NZ Oil & Gas (NZO)

[Anubis]

The late big move up today looks to me clearly to be in anticipation of positive Momoho news being imminent (maybe tomorrow?). I initially thought it was being at least partly driven by Friday night's rise in oil price, but this seems less likely having looked at the Aussie oilers, which were all either down or flat today.

[Anubis]

The chart has also now well and truly done a technical bounce off support at $1.67-68, which was the previous (pre-option exercise) resistance level. Just an observation of a classic recurring pattern in TA - resistance becoming support...

[Oiler]

expect they have already drilled through the target zone as previous report based on 1400 nz time july 9 - 5 days and 8 hours ago.

no news is good news!

expect nzo would be keen to keep the market fully informed on a daily basis, but as origin control when information is released then nzo have to tow the line.
drilling reports for kupe being fine examples of origin's reporting.

M

I agree with you Machine.....no news is good news in this case and origin do have control of the drilling news updates.

Today should be the day everyone has been waiting for

Oiler

[Drone]

OK what are people's picks for SP +ve and -ve movements depending on the news?

Just pulling a figure out of the air if there was say 5mb of condensate (or equiv) @ a net recovered price of say $100/b USD say $132 NZD is approx $100m to NZO, now discount that back and take off a bit for project risks etc and I'd say you'd have about 15c per share. So if there was probable reserves of 15mb equiv.... it would be a good day.

Downside? If it comes in dry I'd say 10-15c also, but recovered over time, the stock is cheap even with existing projects/cashflows IMHO.

Cheers

[manxman]

Manxman

Are you sure imputation credits arise from royalties ?

I'm not an expert, but the divvy we got carried imputation credits and I didn't think that NZO had paid income tax at that point.

Bermuda - you are right, it was George Best, shortly before his (transplanted) liver sought refugee status. Thanks for reminding me.

Mx

[Xerof]

Mx, they had c/f losses to utilise, and did so before the cash machine began printing money

[trackers]

Stock of the week - New Zealand Oil and Gas (NZO)

Company: New Zealand Oil & Gas
Code: NZO
Recommendation: Buy
Market Cap: $515m

The last few weeks have seen oil continue to break new highs above the $140/bl mark. Record high oil priceshave been blamed for the market’s slide to new lows, however they are proving a boom for up and coming oil producers such as New Zealand Oil and Gas (NZO).

The cash has started flowing through the doors following the start of production at the Tui Oil fields off the coast of New Zealand in July last year. The Tui oil fields project is the first stand-alone offshore oil development in New Zealand, and was fast-tracked into production only 4 years after its initial discovery. NZO has a 12.5% stake in the field which has thus far been producing well ahead of expectations. The field was originally estimated to contain reserves of 27million barrels, however the latest reassessment has upgraded the figure to over 50million. The higher than expected field size has been accompanied by stronger than expected production rates. Tui was originally forecast to produce 10m barrels in its first year, however by mid June 13.9m barrels had been filled.

For the six months to December these strong production numbers allowed the company to produce a net profit of $41.4m on the back of $95.5m in revenue. Tui revenues had advanced to $141.8m by the end of March, and with oil continuing to trade near record levels, we expect a ‘bumper’ full year earnings result.

In the oil game you’re only as good as your last discovery, because once an oil field is tapped, production typically declines as time progresses. NZO has factored in a sharp decline in production from Tui in 2009 followed by a gradual easing, but thus far, month on month production has shown no signs of decline.

However, in preparation, the company is advancing its solid pipeline of development assets such as the Kupe project. NZO originally discovered this gas and condensate field in 1986, however development was considered uneconomic until recently. New Zealand in the past has attained its gas supply from the rival Maui field, which brought large volumes and a relatively low, contract based domestic pricing regime. The potential for Kupe was recently invigorated as the Maui field entered into its decline, with the investment decision made in mid 2006.

NZO now has a 15% interest in the project, which is on track to begin production in mid 2009. The company’s share of 2P Reserves stands at 38PJ gas, 165 000 tonnes of LPG, and 2.2million barrels of light oil. In oil equivalent terms, production is forecast to offset the decline of Tui.

NZO's other significant asset is its 31% stake in ASX listed Pike River Coal (ASX code: PRC). Pike River is an emerging producer of high quality hard coking coal in New Zealand. First shipments are expected to commence in the first quarter of 2009, and the company recently locked in a record price of US$300/t for deliveries made up until the end of March 2009. Deliveries during FY09 are expected to total 200,000 tonnes, ramping up to 1m tonnes in 2010. At Pike River’s recent share price of $1.70, NZO’s shareholding is valued at just over $100m.

Strengthening the balance sheet even further in recent weeks has been a highly successful option conversion. The company had 139m options expiring at the end of June at a strike of $1.50. Despite the exercise price being a slight premium to the share price range of $1.20-$1.40 over recent months, shareholder support was very strong, with 92.5% of the options exercised to raise $150m – a significant capital injection indeed.

Given this strong cash position and asset backing, we favour the outlook for the stock and rate it a buy. From a technical perspective the share price appears bullish, teetering near record highs. A correction in the oil price is a key risk, as are production problems at Tui or Kupe. However, should the price of ‘black gold’ remain any where near current levels, we expect the stock to be re-rated. This will be as a result of its earnings capacity from Tui, developmental milestones at Kupe, and a ramp up in production at Pike River Coal.

Tim Morris is an analyst at wise-owl.com, one of Australia's leading independent stockmarket research houses.

http://www.compareshares.com.au/wise62.php

[Bob C]

When was the article published Trackers? $1.70 for PRC is a bit out of date...

The market cap is closer to $700m than the $515m they quote.

Or are those AU$?

Bob C

[tim23]

It refers to PRC as ASX listed so its $A I assume, the researcher is Australia based too.

[clips]

thanks to Digger, and my dart landing on 178,
i am in receipt of a liquor voucher which is burning a hole in my pocket -
open to suggestions , have in mind a bottle or two of Montana Camshorn Pinot Noir,
to put away to celebrate the next Nzo success, and perhaps a bottle of Glenfiddick
12yr old single malt to calm the nerves until then.... (surely duncan will approve)

thanks again Digger..... good bloke that bloke......