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  1. #15911
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    Cool A long term project.

    [Good share to buy into then if you are an investor in your 20s - 30s.
    F.A.BUCHLER

  2. #15912
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    How about Ironbark for an exciting “near-medium prospect”, misterTea?
    Drilling in a year and a half. Best guess is it has 15tcf of gas, not far from an LNG plant.

    What might that be worth?
    Two ways I’ve thought of – direct value of natural gas on US market, or convert to barrels of oil equivalent (boe)

    (1) The US price their natural gas in millions of btu, currently priced at US$2.68 but it’s been up to $4 in recent times.
    At 1020 btu to a cubic foot, Ironbark might have 15.3 billion million btu which is worth about US$42b.

    (2) 6,000 cu ft. of gas is approximately equivalent energy to one barrel of oil.
    So 15tcf/6000 = 2.5b boe. Price of WTI crude is currently US$63. That’s worth about US$150b.

    I have little idea what the operators of the LNG “train” might pay their suppliers. I do know that BP, who are 42.5% partners in Ironbark are also part owners of the LNG plant. I also know that supply for the plant will be tight in future years. And here’s an interesting video saying “the fuel of the future is not a renewable”. (hint, it’s not coal) https://www.bloomberg.com/news/video...ot-a-renewable

    Let’s be conservative and use the lower guestimate of $42b. The US gas market is depressed at the moment – it’s a by-product of their huge oil production from the Permian basin shale fields. The world LNG market is robust.

    NZO have 15% of the field directly, plus half CUE’s 21.5% which is 25.75%. So NZO’s share is around US$10b. (NZ$15b).

    This is gross, gross, for sure, although I’ve been conservative in my pricing. I haven’t deducted any costs of production, but they shouldn’t be huge in comparison, or royalties (not sure, but I think there aren’t any in WA, but there will be other taxes, for sure).

    Then it needs an accountant to convert this to annual income over the unknown life of the field with future discounted values and stuff I don’t really understand. Anyone like to have a go? (Adrian at Mana??)

    Well, I did have a go actually, using a quarter of that NZ$15b given in dividends for a twenty year field life and came up with NZ$1.18 div per share per year for twenty years. BUT – BIG DISCLAIMER, I’m no expert and I’m not trying to ramp the share price – just using my best amateur arithmetic and hoping to get a discussion going.

    However you do the sums, this is pretty exciting stuff.

    There just has to be the gas there!

  3. #15913
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    Sure whats the norm 1 in 10 strikes something viable?

  4. #15914
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    Quote Originally Posted by Joshuatree View Post
    Sure whats the norm 1 in 10 strikes something viable?
    Possibly. So you have to do a bit of a probability exercise when working out the value of the project. I am buying at these prices. At the moment buying cash at less than its nominal value. You do not see that often.

  5. #15915
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    Quote Originally Posted by Lion View Post
    How about Ironbark for an exciting “near-medium prospect”, misterTea?

    *****

    There just has to be the gas there!
    In terms of the game-changing potential Ironbark could have on NZOG - you are preaching to the converted. Though I make no comments on your sums/logic/assumptions, clearly a large gas find would have an enormous impact on Cue and NZOG's future prospects.

    And even though these prospects generally have a 20% success rate, Ironbark is clearly of high interest given BP are running the show and have purchased such a massive stake.

    However, drilling for a test well is only expected to start at the end of next year. Assuming a large deposit of commercially viable gas is found, it will still be years from now before the gas is extracted and sold. So (assuming no unexpected delays) I see Ironbark as an exciting prospect that is a big part of the medium-long game.

    In the meantime (short - medium term) I would hope that the $100M cash could be put to good use to generate higher company earnings now. I certainly wouldn't want Andrew and the team to rush into 'any old thing' just for the sake of being seen to do something with the cash.
    However, it would be ideal if an attractive prospect that was already producing oil and/or gas could be secured sooner rather than later, given they have been holding the cash for quite some time now.

    In theory, having a large motivated and influential owner like OGOG should help with this (it certainly won't hurt!).

  6. #15916
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    Quote Originally Posted by JohnPagani View Post
    Hi Mickey

    Technology has changed a bit since the 1970s, and so has the potential market for product. In those days, gas was not much sought after in the GSB. The issue of how to commercialise a discovery is part of the business case for drilling a well in the first place. That's why the joint venture commissioned an independent economic impact study. You can read it here: https://www.nzog.com/dmsdocument/download/333 [pdf]. That report was commissioned to demonstrate that, if we are successful with a discovery, there will be a market for the product - and indeed there would be. Oil or condensate could be commercially produced directly to an FPSO and exported. Gas could be commercially piped ashore, around 60km. You can see a diagram of how it would work in that report.

    On the weather conditions, the two New Zealand Oil & Gas prospects, Toroa and Barque, have met ocean conditions that are better than Taranaki. The prevailing wind is offshore and they are sheltered behind the island. Oil and gas is commercially produced in less hospitable places.

    So, in summary, the questions you mention are fair, but the issues are well understood around the world, and the engineering and economics required are thoroughly investigated before we make drill commitments.

    Kind regards

    John Pagani
    General Manager Corporate Services, New Zealand Oil & Gas
    Appreciate your response John and the link to the impact assessment, which I found an interesting read. You probably noted that my comments were more related to the Great South Basin south of Invercargill as opposed to the Great South Canterbury Basin and having worked on drill sites off both Dunedin and Taranaki, I can attest that the weather conditions are much calmer and likely similar to what will be expected off Oamaru.

    It's also good to hear that technology has changed significantly from the 70's making drilling and production much more viable than the days I was referring to, which was during the very early stages of deep water drilling situated over 240km offshore and drilling in extremely adverse weather conditions. I can recall that on one well, we had over 60-days of waiting on weather as the rig was heaving higher than the maximum 46-feet the motion compensator could handle. The good news was that after only 6 or 7 wells, we did strike condensate and did have the flare arms burning off the gas for about a week while the Baker specialists conducted their burn off tests. Unfortunately, it was low grade condensate and the geologist told me that we had tapped into it approximately 20,000 years too soon to make it a viable product. Still, it gives me hope that NZ does have huge untapped potential that is ripe for further exploration. I'll be watching your drilling programme with interest and wish you every success.

  7. #15917
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    Quote Originally Posted by blackcap View Post
    I am buying at these prices. At the moment buying cash at less than its nominal value. You do not see that often.
    Indeed, Benjamin Graham would be salivating at the opportunity to buy NZOG right now.

    It would be like buying a house for $800,000 with a small rent-producing granny flat out the back. The rent produces just enough income to cover basic overheads (rates, lawn mowing etc).

    Once you take possession of the house, however, you take a look in the basement only to find $1M sitting there in a briefcase waiting for you! You effectively bought $1M for $800K.

    Unfortunately, even though the share price is ridiculously low right now - the company is illiquid. Trying to purchase meaningful amounts of stock (in a cost-effective way) is difficult at the moment.

  8. #15918
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    Quote Originally Posted by mistaTea View Post
    .

    Unfortunately, even though the share price is ridiculously low right now - the company is illiquid. Trying to purchase meaningful amounts of stock (in a cost-effective way) is difficult at the moment.
    You are right, Graham would be salivating and so am I. These opportunities do not come along often. I purchased MGX at 20 cents a couple of years ago when they had 35 cents per share cash in the bank and no debt. They are now 117, (due to a bit of luck) but that was a no brainer as well.

    Meaningful is such a subjective term. But I am pretty sure I could buy 100k of NZO at under 50 cents within a week. Meaningful enough for my purposes as part of my portfolio. I have already got some at 48 recently and cannot see where the risk is.

  9. #15919
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    Quote Originally Posted by blackcap View Post
    I purchased MGX at 20 cents a couple of years ago when they had 35 cents per share cash in the bank and no debt. They are now 117, (due to a bit of luck) but that was a no brainer as well.
    That’s awesome to hear mate. Peter Lynch would call that damn near a “6 bagger”. You keep that up and you will be giving him a run for his money methinks.

  10. #15920
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    Quote Originally Posted by blackcap View Post
    You are right, Graham would be salivating and so am I. These opportunities do not come along often.
    Except this company seems to present them over and over.

    We placed a buy rec on NZO a few years ago after it converted its primary asset into cash and was trading below nta.
    It sort of worked out, but depended more on your personal timing than the clear strategy itself and came to fruition with the takeover.
    because there is now a controlling shareholder who can tear you up its less likely to succeed imo.
    For clarity, nothing I say is advice....

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