NZ Oil & Gas (NZO)

[mistaTea]

Good point mistatea - I'm thinking of adding to my holding 98c cash for 58c seems like a deal to me!

I was just replying to this comment.

$98M cash is different to 98c (per share).

Anyhow, sounds like everyone is on the same page in terms of how cash exceeds market cap at the moment. No real debt to speak of, so all producing assets plus future prospects are effectively free right now.

[Carpenterjoe]

Thinking NZO is pretty undervalued/hated atm. I think a lot of this is caused by NZ institutions greening their books.

[tim23]

Thinking NZO is pretty undervalued/hated atm. I think a lot of this is caused by NZ institutions greening their books.

Not sure if they've ever liked the company that much - well Tony Radford never seemed to be that popular.

[Marilyn Munroe]

Another negative for Barque is normally a discovery in a frontier exploration province sets off a new interest in exploration and hopefully production by other parties which would give NOG the option of tieing in to things like pipelines on-shore processing plants and oil services to bring down costs.

With the Coalition Governments no more permits policy this is no longer possible.

Boop boop de do
Marilyn

[mistaTea]

Another negative for Barque is normally a discovery in a frontier exploration province sets off a new interest in exploration and hopefully production by other parties which would give NOG the option of tieing in to things like pipelines on-shore processing plants and oil services to bring down costs.

With the Coalition Governments no more permits policy this is no longer possible.

Boop boop de do
Marilyn

There is absolutely no doubt, in anybody's mind, that the current Coalition Government has made exploration in NZ more difficult for NZOG.

It may well turn out that Barque/Toroa ends up being a missed opportunity for New Zealand because of current government misguided ideology. That remains to be seen.

I don't think that we can conclude from the current political challenges that NZOG is totally doomed to fail however.
They do have irons in a few different fires, a lot of cash, and a very wealthy and influential majority owner. In my view, that makes the company at least worth more than the cash it currently holds.

[JohnPagani]

Hello Sharetraders,

Given the comments above about the potential for commercial development of a Barque discovery, I thought you may be interested to read the detailed study that was completed last year by independent consultants MartinJenkin. You can read about it and access a copy of the full report here: https://www.nzog.com/news/study-shows-commercial-potential-for-south-island-discovery/

The study was undertaken to demonstrate to potential investment partners that a commercial development is viable and the absence of existing infrastructure is not an impediment to an exploration well.

In summary - the nature of development potential depends on the composition of the discovery. Liquids could be produced to an FPSO and exported directly, which is the lower cost of the two scenarios. In a gas scenario, the study demonstrated a commercial market exists. The study authors worked with potential industrial customers for gas, and studied potential prices and competitiveness internationally. The commercial value to the jv is similar in either development scenario, although the benefit to the NZ economy is much greater in the onshore scenario.

The study is strong evidence that a development, in a discovery case, depends on neither Otago porridge being heated, nor an LNG mega development.


Hope that's helpful.


John Pagani.
New Zealand Oil & Gas.

[Lion]

Thank you John Pagani for clarifying that. Yes, it is helpful. I do recall that study about the uses for a decent gas discovery at Barque. That's good, solid research. I sometimes let my enthusiasm run away, thinking of an LNG project.
Did the MartinJenkin study consider methanol production from Barque? Gas production from the Taranaki fields is approaching maturity and decline and Methanex just might be looking at another long-term source of gas supply.
I hope there's enough gas left over to cook the porridge in Otago.

[Vaygor1]

Thanks for your post John.


I read and absorbed the MartinJenkin report upon its release. In terms of timing, this was prior to New Zealand’s 2017 General Election and prior to the formation of the current coalition. I doubt it was within the report’s brief to weigh up regulatory risk, and I can’t find a mention of it.


In noting the “… absence of existing infrastructure is not an impediment to an exploration well” , I agree. However, what about the impediment of regulation, law, and bureaucracy?


I remain bewildered and astonished at the current coalition-government's naivety, arrogance, and proven actions in bypassing due process regarding New Zealand's Oil and Gas developments. They cannot be trusted, and goodness only knows what on earth they might do next. I find it very difficult to envisage anyone forking out for an exploration well or two before 2020 while their is little chance of being allowed by the current regime to do anything with the field no matter how spectacular the test results might be.


Hopefully, I will find my ability to envisage lacking, and I do take comfort in the lengthy time-frame required to develop these fields, knowing the current bureaucracy in its current form will be long gone by the time the results of an exploration well or two will be known (assuming NZO is allowed to proceed if/when the crunch comes).


NB. My belief has always been that whether an onshore or offshore Barque gas development eventually took place, the first step would be to throw in a few wells with gas re-injection and take some low-hanging-fruit (aka oil) via FPSO.

[Enjay]

... However, what about the impediment of regulation, law, and bureaucracy?

I remain bewildered and astonished at the current coalition-government's naivety, arrogance, and proven actions in bypassing due process regarding New Zealand's Oil and Gas developments. They cannot be trusted, and goodness only knows what on earth they might do next. I find it very difficult to envisage anyone forking out for an exploration well or two before 2020 while their is little chance of being allowed by the current regime to do anything with the field no matter how spectacular the test results might be.

Hi Vaygor1

Picking up on regulatory / coalition government point this thread, the policy currently only applies to new grants of permits, rather than the progression from a PPP to PEP, or PEP to PMP - as I understand it.

So, for the Clipper / Barque prospect under PEP52717, NZOG and Beach have existing rights to carry out exploration activities until 2027 (including drilling wells as required under the permit). Then, in 2027 or earlier, they'll have the choice to progress to a PMP (if commercially viable plays emerge). These are unaffected by the current government's policy.

One extra piece of red tape to consider is OIO. NZOG and partner Beach being foreign owned would probably need OIO consent to construct on-shore production facilities - those facilities sitting on regulated land. With a FPSO arrangement, a sub $100M transaction will fly under the OIO radar but a $100M+ transaction would be caught.

On my reading, possibly a little less gloomy but not without regulatory risk / uncertainty. Hope that's helpful!

[Marilyn Munroe]

So, for the Clipper / Barque prospect under PEP52717, NZOG and Beach have existing rights to carry out exploration activities until 2027 (including drilling wells as required under the permit). Then, in 2027 or earlier, they'll have the choice to progress to a PMP (if commercially viable plays emerge). These are unaffected by the current government's policy.

I understood the Barque permit holders face a "drill or drop" pivot point in April 2019. Am I wrong?

Boop boop de do
Marilyn