NZ Oil & Gas (NZO)

[Unicorn]

Agreed, BUT I'm on record as questioning the Directors commercial independence making what at the time I was and still am adamant amounted to a $12m donation to PRC when the writing was clearly on the wall.

The Directors admitted that further advances under the $25 million funding facility could have been stopped, i.e. there was a force majure clause, but then went on and immediatly provided the FULL remaining balance under the loan agreement saying it was the right thing to do. There was nothing to stop them making partial further advances which would have at the very least been the more conservative thing to do, was there ?

I seriously call into question the Directors independence on this matter and will be bringing this up at the next AGM if not long before directly with David Sailsbury.

I have lost considerable confidence in the company and its directors to make objective, rational and indpendent decisions and perhaps the market is saying the same by pricing the company down today...on the other hand it could be just negative sentiment but I've made it crystal clear which theory I subscribe too. TR is probably the one to blame on this one so I'll be having a crack at him too.

The donation made by NZO was $500,000. I have no problem with that.

The remaining $12M odd of the available loan money was passed through to PRC fairly quickly. That was not a donation - it was in the form of first ranking debt. The question of how secure it is depends on the value of PRC and its various assets - road, loadout plant, processing plant, tunnel, equipment, insurance policies and coal reserves. Provided those assets prove to be worth $50M odd (approximate first ranking debt level), then that $12M will come back to NZO. If PRC proves to be worth between $26M and $50M then for anything over $26M about half should come back to NZO (split between NZO and BNZ).

My understanding is that by advancing the remainder of the loan at the time it did, NZO surpassed BNZ as the major first ranking debt holder and thereby placed itself in the position of being able to control the receivership. That is not a bad thing at all. If the $12M is repaid and the NZO appointed receiver recovers additional value beyond the $50M of first ranking debt that should help pay the NZO bonds and possibly even result in some remaining shareholder value. NZO stands to gain significantly from any shareholder value that is recovered. Had a BNZ appointed receiver been in control, then it would have suited BNZ had that receiver quickly recovered only its $23M odd plus the NZO $13M odd that had been the total first ranking debt. The NZO receiver will obviously have very different priorities, and that could well prove to be very valuable to NZO.

Of course NZO presented this as being a noble thing to do - but underneath there appear to be very strong business reasons for doing so.

[Lion]

A rare breath of common sense there, Unicorn, compared to some of the bluster posted by many. Easy to criticise after the fact. Ah, the insight of hindsight.

Among the assets you mentioned were coal reserves - do PRC own them? They could be valuable, no?

[Xerof]

Unicorn is exactly right - NZO couched their cash injection in emotive terms to fit the sad occasion, but clearly had a receivership foremost in their minds, and was a 'calculated move'. They 'control' the receivership from here, with BNZ tagging along for the ride.

Nothing can or will happen now in terms of extracting value from their equity stake (along with all equally ranking shareholders) until the inquiries are done and dusted. That might take several years. In the meantime, secured creditors best hope is for a decent insurance claim of sufficient size to be able to cover their secured debt position. The staff do have a preferential position ahead of them, but for how much is unknown. Not likely to be as generous as Peter was intimating, but it will be guided by prevailing legislation.

I think the coal reserves being talked about will be what was stockpiled (sold to Solid Energy I believe, and in the scheme of things - peanuts) The external infrastructure may have some value on a break-up basis, but would clearly have greater value if the Receivers are prepared to wait for the outcome of the inquiries, at which stage, if practicable, they will sell the whole project to the highest bidder.

IMO, PRC shares will not trade again, but may have residual value in a trade sale in years to come, and be pro-rata settled by the receivers across all shareholders

Good luck with your questioning at the AGM or earlier, Roger.

[shasta]

Unicorn is exactly right - NZO couched their cash injection in emotive terms to fit the sad occasion, but clearly had a receivership foremost in their minds, and was a 'calculated move'. They 'control' the receivership from here, with BNZ tagging along for the ride.

Nothing can or will happen now in terms of extracting value from their equity stake (along with all equally ranking shareholders) until the inquiries are done and dusted. That might take several years. In the meantime, secured creditors best hope is for a decent insurance claim of sufficient size to be able to cover their secured debt position. The staff do have a preferential position ahead of them, but for how much is unknown. Not likely to be as generous as Peter was intimating, but it will be guided by prevailing legislation.

I think the coal reserves being talked about will be what was stockpiled (sold to Solid Energy I believe, and in the scheme of things - peanuts) The external infrastructure may have some value on a break-up basis, but would clearly have greater value if the Receivers are prepared to wait for the outcome of the inquiries, at which stage, if practicable, they will sell the whole project to the highest bidder.

IMO, PRC shares will not trade again, but may have residual value in a trade sale in years to come, and be pro-rata settled by the receivers across all shareholders

Good luck with your questioning at the AGM or earlier, Roger.

Doesnt NZO also own coal production rights?

They must be worth something if the mine is ever deemed a going concern

[Xerof]

That would be part of the value in a sale, but the qualification in your second sentence requires a determination first

[shasta]

That would be part of the value in a sale, but the qualification in your second sentence requires a determination first

Theres plenty of hard coking coal still in the mine, that the Japanese steel makers will want, gunna be tough decision to close the mine for good, given the expense invested to date.

Never re-opening the mine will be yet another kick in the guts for those who worked there, not to mention those who died, the West Coast needs it up & running

[skid]

shareprice all over the place yesterday-started at 89-dropped to 83 on news of recievership-climbed back up to 89-and settled at 87-there are obviously some differing views on NZO value in relation to whats going on these days

[swissboy]

If the PRC receivership guaranties 1st payout to NZO and both Tui and Kupe are producing at full bore as expected, Why did the s/p not rise yesterday up to $3.00 or at least where it was at $1.60 12 month ago???

[Beagle]

The donation made by NZO was $500,000. I have no problem with that.

The remaining $12M odd of the available loan money was passed through to PRC fairly quickly. That was not a donation - it was in the form of first ranking debt. The question of how secure it is depends on the value of PRC and its various assets - road, loadout plant, processing plant, tunnel, equipment, insurance policies and coal reserves. Provided those assets prove to be worth $50M odd (approximate first ranking debt level), then that $12M will come back to NZO. If PRC proves to be worth between $26M and $50M then for anything over $26M about half should come back to NZO (split between NZO and BNZ).

My understanding is that by advancing the remainder of the loan at the time it did, NZO surpassed BNZ as the major first ranking debt holder and thereby placed itself in the position of being able to control the receivership. That is not a bad thing at all. If the $12M is repaid and the NZO appointed receiver recovers additional value beyond the $50M of first ranking debt that should help pay the NZO bonds and possibly even result in some remaining shareholder value. NZO stands to gain significantly from any shareholder value that is recovered. Had a BNZ appointed receiver been in control, then it would have suited BNZ had that receiver quickly recovered only its $23M odd plus the NZO $13M odd that had been the total first ranking debt. The NZO receiver will obviously have very different priorities, and that could well prove to be very valuable to NZO.

Of course NZO presented this as being a noble thing to do - but underneath there appear to be very strong business reasons for doing so.

What you've suggested seems like a rational scenario to me, assumming of course there's any recovery of funds at all after the receivers fees, site restoration fees, all recovery fees, legal fees, lawsuits ?, redundencies and so on.....

Without wanting to overstate the obvious the market has emphatically spoken and written off the full value of both NZO's investment in, and all funds advanced to PRC, so clearly the consensus is there it is likely there is no money to be recovered, so without wanting to appear to be dogmatic, clearly the market thinks the $12m
was a quassi donation.

If the market was happy with NZO's handling of the PRC matter why is the share price in the doldrums at circa 85 cents ? All those extra team members David Salisbury has brought in to look at acquisitions and all those huge salaries over quite a length of time now and what have they done ?

Who would welcome an experienced overseas company takeover and running the show more efficiently and effectivly ? I would.

[Casa del Energia]

If the PRC receivership guaranties 1st payout to NZO and both Tui and Kupe are producing at full bore as expected, Why did the s/p not rise yesterday up to $3.00 or at least where it was at $1.60 12 month ago???

Fear. The market doesn't like uncertainty - it doesn't matter that Tui & Kupe are major league cash cows - - a stampede is a stampede. BUT this is where investors with a cool logical head and a certain amount of guts can reserve their spot on the Bermuda waterfront.