NZ Oil & Gas (NZO)

[mistaTea]

As an aside. Even if the scheme goes through, if you do vote ALL of your securities AGAINST, then I believe we have protections under Sec 110 and 111 of the companies Act and will get more than the 62 cents on offer. Can someone refute my argument?

Anyway voted all of mine Against a few days ago.

Hi blackcap,

No, that is incorrect when it comes to a Scheme of Arrangement. The rules for a SoA are very clear.

Under a SoA, if OGOG get 75% of the minority shares to vote in favour then they will acquire all of the shares (regardless of whether you personally voted AGAINST). Hence why it is so important to get as many AGAINST votes as possible - because this scheme really is 'all or nothing' for OGOG.

If they get the 75%, there is an opportunity to go to court at the end of October. I stand to be corrected, but it is my understanding that the courts are only interested in making sure that the SoA process has been carried out correctly, and that there is nothing obviously wrong with the offer. This is not an avenue that I think is likely to create much success for minority holders (though I admit I have no expertise in this area), hence my focus on making sure enough votes materialise to block the deal and avoid the whole situation.

Hope this helps.

[arjay]

Probably because there were none before 2008. From memory and I am really stretching my grey matter to recall but I don't think dividends featured much if at all in the 1980's or 1990's with this one.

Seem to recall dividends paid in the 90s when Ngatoro was producing - Digger might remember. 48c isn’t bad for a 50c float in 1982, compared to other Cos anyway. I remember Cue having a $1/share party in the early 80s. I reckon NZOG has done better in the interim. Just voted No.

[mistaTea]

Some readers were interested in a letter that I previously sent John Pagani (shortly after the SoA was announced). I have made contact with John again, asking for a 'please explain'. He has assured me that I will get a response covering off each point I raised.

For those who might be even mildly interested, I reproduce the text below.

********

Hi John,

You probably already appreciate the broad strokes around the concerns I have for the SoA and valuation, having read my comments on Sharetrader.


I did want to summarise, more formally, the issues I have. Please forward my comments on to Rosalind, Andrew and Alistair.


Ironbark - 95% probability of failure


This, in a way, was probably the biggest shock to minority holders. After reading incredible bullish statements since 2017 about Ironbark - to be told now that the realistic scenario for success is only actually 5% is incredibly difficult to understand. Were the shoe on the other foot, I think you would be just as incredulous.


Given you are now telling us that this project will almost certainly fail (95% certainty of not producing any hydrocarbons), and therefore the NZOG portion of the drill (approx $25M including carrying costs) will be flushed down the toilet, it begs some additional questions that I would appreciate your thoughts on:

1. Why have NZOG chosen to farm in (15%) with such terrible odds? We already had exposure to this ‘gamble’ via Cue - why would Andrew make such bullish comments as recently as June, and commit such a significant percentage of our money to this prospect if the odds are, in reality, so terrible? If Andrew had of told us he was planning to commit our funds to Ironbark, but that we were 95% certain to lose tens of millions of dollars we would have objected and asked for a special dividend instead.
2. Why are OGOG being so generous to us now, after all farm-in agreements have been signed? Since the money we are about to spend on Ironbark is almost certainly going down the toilet (according to the odds provided by Dr Archer and Northington Partners), it makes no logical sense that OGOG would want to further increase their exposure to this almost-certain significant loss?
3. Not a question, but a comment for point three - it also appears very strange to the minority shareholders that BP and Beach would collectively acquire 63.5% of the equity in Ironbark, given they are almost certainly going to waste more than US$60 million on this project.

Ironbark - Effectively offering $0.5 million dollars


I note that the value of Ironbark has been set at a meagre $4.4 million. Calling that a low ball offer for a resource that could be worth billions of dollars would be an understatement. However, what is even more perplexing is that $3.9 million is apparently to be deducted from our cash balance because OGOG expect us to contribute to the carrying costs owed to Cue for this project (funds yet to be paid).


So, in effect, we are going to be paid $500,000 for our share of a 15Tcf gas prospect that is in advanced stages of the planning.


You are making an offer to purchase our assets in order to gain 100% control of the company. Any ongoing cost related to a growth project must be borne by OGOG alone. Expecting departing shareholders to subsidise the project costs (when we would not reap any benefits from the project) is unreasonable and unacceptable.


By your logic, and given it has now been stated that Ironbark will almost certainly fail, you should go ahead and deduct the $20million drilling costs from our settlement too. That way, OGOG can well and truly get a free shot at this prospect.


Clipper - Worthless


I note that the value set for Clipper (holding the 11Tcf of gas Barque prospect) has been set at zero dollars. This is also difficult for minority shareholders to understand. Given Clipper is absolutely worthless, why have we bothered asking the government for repeat extensions? In reality, if Clipper held no value at all I would have expected OGOG (as 70% owner of NZOG) to force the abandonment of this permit. Our energy would be better off searching for other assets, rather that trying to convince would-be farm in partners to stump cash for an asset that is apparently not worth a dime.


Corporate Overheads


According to your reasoning, departing minority shareholders are expected to further subsidise staff wages, commercial rents and travel costs up until 2027 to the tune of $28 million dollars. This concept is not one that I can easily understand.


Why would we pay towards OGOG’s “corporate overheads” for the next eight years when we would no longer have any interest in the company?


To highlight how incredulous this is, I note that Northington Partners have valued Kupe (NZOG’s only directly held producing asset) at $24 million dollars. If we are to subsidise OGOG’s overheads for the next 8 years, totalling $28 million, then that means that, in effect, we have had to pay OGOG $4 million dollars to take Kupe off our hands.


This is the asset, by the way, that still has 2 million barrels oil equivalent in reserves. A project will be underway soon to further bolster those reserves.


Please provide me with an explanation as to why you think this makes sense. By this reasoning, when we purchased 4% of Kupe from Mitsui, we should have deducted at least $32million dollars in our corporate overheads. So we should only have actually paid them $3million maximum.


I reiterate, you are asking to buy our share of the assets. The only thing that should be on the table is a fair estimate of what each asset is worth. You do not get to deduct ongoing CAPEX and OPEX from the settlement, reaching out all the way to 2027.


I look forward to hearing from you soon John.

[digger]

mistaTea,

Do I have your premission to copy and then on Tuesday coming pass on to NZSA your letter as outlined on post 16223.


I have never before experienced Capex and Opex carried into the future as OGOG wants us to agree to.Totally lost as to how anyone can come up with this.I knew there must be some thing big in it for the independent directors and John as I was approached 4 times to see the CEO of OGOG. 4 times i said no.
We have refered to this offer as low ball.

[Wiremu]

This is from the BP announcement of contracting a rig to drill Ironbark:

"Ironbark, in the offshore Carnarvon basin, has the potential to hold up to 15 tcf of recoverable gas resource and is seen as a world-scale prospect in a proved gas-prone basin."

Now that hardly sounds like "frontier" exploration.

[Wiremu]

Digger,

And don't overlook the importance of the Liquidation Valuation section in Northington's valuation.

Oh, that's right it's conspicuous by its absence.

The Liquidation Valuation section was in the 2017 version they prepared for the partial takeover offer, but completely missing from the current version everyone is now focused on.

It can only be missing for one reason, and that is it would have made a nonsense of the huge increase in the 2019 valuation for corporate overheads which leads on to the range starting at 62 cents per share. Its absence is misleading, to say the least.

If the scheme gets before the Court for final approval this one factor will be telling.

[flyingmariner]

It will be interesting to see where oil goes in the WTI futures Sunday night (midday NZ time Monday) after the attack on Saudi Arabia. They estimate being up and running by Monday and production back to normal, that's a joke.

[Chippie]

My remaining 25K shares just voted against this joke.

For the me worst thing is that in 2008 I converted a lot of NZOOD options at $1.50 per share. Since then, incompetent NZO management has managed to do nothing material with all the capital they have been sitting on (except for pay for their salaries). Now they finally have some exciting prospects, then tell us they want to save us from a high risk investment. I have nothing to lose if I end up writing of my remaining shares especially after supporting NZO over all these years.

I cannot believe just how right Balance has been proved over all this time.

I really hope the NZSA grab this one and ensure these people are held to account.

Best of luck everyone,

[Marilyn Munroe]

Some drilling news including a possible change in the drilling timetable for a non NZOG permit in the Canterbury Bight

http://www.scoop.co.nz/stories/BU190...es-options.htm

Boop boop de do
Marilyn

[Lion]

Its all in the takeovers code-eg they could do nothing,they could creep,they could make a full takeover bid and if they acquire 90% shares compulsively acquire the remainder.

If they did the latter and you vote against then arbitration and you get a fair and reasonable price with ogog paying costs and interest.

Thanks fish. I've been looking at the Takeovers Code this afternoon. I must say it's quite well written for a legal document - even I can understand most of it.
I've selected two quotes for discussion here: (1) "If the approval thresholds are not met, then the scheme will fail." So that's the end of that scheme, they can't just offer a higher price in the same scheme. Another new scheme is quite a big process, with another "independent adviser" (hah!) for shareholders and another sgm, just like the current process that has dragged on for some time now.

Then the creep, you mention - it has limitations (2) "A shareholder with more than 50% can buy more shares without having tocomply with the Code’s rules. But they must not buy more than 5% of the company’s shares over any 12-month period."
So if OGOG took that route, it would be more than three years to get to 90% where they can compulsorily acquire the remainder. The Ironbark drill is only twelve months away now.

They could do nothing (that would suit most of us here, I think)

Or, as you say, OGOG could make a full takeover bid and if they acquire 90% shares compulsorily acquire the remainder.

I rather suspect that if they did this, they would have to pay up large now, after all the publicity and discussion and the realisation that NZOG's assets are worth substantially more than they have mischievously tried to make us to believe.