully next summer-but will be within 3 years as per permit extension terms.
A successful drill would really push the sp.

[Vaygor1]

Well as usual the rampers will come out of the woodwork.
On paper and depending on ones limitless imagination, one can unreservedly aggre this MAY BE a marvelous developement.
However like in previous similar occasions Hochstetter, Pike River sanity returns usualy very quick, nothing wrong with the Drill & thrill that we all are presumably in this Co for of course.
Fish to his credit is not far off with his take on his TIME LINE, coinsidering a few realety checks like Availabilety of Drilling Rig supposed to be drilling this year, wich NZOG btw.rates success at 10-20% idealy if nzo retains about 20% == drilling cost would be 30 -40 mil. [est. some years ago total 120 mil.+ } not big considering what they been sitting on at the moment for some years. Deffenitely WELCOME ACTION promised over a long time now. Good thing here is that the they can drill through the 3 Sections in one go.
If the find should be as big as claimed, developing costs could be billions.
Facture in a more than 50/50 chance of a Green led Labour govt. in for 1-2 terms with no J. Key arround, so give your Imagination free range on any time line.
Btw. Should NZOs share be indeed 250 odd barels the mil. of $ profit would take quite some time, but yes POO could of course subst.rise over such a period as an added bonus.
Some investers may very well have been aware of Yesterdays Details well bevore the voting on Kupe & Tui. There is a word for this wich at moment slipped my mind [ grin ]

I sincerely trust you are not including me in your term 'rampers' fabs.
And I further trust you are not insinuating I had inside knowledge, especially given my posted web-links forming the basis of my prediction.

If so, in both cases you or anyone else would be very wrong. There is a word for these kind of people which does not escape my mind.

All the articles and announcements linked to were issued to the public starting from about 4 years ago.

[fish]

No one should be using the terms 'knockers', 'rampers' or similar as it can lead to the term 'banned'.
Thank you STMOD
To be falsely accused is generally upsetting but I do value all opinions and am glad you havnt banned.
Spelling was atrocious as well

[macduffy]

Spelling was atrocious as well

I hope they're not slouching - as well.

(Apologies to Enid Blyton, I think?)

;)

[fabs]

VYGOR1
Re; 'rampers','insiders' & 'knockers' { the none gender specific }
1/ Yes a generalization, the only ones possibly taking umbrage would the ones it applies to.
2/ Well had only entities of the top 20 S/Hs in mind, so if you are in that category but if innocent of my 'insinuations'.
Accept My unreserved apologies please.
3/Don't know where to go with that.
Would have actually been happier if someone responded positive /negative to the points raised in that missive.
CHEERS

[Marilyn Munroe]

For a perspective on the time challenges and costs of establishing an offshore LNG production go onto YouTube and do a search using the terms 'shell' and 'prelude'.

Boop boop de do
Marilyn

[blackcap]

Hope they have not forgotten to put out their half year report. Running out of time.....

(I note last year it was also on the last day in Feb, but it was at 9AM.)

[Sideshow Bob]

Not forgotten BC, but just not much to get excited about........

New Zealand Oil & Gas Half Year Result8:30am, 1 Mar 2017 | HALFYRThe last eight months have been a time of transformation for New Zealand Oil & Gas as the Company successfully sold its two major producing assets.
Half-year accounts released today do not include the profit on the sale of the company’s interest in the Kupe gas field, which was sold for $168 million, nor the disposal of its interest in the Tui oil field.
Both transactions were completed with an effective date of 1 January 2017 and therefore the full-year financials will give a more appropriate picture of the 2016-17 financial position. In particular, net tangible assets will materially change.
Corporate costs are now considerably reduced. Overheads in the six months to 31 December were down by $2 million compared to the previous year, despite the inclusion of one-off costs for restructuring at Cue and $0.5 million in costs from the sale of Kupe. Exploration expenses in the six months were $4.0 million, down from $9.4 million in the previous year. Capital spending on oil and gas assets was $3.0 million, down from $7.7 million.
New Zealand Oil & Gas recorded a cash surplus from operations of $13.2 million in the six months to 31 December 2016.
Chairman Rodger Finlay says cash flows received by New Zealand Oil & Gas were strong during the past six months.
“In the twelve months to 24 February 2017, as New Zealand Oil & Gas realised value from its assets and focused on reducing its overheads, its share price increased by 49.43 per cent. This was one of the best share price performances last year among NZX companies with a market capitalisation in excess of $150 million.
“In addition, shareholders received a fully imputed 4 cents per share dividend in October.”
A net loss of $25.4 million in the six months to 31 December 2016 was principally due to Cue's impairment of its Maari asset ($7.7m); a loss of $2 million on Cue's sale of its loss-making Pine Mills field in the United States; lower receipts from the Tui field due to production decline; production outages at Kupe and Maari; and $9.5 million associated with de-recognition of deferred tax assets related to Tui and Kupe.
Chief executive Andrew Jefferies says New Zealand Oil & Gas is entering a new stage of its life following the sale of its two major assets.
"We achieved incremental value for our legacy assets and now have a lower cost structure in the business including a reduced executive team and lower corporate rental overhead.
“Progress will be more obvious in our full year accounts, which will include the impact of returning $100 million of capital to shareholders in May.
“Growth will be achieved by deploying our remaining cash to acquire quality assets at a scale, risk-profile and price that suit our size.
“In addition, in New Zealand, we are participating in two potentially transformational deepwater prospects off the South Island, including the Barque prospect that we estimate could hold 11 trillion cubic feet of gas and 1.5 billion barrels of oil or gas condensate liquid (best estimate, unrisked, in place across three horizons). This prospect alone could transform the national economy if it is successfully drilled with partners to help share drilling costs," Andrew Jefferies said.

[t.rexjr]

New Zealand Oil & Gas is now seeking initial orders from the High Court
to implement the scheme. The scheme of arrangement will involve cancelling one
out of every two ordinary shares for a payment of NZ$0.62724388 per
cancelled share. Part-paid shares that have been issued as part of the
company's Employee Share Ownership Plan will not participate in the return of
capital."

By my crude accounting there's at least that value in the company in cash. Whats the general outcome for share price when this sort of thing happens? Seems to me there is no value placed on current assets... FYI am a newbee so may not have a clue what I'm talking about...

[Banksie]

By my crude accounting there's at least that value in the company in cash. Whats the general outcome for share price when this sort of thing happens? Seems to me there is no value placed on current assets... FYI am a newbee so may not have a clue what I'm talking about...

I'm also grappling to understand the implications...as I see it they are returning approx $0.209 per share ($0.627/3). So I would expect the share price to drop by that after the capital return. Does that mean they are valuing the other assets at $0.42 per share?

[blackcap]

I'm also grappling to understand the implications...as I see it they are returning approx $0.209 per share ($0.627/3). So I would expect the share price to drop by that after the capital return. Does that mean they are valuing the other assets at $0.42 per share?

It's quite simple I think. There are currently 319m shares on issue. After the capital repayment there will be:

159.5m shares on issue.
The company has $100m less in the bank.

Or have I misinterpreted this?

[t.rexjr]

That's simple enough.

Though that's essentially valuing the company at $200m. They have that in cash let alone stock and assets. I would think that if you’re buying/cancelling half my asset, you'd pay me for half my asset. No?

Seems to me like the shortfall is expected to be made up by share price gains. Share price and asset value are different things...

[blackcap]

How is that valuing the company at $200m? Or were you replying to Banksie?

No very simply they are cancelling x amount of shares and giving $100m in the process. Nothing to do with valuing the company in my opinion. Just keeping it tidy and simple by cancelling half the shares.

But for what its worth, the market is currently valuing the company at $200m so it makes sense too. (SP of 63 cents *319m shares = $200m)

[Ripping]

It's quite simple I think. There are currently 319m shares on issue. After the capital repayment there will be:

159.5m shares on issue.
The company has $100m less in the bank.

Or have I misinterpreted this?

My view:
Today the company values itself at 200m (319m shares x 0.627cps)
Company initiates buyback at 0.627cps and cancels 159.5m shares.
After buyback company value of 100m (159.5m shares x 0.627cps)
I see that all this is doing is reducing liquidity in the market of NZO with no apparent benefit to shareholders.
Am I wrong ?

[t.rexjr]

How is that valuing the company at $200m? Or were you replying to Banksie?

No very simply they are cancelling x amount of shares and giving $100m in the process. Nothing to do with valuing the company in my opinion. Just keeping it tidy and simple by cancelling half the shares.

But for what its worth, the market is currently valuing the company at $200m so it makes sense too. (SP of 63 cents *319m shares = $200m)

So the upshot is:
For the sale of Kupe to have any benefit to shareholders the share price or dividends must increase after the share cancellation & capital return. If it doesn’t then we’ve just thrown an income source into the toilet.

[blackcap]

My view:
Today the company values itself at 200m (319m shares x 0.627cps)
Company initiates buyback at 0.627cps and cancels 159.5m shares.
After buyback company value of 100m (159.5m shares x 0.627cps)
I see that all this is doing is reducing liquidity in the market of NZO with no apparent benefit to shareholders.
Am I wrong ?

I think the company values itself more than $200m (off the balance sheet). Its the market that values it at $200m.
Liquidity stays the same although no benefit to shareholders. Although no detriment either. Better than paying the $100m as a dividend though.. surely?

[t.rexjr]

My view:
Today the company values itself at 200m (319m shares x 0.627cps)
Company initiates buyback at 0.627cps and cancels 159.5m shares.
After buyback company value of 100m (159.5m shares x 0.627cps)
I see that all this is doing is reducing liquidity in the market of NZO with no apparent benefit to shareholders.
Am I wrong ?

That's how it looks to me...

[Ripping]

The company has been banging on for years about how the market is undervaluing the share price. This was the opportunity for them to say "our company is worth 300m (or whatever), here is your 50% of the company value".
What they have done is said "OK, if the market believes we are only worth 200m, then we will buyback half the shares at that price."
The effectively kills the market for NZO until the share cancellation is complete. And only after that does the share price have an opportunity to relevel to its supposed 'real' value. And if it does do that:
Company:1 Shareholders:0
I don't see this a returning 100m to shareholders, I see this as a capped, enforced buyback.
Perhaps I'm making this up, but that's how I see it.

[t.rexjr]

The company has been banging on for years about how the market is undervaluing the share price. This was the opportunity for them to say "our company is worth 300m (or whatever), here is your 50% of the company value".
What they have done is said "OK, if the market believes we are only worth 200m, then we will buyback half the shares at that price."
The effectively kills the market for NZO until the share cancellation is complete. And only after that does the share price have an opportunity to relevel to its supposed 'real' value. And if it does do that:
Company:1 Shareholders:0
I don't see this a returning 100m to shareholders, I see this as a capped, enforced buyback.
Perhaps I'm making this up, but that's how I see it.

Exactly. To align with company 'worth' they should only be cancelling 1/3 of the shares. 'Capped, enforced buy back' sums it up nicely. Not that that is a bad thing so long as the market views the reamaining shares at 30% more than it does currently... On market buyback would be a better way forward from my perspective.

[Beagle]

Part-paid shares that have been issued as part of the
company's Employee Share Ownership Plan will not participate in the return of
capital."


Okay let me put my bias out there right from the start and say that the only people that have done really well out of NZO over the last thirty plus years are the employees and directors. Over the long run relative to the NZX50 this company has been a truly appalling investment.
Now moving on, its clear you guys have missed this major point. This arrangement is ostensibly to benefit owners or the partly paid shares as any possible intrinsic value the market is presently not recognizing carries forward and materially benefits those with partly paid shares. Yes it is better than a dividend, they wouldn't have sufficient imputation credits to fully impute such a large dividend but again this is ostensibly an arrangement that benefits management and directors with partly paid shares as any unrecognized intrinsic value is doubled on a per share basis going forward given the 2:1 share consolidation. Its designed to bolster the SP going forward and as future potential partly paid shares when they may be fully paid will have more of a relative dilution effect management end up with double the bang for their buck with their already lucrative employee share scheme...management are the real winners...again !
Stripping $100m out of the company in cash is a dumb idea. Removes critical mass...really I see this as a losing situation for shareholders.
Disc: I don't think much has really changed from the Tony Radford days.
Again we see NZO management / directors acting in their own best interests...that's something "new" isn't it.
That's my 3 cents, sorry guys can't be bothered debating this pup...just posted because I have some technical knowledge of how these sort of proposed capital returns work.
IRD binding ruling approval is almost certain in my opinion. GLTAH

[digger]

Have read comments from the last day several times.Who voted for selling KUPE anyways and were you informed beforehand that the 100 million return was to take this shape. Does not suprize me. Of all comments Roger has hit the nail square on the head with the huge advantage to unlisted partly paid shares.The exercise price to be fair should be lifted about 39% to reflect the true underlying value of NZO other non cash assets. That to me is the biggest proof of managements serving management.
Cancelling half my shares to me is neither here or there as my % holding in the company stays the same.

[Beagle]

27. Share-based payments The Group operates an Employee Share Ownership Plan (ESOP) which is open to nominated employees. Under the plan there are currently 9.5 million partly paid shares for which employees have paid $0.01 per share. After 2 years, and under certain conditions, the employee has the option to fully pay for the shares. This option lasts for 3 years. The cost of the ESOP to the Group is calculated using the Black Scholes option pricing model and in the year ended June 2016 $0.09 million was expensed through the Consolidated Statement of Comprehensive Income. A total of 2.3 million shares were awarded, 0.2 million shares vested during the year at an average cost of $0.45 per share, expired shares totalling 0.5 million were sold and 0.1 million shares were forfeited.


Kupe has outstanding growth opportunities.

Couldn't resist posting a couple of excerpts from the 2016 annual report.

[JohnPagani]

Hello Sharetraders.

Thanks for your comments. Eveeryone's entitled to a view - but you might consider that the NZO share price increased by 49% from Feb 16 to feb 17, and that was one of the strongest performance son the NZX among the companies that started with a mar cap over $150 million.

We will arrange for CEO Andrew Jefferies to join you in here for a Q+A after the Notice of Meeting is published later this month.

Couple of quick point to answer comments so far: Employee Share Options Scheme shares do not participate in the capital return - even the partly paid up shares do not participate. Since ESOP shares are issued at a premium of 20% to the current share price, most are not in the money; when they are sold, the employee gets back only the amount they have paid up. The capital return should not change the share price, as the proportion of shares issued to capital of the company remains constant. Therefore, while holders of ESOP shares are treated differently as a class, they should not be either advantaged or disadvantaged overall.

Some of you have expressed a view about the share price as a proportion of the company's NAV. The price paid for the cancelled shares has been set as a proportion of the market cap to the current number of shares on issue. It doesn't reflect NAV, except indirectly to the extent that the market cap reflects NAV.

The capital return is good capital management. The share price increased strongly when the return was announced, from under 50c to around 63c the day the Kupe transaction was announced. The stock continues to trade a discount to NAV - so the capital return allows you to capture 100% of NAV, without that discount over that part of the NAV returned, therefore creating a more efficient balance sheet.


I encourage you to continue to seek more information on this capital return. It's important to vote, and remember a 75% majority is required to approve the return.

If you have queries about how the capital return will work, you are welcome to call me on 021 570 872, preferably while I'm at home having my dinner ;-)


All the best


John Pagani
New Zealand Oil & Gas

[fish]

Thank you John,
I suspect everyone is gobsmacked
The truth is so important
The attempt to brand the company as acting against the interests of ordinary shareholders was probably ignorance rather than malice.
Its so easy in hindsight to blame-its the nature of people
A lot of shareholders lost a lot of money investing tax-paid funds into the company at $1.50
You have a good plan to return capital that will not be taxed and I certainly will be voting for it

[t.rexjr]

Hello Sharetraders.

Thanks for your comments. Eveeryone's entitled to a view - but you might consider that the NZO share price increased by 49% from Feb 16 to feb 17, and that was one of the strongest performance son the NZX among the companies that started with a mar cap over $150 million.

We will arrange for CEO Andrew Jefferies to join you in here for a Q+A after the Notice of Meeting is published later this month.

Couple of quick point to answer comments so far: Employee Share Options Scheme shares do not participate in the capital return - even the partly paid up shares do not participate. Since ESOP shares are issued at a premium of 20% to the current share price, most are not in the money; when they are sold, the employee gets back only the amount they have paid up. The capital return should not change the share price, as the proportion of shares issued to capital of the company remains constant. Therefore, while holders of ESOP shares are treated differently as a class, they should not be either advantaged or disadvantaged overall.

Some of you have expressed a view about the share price as a proportion of the company's NAV. The price paid for the cancelled shares has been set as a proportion of the market cap to the current number of shares on issue. It doesn't reflect NAV, except indirectly to the extent that the market cap reflects NAV.

The capital return is good capital management. The share price increased strongly when the return was announced, from under 50c to around 63c the day the Kupe transaction was announced. The stock continues to trade a discount to NAV - so the capital return allows you to capture 100% of NAV, without that discount over that part of the NAV returned, therefore creating a more efficient balance sheet.


I encourage you to continue to seek more information on this capital return. It's important to vote, and remember a 75% majority is required to approve the return.

If you have queries about how the capital return will work, you are welcome to call me on 021 570 872, preferably while I'm at home having my dinner ;-)


All the best


John Pagani
New Zealand Oil & Gas

At what point are the ESOP shares issued? I'm assuming they are issued upon part payment of the share? Which would mean the 20% premium on current share price is in fact 'current share price at time of issue'.

Which is neither here nor there if half of the ESOP shares are also cancelled after the capital return. If they are not however, then that would be a different story given that the market share value instead of NAV value is being used.

[Kay]

Hello Sharetraders.

Thanks for your comments. Eveeryone's entitled to a view - but you might consider that the NZO share price increased by 49% from Feb 16 to feb 17, and that was one of the strongest performance son the NZX among the companies that started with a mar cap over $150 million.

We will arrange for CEO Andrew Jefferies to join you in here for a Q+A after the Notice of Meeting is published later this month.

Couple of quick point to answer comments so far: Employee Share Options Scheme shares do not participate in the capital return - even the partly paid up shares do not participate. Since ESOP shares are issued at a premium of 20% to the current share price, most are not in the money; when they are sold, the employee gets back only the amount they have paid up. The capital return should not change the share price, as the proportion of shares issued to capital of the company remains constant. Therefore, while holders of ESOP shares are treated differently as a class, they should not be either advantaged or disadvantaged overall.

Some of you have expressed a view about the share price as a proportion of the company's NAV. The price paid for the cancelled shares has been set as a proportion of the market cap to the current number of shares on issue. It doesn't reflect NAV, except indirectly to the extent that the market cap reflects NAV.

The capital return is good capital management. The share price increased strongly when the return was announced, from under 50c to around 63c the day the Kupe transaction was announced. The stock continues to trade a discount to NAV - so the capital return allows you to capture 100% of NAV, without that discount over that part of the NAV returned, therefore creating a more efficient balance sheet.


I encourage you to continue to seek more information on this capital return. It's important to vote, and remember a 75% majority is required to approve the return.

If you have queries about how the capital return will work, you are welcome to call me on 021 570 872, preferably while I'm at home having my dinner ;-)


All the best


John Pagani
New Zealand Oil & Gas

Caveat 1: I'm New (to posting on this forum at least!)

Caveat 2: I invest for fun (ish) and don't take bad results to heart (too much)

Caveat 3: I rarely know what I'm talking about on a good day

But I invested in nzo as I felt they were undervalued. Possibly are still. Possibly not.

Following the kupe sale announcement in november the share price has fluctuated between 61-65c. I could have sold 50% of my holding for up to 65c but chose not to.

Today it is suggested that I will be selling 50% of my investment for 62.7c/share.

Had I have known this earlier I would have cashed out and put my money to better use.

As per caveat 2 I play for fun. But the sense of fun is absent when I am told I am selling 50% of my shares for a price determined by others that I disagree with (I wouldn't still be here if I thought 62.7 was a good sell price)

But at least there is a vote.

[fish]

Kay you have a great attitude that I wish I could emulate.
A capital return by giving you 62.7 cents tax-free for every 2 shares you own is tax-efficient-ie no tax compared to a dividend.
Each share entitles you to a small share in the company..You will still own exactly the same share of the company after the capital return.
I bought a lot of shares at 61.5 cents today because I like the way they are doing it.
I do not like paying more tax than I should.
I like buying shares when I think they are under-valued.
NZO shares are high risk but unlike most other companies we invest in they hold a lot of money that is earning zilch so less risk involved if they return capital to us

[tim23]

I don't know what the fuss is about still get about 30c per held share and when they cancel the shares you will hold half number of shares but price should stay the same. Market cap will then be about 100 million and they will hold about 168 million cash plus misc holdings, seems like value to me?

[janner]

Okay let me put my bias out there right from the start and say that the only people that have done really well out of NZO over the last thirty plus years are the employees and directors. Over the long run relative to the NZX50 this company has been a truly appalling investment.
Now moving on, its clear you guys have missed this major point. This arrangement is ostensibly to benefit owners or the partly paid shares as any possible intrinsic value the market is presently not recognizing carries forward and materially benefits those with partly paid shares. Yes it is better than a dividend, they wouldn't have sufficient imputation credits to fully impute such a large dividend but again this is ostensibly an arrangement that benefits management and directors with partly paid shares as any unrecognized intrinsic value is doubled on a per share basis going forward given the 2:1 share consolidation. Its designed to bolster the SP going forward and as future potential partly paid shares when they may be fully paid will have more of a relative dilution effect management end up with double the bang for their buck with their already lucrative employee share scheme...management are the real winners...again !
Stripping $100m out of the company in cash is a dumb idea. Removes critical mass...really I see this as a losing situation for shareholders.
Disc: I don't think much has really changed from the Tony Radford days.
Again we see NZO management / directors acting in their own best interests...that's something "new" isn't it.
That's my 3 cents, sorry guys can't be bothered debating this pup...just posted because I have some technical knowledge of how these sort of proposed capital returns work.
IRD binding ruling approval is almost certain in my opinion. GLTAH

A good honest appraisal. IMO...

Disc. Never been never will a holder .. Until something changes .. A fly paper for newbies

[Kay]

Kay you have a great attitude that I wish I could emulate.
A capital return by giving you 62.7 cents tax-free for every 2 shares you own is tax-efficient-ie no tax compared to a dividend.
Each share entitles you to a small share in the company..You will still own exactly the same share of the company after the capital return.
I bought a lot of shares at 61.5 cents today because I like the way they are doing it.
I do not like paying more tax than I should.
I like buying shares when I think they are under-valued.
NZO shares are high risk but unlike most other companies we invest in they hold a lot of money that is earning zilch so less risk involved if they return capital to us

I enjoy the risk (calculated and affordable risks!). And I feel a decision to sell should be my own. If it's forced upon me then it should be favourable to me. I don't see 62.7c as favourable.

I don't want to sell 50% of my holding for 62.7c. If I did I would have done it already.

I guess I can't overly complain. It's technically fair. But investing is risk and 50% of my risk has been taken away! I might as well pop into anz (or others) and put my money in a term investment!

[blackcap]

I enjoy the risk (calculated and affordable risks!). And I feel a decision to sell should be my own. If it's forced upon me then it should be favourable to me. I don't see 62.7c as favourable.

I don't want to sell 50% of my holding for 62.7c. If I did I would have done it already.

I guess I can't overly complain. It's technically fair. But investing is risk and 50% of my risk has been taken away! I might as well pop into anz (or others) and put my money in a term investment!

The capital return of $100m was signalled quite a while ago. So why did you not sell when this was announced? The 62.7 cents they came up with today is immaterial. The company is going to lose $100m, half the shares are going to be gone. Alternatively they could have said that they would do it by selling a third of the shares at $1. However then your shares post capital repayment are going to be worth a lot less then they are under the current scenario. I would not be too hung up about the figure contrived at for the capital repayment.

Because if the stock is undervalued, it will be just as undervalued after the capital return (or the selling of half your stock as you put it).

[Kay]

The capital return of $100m was signalled quite a while ago. So why did you not sell when this was announced? The 62.7 cents they came up with today is immaterial. The company is going to lose $100m, half the shares are going to be gone. Alternatively they could have said that they would do it by selling a third of the shares at $1. However then your shares post capital repayment are going to be worth a lot less then they are under the current scenario. I would not be too hung up about the figure contrived at for the capital repayment.

Because if the stock is undervalued, it will be just as undervalued after the capital return (or the selling of half your stock as you put it).

I hear your point!

I guess I am naively looking at this from a total money invested perspective rather than looking at the percentage of company etc. And if nzo have no use for $100m then maybe best returned.

And i guess I can simply rectify my money invested by purchasing the value of half my stock for 62.7c or under (or capital return as you put it). And it's business as usual and I can go back to reading this forum rather than writing!

[blackcap]

I hear your point!

I guess I am naively looking at this from a total money invested perspective rather than looking at the percentage of company etc. And if nzo have no use for $100m then maybe best returned.

And i guess I can simply rectify my money invested by purchasing the value of half my stock for 62.7c or under (or capital return as you put it). And it's business as usual and I can go back to reading this forum rather than writing!

No please do keep contributing. I was not trying to be critical, just trying to help. I bought for the same reason (a small enough parcel). Not that I am a shill for NZO, I note they have made plenty of mistakes in the past and the jury is still out. I think that they are worth about 75 cents currently so there is a discount in the market. That discount will naturally be amplified post capital return but if the market does not realise the discount now, they are unlikely to post capital repayment.

[Kay]

No please do keep contributing. I was not trying to be critical, just trying to help. I bought for the same reason (a small enough parcel). Not that I am a shill for NZO, I note they have made plenty of mistakes in the past and the jury is still out. I think that they are worth about 75 cents currently so there is a discount in the market. That discount will naturally be amplified post capital return but if the market does not realise the discount now, they are unlikely to post capital repayment.

no worries at all...constructive criticism always welcome...And probably needed!!!

I have leant a good deal on the sidelines of this forum (with translational help from investopedia!)

[RTM]

I don't know what the fuss is about still get about 30c per held share and when they cancel the shares you will hold half number of shares but price should stay the same. Market cap will then be about 100 million and they will hold about 168 million cash plus misc holdings, seems like value to me?

I'm with you Tim. They are doing more or less what I expected to return the 100Mil to us all in a tax effective way. And I will be voting for it.
What we are all grappling with I suspect is what will the value of the company be once the transaction has occurred ? That is the big question in my mind and I'm not sure how to figure out the answer...other than to simply wait and see how it plays out.
Disc: very very very long time shareholder.

[digger]

Because if the stock is undervalued, it will be just as undervalued after the capital return (or the selling of half your stock as you put it).[/QUOTE]

Blackcap could you please respond about this line you wrote.As I see it it will be twice as undervalued per share as it was before the 50% cancellation.And it is this point that I think the market is letting it slip under the radar. If as some do think the current value should be 90 cents it is 30 cents undervalued. After the cancellation this 30 cent per share now must become 60 cents to cover the non cash element of the company.
So after the 50% cancellation the remaining shares the share value will go from current 90 to 1-22.Naturally if you say the current undervaluation is only 10 cents then the after valuation will be 82 cents. Again it is this very point that is important as immediately after the 50% cancellation the company will be ripe for a very cheap TO at say 62 cents which will cost our major shareholder very little as most of the money will have just come in from NZO own account.

[blackcap]

Because if the stock is undervalued, it will be just as undervalued after the capital return (or the selling of half your stock as you put it)

Blackcap could you please respond about this line you wrote.As I see it it will be twice as undervalued per share as it was before the 50% cancellation.And it is this point that I think the market is letting it slip under the radar. If as some do think the current value should be 90 cents it is 30 cents undervalued. After the cancellation this 30 cent per share now must become 60 cents to cover the non cash element of the company.
So after the 50% cancellation the remaining shares the share value will go from current 90 to 1-22.Naturally if you say the current undervaluation is only 10 cents then the after valuation will be 82 cents. Again it is this very point that is important as immediately after the 50% cancellation the company will be ripe for a very cheap TO at say 62 cents which will cost our major shareholder very little as most of the money will have just come in from NZO own account.

Yes you are right digger... shhhh, don't tell anybody. :)

Exactly it will be twice as undervalued after the CR. What I was meaning was that if the market undervalues it pre it will probably also undervalue it post capital repayment. My terminology was incorrect, granted, I should have said.. more undervalued post capital return.
Yes you are right in that if you think NZO is worth $242million (which I think it is worth) on 319 million shares then right now the shares should be trading at 76 cents.

Post capital return NZO is then worth $142million but only on 160 million shares or 88 cents per share :) happy days.


However the market is currently valueing NZO at $200m and thus after the capital return of $100m, I do not see the market valuing NZO any differently than now, so after the CR the market will probably value NZO at $100m or 62.5 cents per share give or take a cent or two.

[Sideshow Bob]

Hello Sharetraders.

Thanks for your comments. Eveeryone's entitled to a view - but you might consider that the NZO share price increased by 49% from Feb 16 to feb 17, and that was one of the strongest performance son the NZX among the companies that started with a mar cap over $150 million.



Hi John,


Appreciate the posting - think more companies could do well to make the occasional post. Hope you enjoyed your dinner last night.

Just in terms of your first comment, one can select any dates and make things look good. Many of the posters on this forum are long-term holders, and depending on when they bought etc would still be below water. Graph below - nowhere near the top performer of the NZX over the years regardless of market cap!

I view NZO as a learning experience......one which I should have exited more of my holding some time ago. ;)


Cheers
SSB

8734

[t.rexjr]

I'm not sure there is a fuss either. My query was to try and get a feel from those more experienced than I of where the value of the company would be after the transaction. My only experience so far with this sort of thing was with Tenon where they clearly stated


Grant Samuel is preparing a valuation report for Tenon shareholders, which shows a value range of NZ$3.01 - NZ$3.25 per Tenon share assuming completion of the Blue Wolf offer


The reality is that post Bluewolf the remaining shares are likely to be sold for $2.12.

Hence my query. So thank you Blackcap and Digger for your last two posts...

I do have a query regarding the ESOP shares. They are not part in the capital return (which i think is fair enough in terms of the part paid ones) but do they get cancelled as per the ordinary shares? As I see it, if they are not then effectively, while ordinary shareholders % holding in the company remains the same after the cancellation, the ESOP shares would double their % holding. If NAV and Market were that same then neither here nor there. If not then those ESOP shares are effectively increasing their stakehold at a discounted rate are they not?

[Balance]

Because if the stock is undervalued, it will be just as undervalued after the capital return (or the selling of half your stock as you put it).

Blackcap could you please respond about this line you wrote.As I see it it will be twice as undervalued per share as it was before the 50% cancellation.And it is this point that I think the market is letting it slip under the radar. If as some do think the current value should be 90 cents it is 30 cents undervalued. After the cancellation this 30 cent per share now must become 60 cents to cover the non cash element of the company.
So after the 50% cancellation the remaining shares the share value will go from current 90 to 1-22.Naturally if you say the current undervaluation is only 10 cents then the after valuation will be 82 cents. Again it is this very point that is important as immediately after the 50% cancellation the company will be ripe for a very cheap TO at say 62 cents which will cost our major shareholder very little as most of the money will have just come in from NZO own account.

TO has been used as a rallying point on NZO since time memorial - and with no consequential benefit, save to entrench the bunch of no hopers and misfits directors and management through decades of squander and wealth destruction.

So pays to leave that aside and review what happens after the CR.

NZO post CR is effectively a shell with costs - Zeta has recouped most of the capital/funds/losses buying into NZO and they have not covered themselves with glory (more like gory).

Seems to me that Zeta will continue to milk fees from NZO until time infinite and there will be nothing the disparate bunch of remnants shareholders can do about it. The institutions saw the light and left the building a long time ago.

[digger]

John Pagani

After the 100 million capital return and the sale of TUI [settlement] and any other cash settlements,what will be the expected cash available to NZOG accounts? Only interested in the cash do not give values for other assets.

[Bixbite]

A capital return by giving you 62.7 cents tax-free for every 2 shares you own is tax-efficient-ie no tax compared to a dividend.


No tax?????

It‘s a little bit right and a little bit not right.

If you are NZ trader (profit and loss tax), or OZ shareholder (………)

However, I agreed “cancelling one out of every two ordinary shares”.

[tim23]

Anyone notice the Cushings filed SSH notice a few weeks back - maybe they can see a short term value play. Effectively a cash box now with Cue holding for nothing plus other permits, I'm probably going to invest my buyback $ back in the company.

[peat]

digger it will be about $160-170m

[digger]

digger it will be about $160-170m

Somewhere about that ,but I am a little unsure what the final figure was with the TUI settlement.We had money set aside which after the settlement can go back into the cash pile. That is why I want the exact figure.

[digger]

digger it will be about $160-170m

If that turns out to be correct that means that after we all lose one half of our shares the remaining shares will be backed by a dollar a share on cash only. This is the point I am trying to make where as some of you posters think it is only 62.5 cents.
The company after this 100 million return and 1/2 shares removed will be very ripe for TO.

[Balance]

If that turns out to be correct that means that after we all lose one half of our shares the remaining shares will be backed by a dollar a share on cash only. This is the point I am trying to make where as some of you posters think it is only 62.5 cents.
The company after this 100 million return and 1/2 shares removed will be very ripe for TO.

TO of a cash vehicle?

Zeta has already done that - control the company with less than 50% shareholding.

And with independent reports these days, no fly zones, etc - ain't no mileage to be made trying to takeover cash via a discounted cash offer. The independent directors can hardly recommend an offer of less cash for cash!

[JohnPagani]

Here's the financial info you are looking for, which has just been sworn in court and released to NZX.

https://www.nzx.com/companies/NZO/announcements/298115

[digger]

TO of a cash vehicle?

Zeta has already done that - control the company with less than 50% shareholding.

And with independent reports these days, no fly zones, etc - ain't no mileage to be made trying to takeover cash via a discounted cash offer. The independent directors can hardly recommend an offer of less cash for cash!

What planet are you on. Independent directors have recommended lots of more strange things than what I suggested.

[digger]

Here's the financial info you are looking for, which has just been sworn in court and released to NZX.

https://www.nzx.com/companies/NZO/announcements/298115

So somewhere between 91 to 100 cents is the Net asset backing. So what is the strictly cash situation---the question I asked first.?

[fish]

Somewhere about that ,but I am a little unsure what the final figure was with the TUI settlement.We had money set aside which after the settlement can go back into the cash pile. That is why I want the exact figure.

All shareholders need to be privy to this-perhaps you could make a dinner time phone call ?
I am off fishing but if an answer is not received I will be making one next week.

[fish]

Just thought to check sp and see John P has announced the figure.
I make the NAV share after the capital return $1.20.
So have just bought heaps more-still a few left at 62 cents

[RTM]

Yes. Just been through the figures as well. This seems to good to be true. What am I missing ?
I have bought some more as well.
Might finally break even on NZOG ......yeah right.

[blackcap]

Yes. Just been through the figures as well. This seems to good to be true. What am I missing ?
I have bought some more as well.
Might finally break even on NZOG ......yeah right.

There is nothing new here. You could have worked it out from the HY accounts. Remember current assets does not equal cash so it may appear as if there is more than there is. But it is consistent with the HY accounts.

From the HY accounts you have the cash figure. Remember the accounts are consolidated.. so about $22m of this is in Cue.

[t.rexjr]

Nav of ordinary shareholders Pro forma per share currently 0.77. That effectively doesn’t really change their worth upon CR as to increase that figure to 0.91 (14c gain) said shareholder has cancelled ½ their shares at 14c below NAV. So looks fancy but really even Shakin Stevens.
Given pre sale talk, share price was down in the 40's it'll be interesting to see if share price manages to increase from current levels. I can't see what would drive it...

[Kay]

Hi,

Not sure if someone can easily shed some light on my below query...But two glasses into my pinot noir and I feel compelled to ask. Again I am a novice investor who largely gambles on "growth" stocks with little success!. NZO are one of the few companies I have tried to understand.

But in nzo I see a company with money and assets which exceed the value of it's share price (I understand Nav to be a basic tool but I am basic in my understanding). This was the case prior to the kupe sale and why I invested in them on the first place. And I considered it a simple and easy decision to invest. Essentially I feel like I am buying money (possibly foolishly!).

I am a believer in the wisdom of crowds so I assume I am missing something. I purchased a few more at 61.5 yesterday to more than cover the capital return.

I would be grateful for any thoughts as to why nzo are valued at 62c when the nav suggests that they are worth more. And nzo's assets are real money and natural resources. Not a brandname or anything overly speculative.

Is it simply that they are assumed to make a loss for a number of years...oil prices won't recover?

[digger]

Hi

Is it simply that they are assumed to make a loss for a number of years...oil prices won't recover?

This last line is very easy to clear up. Apart from CUE nzog has no oil to sell so can not make a lose on the sale of oil. NZOG should now be called NNZOG {NO NEW ZEALAND OIL OR GAS]

[Kay]

This last line is very easy to clear up. Apart from CUE nzog has no oil to sell so can not make a lose on the sale of oil. NZOG should now be called NNZOG {NO NEW ZEALAND OIL OR GAS]

Haha appreciated...youre not a fan then...are you telling me they are simply a pot of money which would be better served sat in the comfort of a high street bank?...

[fish]

Haha appreciated...youre not a fan then...are you telling me they are simply a pot of money which would be better served sat in the comfort of a high street bank?...
Bad guess Kay.
I havnt spoken to digger for sometime-time flies-.
but its always informative to do so-I suspect he is holding onto more shares than everyone here combined and similarly Knows more than everyone here.
Money in the Bank if you have no intention of using it is better returned to shareholders
NZO potentially has a huge gas field-currently holding 50%.
They need to find another partner capable of drilling a deep well.In my opinion they have a good chance of finding a game changing world scale field-no one knows until it is drilled which will probably happen before this decade is over.
They might decide to sell their interest and wind up the company although i suspect they are honest and atm are looking for that big partner.
Plans can change and investing in nzo is much higher risk than the bank,
That risk will decrease after the capital return and remaning shares may be worth more
However there is no way that you will get much chance of a return with a bank-no more than capital invested plus interest minus inflation and minus tax