NZ Oil & Gas (NZO)

[Awamoa]

What can we do to protect our interest from further declining? vote the board out?

Thats what happened at GPG

[shasta]

What can we do to protect our interest from further declining? vote the board out?

Thought i'd go back over the last 4 quarterlies & run some numbers, lets take opinion out of it & see what the numbers say.

Revenue (as per cashflow reports) Mar 10 $27.6m + Jun 10 $26.3m + Sept 10 $32.2m + Dec 10 $23.4m = $110m

Admin costs (as per cashflow reports) Mar 10 $2.6m + Jun 10 $3.9m + Sept 10 $3.0m + Dec 10 $4.7m = $14.2m (big increase this quarter, why?)

Opening Cash balance @ Mar 10 was $192.4m ($NZ79.3m + $US80.3m), there was also $63m debt in respect of Kupe, so net cash $129.4m

# Shares on issue @ Mar 10 = ~389m

Closing Cash balance @ Dec 10 was $111.8m ($NZ41.1m + $US54.4m), there is still the $63m debt, so net cash is $48.8m

# Shares on issue @ Dec10 = ~400m, so the buyback has kept things relatively stable, & a 5c dividend would cost around $20m

Chris responded to my earlier post that they "needed" the funds in $US (even though they generated $NZ110m in revenue, which would have been in USD)

Despite all the revenue generated, the net cash position is down $80.6m, now a big chunk of that is the Pike funding + exploration/development costs

But lets see how the NZD/USD amounts changed:

At Mar 10 NZO had $NZ79.3m, & as at Dec 10 had $NZ41.1m, net decrease of $NZ38.2m, has been reducing at a relatively even rate each qtr

At Mar 10 NZO had $US80.3m, & as at Dec 10 had $US54.4m, net decrease of $US25.9m, at no quarter did they drop below $US50m!

During the period Mar 10 - Dec 10, NZO paid a 5c dividend, whilst not reducing the Kupe debt at all.

Given that paying the Kupe debt isnt a priority (thats clear) they do not need $50m sitting in USD, they should of converted this along time ago & crystalised a large profit on realising the gains.

They generate revenue & most costs in $USD, so if they don't hedge, its no real difference, the net effect is basically zero.

Over the last 4 quarters the cash balance has reduced by around $20m per quarter, most of that was re Pike, so thats not an ongoing cost, there exploration is pretty much minimal, & there development costs now Tui is back up & running on all wells, should reduce as Tui & Kupe are in production.

Given there $US cash balance taking out $US15m out of the USD a/c would finance a $20m dividend (assuming NZD/USD ~0.75)

With revenue around $20m at least a quarter (& high tapis prices) you would think they could cover there costs, now the black hole of Pike has ceased.

NZO can afford a dividend, & if they say they cant, they should provide shareholders with an honest reason why not, & what the cash is to be used for.

[geezy]

Time for some shareholder action IMHO

[the machine]

Shasta, have you taken this up with the CEO direct?

M

[shasta]

Shasta, have you taken this up with the CEO direct?

M

No, as im not a shareholder & haven't been for a long time*, but Chris's answers didnt stack up, both Corporate & myself (both accountants) picked up on NZO's "double standard", ie advertise a normalised profit & then due to unrealised losses say no dividend due to having a loss!

Cant have it both ways...

* Much better ASX listed O&G companies

[Corporate]

Totally agree with what you are saying shasta. One small point, the kupe gas sales are probably in NZD. Condensate is mostly likely USD.

[Balance]

NZO should really pay shareholders a big dividend from supporting the company unquestioningly over the last 5 years.

The company has NOT deserved such undying and unquestioning support.

Interesting to note that shareholders contribute $191m in new capital ($1.50 share) in June 2008 and for their efforts, have been paid 3 x 5 cents dividends in the last 3 years.

And around 33% opted for the DRP - so more cash for the directors and management to 'invest'. Last conversion price was $1.26.

Do the right thing, NZO - pay them a dividend. The cash is there and until you can prove that you are good guardians of the funds and cash generated, pay it to shareholders.

Shareholders deserve to get some funds back to reinvest elsewhere if they choose.

[manxman]

Anybody else out there get the feeling that they are hoarding cash until the Pike River situation becomes clear.

Whoever is holding Pike when the decision is made to open cast the mine will reap a billion dollar windfall. It would be a shame to see this windfall accrue to a new overseas owner, but that's the way we do things in New Zealand.

No decision on opencasting will be made before the election. (Unless the decision is NO) There's a long game to being played here. Any of the many "interested parties" will have sounded out Gerry Brownlie about open casting, and doubtless the receiver is well aware also, and would like the feather in his cap. If the receiver is still in charge when the decision is made, then he will be able to trade the company through, with cash support from NZO and BNZ.

So NZO hoarding its cash at this stage may be a prudent thing to do. Their stated reasons are, as Shasta has pointed out, not entirely credible, so we can only speculate.

Anyone heard from Mouse?

[shasta]

Anybody else out there get the feeling that they are hoarding cash until the Pike River situation becomes clear.

Whoever is holding Pike when the decision is made to open cast the mine will reap a billion dollar windfall. It would be a shame to see this windfall accrue to a new overseas owner, but that's the way we do things in New Zealand.

No decision on opencasting will be made before the election. (Unless the decision is NO) There's a long game to being played here. Any of the many "interested parties" will have sounded out Gerry Brownlie about open casting, and doubtless the receiver is well aware also, and would like the feather in his cap. If the receiver is still in charge when the decision is made, then he will be able to trade the company through, with cash support from NZO and BNZ.

So NZO hoarding its cash at this stage may be a prudent thing to do. Their stated reasons are, as Shasta has pointed out, not entirely credible, so we can only speculate.

Anyone heard from Mouse?

NZO is a secured creditor & will "likely" receive in excess of $20m from Pike, who have an insurance policy cover of $100m.

When this situation is resolved who knows, could take a while but any insurance recovery will add to NZO's cash, so i would have thought NZO could have come out & said "we will look at paying an interim 5c dividend on receipt of the Pike insurance/receivership monies".

I'm sure given the Pike tragedy & the financial effect on NZO, there shareholders would accept the situation, knowing the dividend is more likely deferred rather than suspended.

I really think this is another PR nightmare for NZO, institutional investors would invest on the basis that the Tui & Kupe projects cashflows would easily support a 5c dividend (approx $20m) on a sustainable basis going forward.

NZO is alienating not only its long term investors (from ST) but risks losing institutional support, who are largely only buying due to NZO inclusion in the NZX indexes

[Rabbi]

Realistically, it is more likely receiver's fees will bleed PRC dry before the mine and assets are sold off. Even if NZO was interested they couldn't out bid a cashed up overseas miner if the mine was put up for sale.
At best they might recover their secured debt, while PRC shareholders won't get back a red cent.
A right royal gravy train for the receivers and probably a cheap coal mine for an overseas investor.

The strongman mine reopened 1 month after that disaster but this ones covered in so much 21st century regulatory red tape it's not funny. Why the hell should they wait until the Royal Commission is over to approve Pike for open open cast mining. What possible difference would it make but then it can't be sold until it can reopen and it can't reopen until after the Royal Commission of Inquiry.
Meanwhile the receivers will be charging $500+ an hour for services rendered and the $500 is a low ball park figure.