NZ Oil & Gas (NZO)

[Banksie]

By my crude accounting there's at least that value in the company in cash. Whats the general outcome for share price when this sort of thing happens? Seems to me there is no value placed on current assets... FYI am a newbee so may not have a clue what I'm talking about...

I'm also grappling to understand the implications...as I see it they are returning approx $0.209 per share ($0.627/3). So I would expect the share price to drop by that after the capital return. Does that mean they are valuing the other assets at $0.42 per share?

[blackcap]

I'm also grappling to understand the implications...as I see it they are returning approx $0.209 per share ($0.627/3). So I would expect the share price to drop by that after the capital return. Does that mean they are valuing the other assets at $0.42 per share?

It's quite simple I think. There are currently 319m shares on issue. After the capital repayment there will be:

159.5m shares on issue.
The company has $100m less in the bank.

Or have I misinterpreted this?

[t.rexjr]

That's simple enough.

Though that's essentially valuing the company at $200m. They have that in cash let alone stock and assets. I would think that if you’re buying/cancelling half my asset, you'd pay me for half my asset. No?

Seems to me like the shortfall is expected to be made up by share price gains. Share price and asset value are different things...

[blackcap]

How is that valuing the company at $200m? Or were you replying to Banksie?

No very simply they are cancelling x amount of shares and giving $100m in the process. Nothing to do with valuing the company in my opinion. Just keeping it tidy and simple by cancelling half the shares.

But for what its worth, the market is currently valuing the company at $200m so it makes sense too. (SP of 63 cents *319m shares = $200m)

[Ripping]

It's quite simple I think. There are currently 319m shares on issue. After the capital repayment there will be:

159.5m shares on issue.
The company has $100m less in the bank.

Or have I misinterpreted this?

My view:
Today the company values itself at 200m (319m shares x 0.627cps)
Company initiates buyback at 0.627cps and cancels 159.5m shares.
After buyback company value of 100m (159.5m shares x 0.627cps)
I see that all this is doing is reducing liquidity in the market of NZO with no apparent benefit to shareholders.
Am I wrong ?

[t.rexjr]

How is that valuing the company at $200m? Or were you replying to Banksie?

No very simply they are cancelling x amount of shares and giving $100m in the process. Nothing to do with valuing the company in my opinion. Just keeping it tidy and simple by cancelling half the shares.

But for what its worth, the market is currently valuing the company at $200m so it makes sense too. (SP of 63 cents *319m shares = $200m)

So the upshot is:
For the sale of Kupe to have any benefit to shareholders the share price or dividends must increase after the share cancellation & capital return. If it doesn’t then we’ve just thrown an income source into the toilet.

[blackcap]

My view:
Today the company values itself at 200m (319m shares x 0.627cps)
Company initiates buyback at 0.627cps and cancels 159.5m shares.
After buyback company value of 100m (159.5m shares x 0.627cps)
I see that all this is doing is reducing liquidity in the market of NZO with no apparent benefit to shareholders.
Am I wrong ?

I think the company values itself more than $200m (off the balance sheet). Its the market that values it at $200m.
Liquidity stays the same although no benefit to shareholders. Although no detriment either. Better than paying the $100m as a dividend though.. surely?

[t.rexjr]

My view:
Today the company values itself at 200m (319m shares x 0.627cps)
Company initiates buyback at 0.627cps and cancels 159.5m shares.
After buyback company value of 100m (159.5m shares x 0.627cps)
I see that all this is doing is reducing liquidity in the market of NZO with no apparent benefit to shareholders.
Am I wrong ?

That's how it looks to me...

[Ripping]

The company has been banging on for years about how the market is undervaluing the share price. This was the opportunity for them to say "our company is worth 300m (or whatever), here is your 50% of the company value".
What they have done is said "OK, if the market believes we are only worth 200m, then we will buyback half the shares at that price."
The effectively kills the market for NZO until the share cancellation is complete. And only after that does the share price have an opportunity to relevel to its supposed 'real' value. And if it does do that:
Company:1 Shareholders:0
I don't see this a returning 100m to shareholders, I see this as a capped, enforced buyback.
Perhaps I'm making this up, but that's how I see it.

[t.rexjr]

The company has been banging on for years about how the market is undervaluing the share price. This was the opportunity for them to say "our company is worth 300m (or whatever), here is your 50% of the company value".
What they have done is said "OK, if the market believes we are only worth 200m, then we will buyback half the shares at that price."
The effectively kills the market for NZO until the share cancellation is complete. And only after that does the share price have an opportunity to relevel to its supposed 'real' value. And if it does do that:
Company:1 Shareholders:0
I don't see this a returning 100m to shareholders, I see this as a capped, enforced buyback.
Perhaps I'm making this up, but that's how I see it.

Exactly. To align with company 'worth' they should only be cancelling 1/3 of the shares. 'Capped, enforced buy back' sums it up nicely. Not that that is a bad thing so long as the market views the reamaining shares at 30% more than it does currently... On market buyback would be a better way forward from my perspective.