NZ Oil & Gas (NZO)

[arjay]

Correct Digger, but recall that the OBs were issued with a number of goals set for their life-span, one of which was the drilling of Opito. Opito was delayed so the OBs expiry date was extended (perhaps assisted by a bit of lobbying from option-holders in that direction?). Were the OCs issued with a clear set of objectives attached? As you say, a good option would be to do what they finally did for the OBs, and that is to issue new options (OE's) for a couple of cents to both OD and head holders - that is, if NZO wants to bother with options again.

With all the talk about the US heading into recession and the slow decline in sharemarkets generally, NZO seems to be doing quite well. It reminds me of someone trying to walk to the shore while the current is trying to drag them back. A scary 6 months for the ODs ahead I feel.

[Mingeathinaikos]

The b's were extended,but were not the first options to be extended. In fact in this industry extension is more common than expiry or exercising. My personal thinking here is that the OD's should be extended much as the OB's were. That is given the slower than expected progress on KUPE and PIKE from option issue date the options need the extra time to bring the exercising as likely as there were on first issue. The OB's were converted to OC's on a one for two basis for both holders of Heads and Options at 2 cents per new option. This time we need the same arrangement of OD to OE but at no cost as it should be given as a dividend when no dividend can be given in cash do to nil imputations credits being yet available. Just my thoughts.

I won't be a favourite on this site for saying this, but i think it is absolutely ridiculous to be expecting the NZOOD's to be extended.

When issued, they had an expiry date which we all knew, and each holder had roughly 2 years to do with them what they want. Anyone that purchased additional options also knew the expiry date and risks.

How can people call for them to be extended just because they aren't in the money!!!! If you think they need to be extended (won't be exercised) - SELL THEM.
Imagine the market if options were extended everytime they looked like they wouldn't be converted.

[Nitaa]

It depends on what side of the fence you are sitting on. Ultimately, the decision should be in the best interest of the company. If they want to raise extra capital as the company has alluded to then extending the options would seem a logical choice if they are not in the money come June 30.

[KentBrockman]

It depends on what side of the fence you are sitting on. Ultimately, the decision should be in the best interest of the company. If they want to raise extra capital as the company has alluded to then extending the options would seem a logical choice if they are not in the money come June 30.

If those options were extended, wouldn't the company open itself up to all sorts of law suits by those who have already sold their options, based on the perception that they won't be in the money come expiration date?

[corran]

It is an off-market transaction coded IN - Not sure IN stands for but could be "internal" or "inhouse" or similar - ie a crossing between 2 clients of the same broker.

Why at $1.17? - no idea - maybe someone has said buy me XXX NZO at up to $1.17 so a diligent broker has sold some of his clients holding at $1.17

Alternatively the broker may have just bought them later in the day

thanks for the explanation dsurf :-)

[JBmurc]

Double or nothing: traders bet on oil reaching $US200 a barrel by year's end

Grant Smith in New York

January 8, 2008

THE fastest-growing bet in the oil market these days is that the price of crude will double to $US200 a barrel by the end of the year.

Options to buy oil for $US200 on the New York Mercantile Exchange rose 10-fold in the past two months to 5533 contracts, a record increase on any similar period. The contracts, the cheapest way to speculate in energy markets, have appreciated 36 per cent since early December, with crude oil futures reaching a record $US100.09 on January 3.

While analysts at Merrill Lynch and UBS say the slowing US economy will lead to the biggest drop in prices since 2001, the options show some traders expect oil to rise for a seventh consecutive year. Demand will increase 2.5 per cent this year, the International Energy Agency (IEA) says. US oil inventories fell to a three-year low on December 28. Production from Mexico is declining and Saudi Arabia is behind schedule in opening its newest field.

"One hundred dollars a barrel is actually 14.9 cents a cup, so we're still talking about oil being remarkably cheap," said Matthew Simmons, the chairman of Simmons & Co International, an investment bank that focuses on energy. Inventories "are tight as a drum and I don't see how we get out of this box", he said in an interview on Bloomberg television last week. "Demand clearly isn't starting to slow down."

World consumption will rise to 87.8 million barrels a day this year, 2.1 million more than last year, or about the amount that Nigeria supplies, says the IEA, which advises oil-consuming nations. Demand from China alone will rise 5.7 per cent to 8 million barrels a day as imports expand to support an economy that is likely to grow 11 per cent.

Oil suppliers are straining to increase production. Saudi Arabia, the world's largest exporter, said last week that the 500,000 barrel-a-day Khursaniyah oilfield missed a December start date. Brazil's Tupi field, the second-largest find of the past 20 years, is more than eight kilometres below the ocean surface and will take at least five years to develop.

Mexico's state oil monopoly, Petroleos Mexicanos, suffered a three-year, 40 per cent decline at its Cantarell field, the world's third-largest. Since December 2005, fighting in Nigeria has reduced production 11 per cent to 2.18 million barrels a day.

Crude futures rose 2 per cent in the first three trading days of the new year, closing at $US97.91 a barrel in New York on January 4.

"We haven't got to $US100 on just a whim," said Paul Horsnell, the head of commodities research at Barclays Capital in London. "This is at heart also about longer-term concerns that supply capacity investment needs higher prices to keep up with demand growth."

Barclays forecasts oil will average $US87.40 a barrel this year, a 21 per cent increase from last year's average.

The Nymex options, which give speculators the right to buy 1000 barrels of oil in December, are becoming a favourite for traders, even if they don't expect crude to reach $US200, because they are a cheaper way to speculate than using futures contracts. Options expire worthless if crude fails to reach the "strike" price. There were 500 of the options on November 7.

The price of the options rose as high as $US550 last week before closing at $US300 on January 4. That amounts to 30c a barrel. The December futures to purchase 1000 barrels in December rose 3.5 per cent to $US94,010, or $US94 a barrel.

"The most common analogy used to describe options is that it represents insurance" against "low-probability" events, said Tim Evans, an energy analyst at Citigroup Global Markets.

Oil forecasters say there is no chance of $US200 crude, as the US, which consumes a quarter of the world's oil, slows. Prices will average $US78 a barrel this year, 20 per cent below the present level, and $US75 in the fourth quarter, according to the median forecast of 27 analysts surveyed by Bloomberg. The last time prices fell that much was in 2001, when they dropped 26 per cent.

Merrill Lynch and Morgan Stanley in New York expect the US economy, the world's largest, to slip into recession this year. The jobless rate rose to 5 per cent in December, the highest in two years. The Institute for Supply Management's factory index fell to the lowest level in almost five years in December.

Oil was overpriced, given the outlook for the economy, said Jan Stuart, an analyst at UBS in New York. He forecasts an average price of $US74 a barrel this year, little changed from last year. Merrill Lynch's Francisco Blanch predicts $US78 in the fourth quarter.

"I am afraid that we are going to see an economic slowdown that we have not seen the beginning of yet that will take some significant amount of oil demand off the table," Stuart said on January 2.

But most strategists didn't foresee last year's 57 per cent gain. Crude traded at an average of $US72.36. A Bloomberg survey of 29 analysts in September 2006 forecast a median price of $US64.

"Going through $US100 means that people are seeking more protection against a higher number," said Michael Lewis, a strategist at Deutsche Bank in London. Deutsche Bank expects oil to fall to about $US80 a barrel.

Options trading indicated that the likelihood of crude reaching $US125 a barrel in December had almost doubled since December 25, to 18 per cent, Mr Lewis said.

While $US200 may remain an outside chance, Matthew Simmons has shown he is willing to make that bet. He wagered $US5000 with the New York Times columnist John Tierney in August 2005 that oil would average at least $US200 a barrel in 2010.

The latest assessment from OPEC, which produces 40 per cent of the world's oil, suggests prices will rise.

"There is enough oil in the market," Chakib Khelil, the president of the Organisation of Petroleum Exporting Countries, told reporters in Algiers at the weekend. Mr Khelil, who is also Algeria's Energy Minister, said rising prices were not OPEC's fault.

"You will see even $US200 oil in the next five years," said Jean-Francois Tardif, a senior portfolio manager at Sprott Asset Management in Toronto.

[Nitaa]

If those options were extended, wouldn't the company open itself up to all sorts of law suits by those who have already sold their options, based on the perception that they won't be in the money come expiration date?

As an option holder, you should be under the perception that the company reserves the right under the NZX rules that they can extend the expiry date. Whether they do or not is another thing. It adds to the volatility that there is big money can be won and lost on these options.

[JBmurc]

I won't be a favourite on this site for saying this, but i think it is absolutely ridiculous to be expecting the NZOOD's to be extended.

When issued, they had an expiry date which we all knew, and each holder had roughly 2 years to do with them what they want. Anyone that purchased additional options also knew the expiry date and risks.

How can people call for them to be extended just because they aren't in the money!!!! If you think they need to be extended (won't be exercised) - SELL THEM.
Imagine the market if options were extended everytime they looked like they wouldn't be converted.

I see the very savy oil&Gas jnr weeky writer John campbell stated in his lastest release he had brought alot of NZO opts and more head shares his view like mine is NZO is massively undervalued and should really be closer to $2 per share

[digger]

If those options were extended, wouldn't the company open itself up to all sorts of law suits by those who have already sold their options, based on the perception that they won't be in the money come expiration date?

No not at all. The options were issued fairly at 1for 2 to all head holders and listed as tradeable. What each holder then does with his or her holding in options is there own business,and in keeping with what they think the future may play out.In no way is the company responsable for this indiviable choice,so the company can only assume all holders are as they were at options issue date. Extension for whatever reason on this basic is fair if heads and option holders are included as before. It can also be argued as it has happened before it is part of the expected culture of this company,while not necessarly a condition of it. So it is just as much a personal risk to sell thinking they will be out of the money as it is to hold thinking they may be extended. At this stage i doubt the company inself has a clear opion on the subject. I just brought it up to express what i felt was the best way forward for the company given the large revenue increase that will mostly happen after 30 june 08 and further protection from a too cheap takeover.

[peterfindlay]

As an option holder, you should be under the perception that the company reserves the right under the NZX rules that they can extend the expiry date. Whether they do or not is another thing. It adds to the volatility that there is big money can be won and lost on these options.

I am advised that the expiry date cannot be extended. The requirements of both the ASX & NZX rules need to be considered. Where there is inconsistency between the rules of the two stock exchanges, the more onerous requirement of the two exchanges needs to be considered as applying.