NZ Oil & Gas (NZO)

[Lego_Man]

I agree, business is business. Ridiculous and emotive decision to piss that money down the drain.

[Beagle]

NZO will trade now at a deep discount to any kind of valuation - hopeless management and hopeless directors.

We both know for a fact that any truly independent lender acting in a prudent and conservative manner would have excercised their force majure rights. The directors said at the time there were sound commercial reasons for their decision. I wonder if these so called sound commercial reasons will stand up to close examination in the cold light of day. Looking forward to putting this too them at the next AGM and holding them accountable so they can explain to us all why they appear to have given away $12m for what prima facie appear to be nothing more than sentimental reasons. Media report late last week saying PRC employees promised their Christmas bonus, we all know where that money is coming from. Yes that's right, that's yet another bonus on top of their bonus for such "wonderful" performance with hydro extraction, and I can't help but speculate on what Chrismas bonus NZO staff are up for considering their "wonderful" business performance this year.

If NZO have such vast volumes of free cash flow to throw around perhaps they need to remember who are the owners of the company and reward us with our Christmas bonus, who would say No to another dividend ?

[fish]

We both know for a fact that any truly independent lender acting in a prudent and conservative manner would have excercised their force majure rights. The directors said at the time there were sound commercial reasons for their decision. I wonder if these so called sound commercial reasons will stand up to close examination in the cold light of day. Looking forward to putting this too them at the next AGM and holding them accountable so they can explain to us all why they appear to have given away $12m for what prima facie appear to be nothing more than sentimental reasons. Media report late last week saying PRC employees promised their Christmas bonus, we all know where that money is coming from. Yes that's right, that's yet another bonus on top of their bonus for such "wonderful" performance with hydro extraction, and I can't help but speculate on what Chrismas bonus NZO staff are up for considering their "wonderful" business performance this year.

If NZO have such vast volumes of free cash flow to throw around perhaps they need to remember who are the owners of the company and reward us with our Christmas bonus, who would say No to another dividend ?

Commercial reasons must mean the directors expect to get it back . They had offers for their shareholding in the company before the tragedy . Maybe they expect the liquidators to sell the company for more than the value of their loan .

[Lizard]

Roger,

Agree that many investors would have known it was pretty clear by the Saturday after the explosion that receivership was inevitable. But also, that it was completely unacceptable to the general public of New Zealand to say it out loud at that time. Was that worth an additional $12m (of secured debt)? I guess that would have been a difficult call for NZO management on the day, but I can understand no one having the stomach for it. Can you picture how those press conferences would have looked on the Monday or the press (and talkback!) reaction? It would have made for an interesting board room discussion!

Yes, they knowingly put another $12m at risk, but I'm guessing they did it with the knowledge of the value of the above ground assets and knowing that they could still pull the plug on a better day. They also put themselves in a position to pick up the rights to the coal resource at a discount - though at that (pre further explosion) point, they may have had a more optimistic view on timeframe for possible mining.

It was a tough call, but at one level, I find their actions honourable and applaud them.

[peat]

yes I agree Lizard
I'm not sure if its so relevant for NZO or not but PR can get pretty ugly in situations like this

[fabs]

Is it possible that NZO has spent big MONEY, on legal advice to get the Receivers in, if so best decision in 2 years, hard to see present Management having come up with it, given the time lag.

[friedegg]

yes I agree Lizard
I'm not sure if its so relevant for NZO or not but PR can get pretty ugly in situations like this

why would nzo be affected by bad pr,they dont sell cans of beer to the public,they donated thier $500,000 to the tradgedy,the 12mill was not good

[Beagle]

Roger,

Agree that many investors would have known it was pretty clear by the Saturday after the explosion that receivership was inevitable. But also, that it was completely unacceptable to the general public of New Zealand to say it out loud at that time. Was that worth an additional $12m (of secured debt)? I guess that would have been a difficult call for NZO management on the day, but I can understand no one having the stomach for it. Can you picture how those press conferences would have looked on the Monday or the press (and talkback!) reaction? It would have made for an interesting board room discussion!

Yes, they knowingly put another $12m at risk, but I'm guessing they did it with the knowledge of the value of the above ground assets and knowing that they could still pull the plug on a better day. They also put themselves in a position to pick up the rights to the coal resource at a discount - though at that (pre further explosion) point, they may have had a more optimistic view on timeframe for possible mining.

It was a tough call, but at one level, I find their actions honourable and applaud them.

I can certainly see where you are coming from Lizard and agree there would be a PR disaster well baked in if NZO had excercised their force majure cessation of further funding rights, and to be honest its really gut wrenching stuff not for the faint of heart however I would have thought a more measured or balanced approach rather than just throwing all the remaining undrawn line of credit at them might have been prudent given the fact that they were allready well secured over PRC's assets, whatever they may or may not be worth.

Leaving emotions aside it still looks like a hasty sentimentally based decision to me. Business, especially in this new GFC environment can be a cold hard place and there can be little question a truly independent lender would have acted in a more prudent and carefully measured manner. Tony Radford's long association with both companies needs close examination in my view, there's a very clear lack of independence perhaps if he hasn't got the stomach to make prudent and carefully balanced commercial decisions its time to retire ?

There's no question I'll be putting this matter to him at the next AGM and lets agree to see how they justify this based on what they said were sound commercial reasons in due course, after all a donation is a donation and to call the full payment of all remainign funds available in one hit anything else, looks like very creative accounting to me. NZO are only a 30% shareholder and had no legal obligation to provide the remaining funding to PRC, especially all at once.

Call me a cynical bugger if you like, or a rational prudent businessman, (I prefer that), but I'm sure I don't need to ask the question what did the other substantial shareholders (Indian owners) of PRC contribute / donate...the answer should be obvious to all.

[Lizard]

To be honest, Roger... it was me worrying they'd have to do the VA or receivership announcement by the Tuesday after... and you that convinced me the reality was that they wouldn't.... So you called it right - and, in my heart, I am happier that you had the clearer call on that one...

[Beagle]

To be honest, Roger... it was me worrying they'd have to do the VA or receivership announcement by the Tuesday after... and you that convinced me the reality was that they wouldn't.... So you called it right - and, in my heart, I am happier that you had the clearer call on that one...

Thanks for that Liz. I certainly acknowledge it has been and continues to be a real gut wrenching time for all concerned, and there's no question that they have done the politically correct thing but where's their hard nosed business approach, there's plenty of cash flow from Tui and Kupe but to me it begs the question of when there's plenty of lard in the cupboard if its not all too easy to play fast and loose with shareholders money ? There are five independent directors on NZO's board, surely this was a split decision of the board, they can't all be sentimental emotional decison makers ? or were there really sound commercially based reasons for their decision as they said, if so I can't wait to hear them.