NZ Oil & Gas (NZO)

[arjay]

Thanks also Bermuda for asking those questions. thanks also to Neopole and Rotti for keeping the issue of shareholder rewards to the fore. From David Salisbury's answers to Bermuda's questions, it seems fairly clear that the shareholders of NZO are well down the list of beneficiaries from Tui and other cashflows. Ahead of shareholders comes the government (roylaties, taxes etc), repaying debt to banks, and 'administraiton costs' - which probably includes staff salaries and benefits to the directors. The people who risked most to discover and develop Tui (ie the ordinary shareholder) will benefit last. However, I recall NZO saying once they planned to pay out 50% of a consistent profit stream as dividends. What they mean by 'consistent' is anyone's guess (maybe someone could ask at the AGM) and maybe a mere 10 year cashflow from Tui will not be considered consistent enough. However, in the meantime I reckon return to the investor should at least equal the increases in benefits being recieved by the likes of Tony Radford. I noticed form a quick flick through the PPP annual report the other day that TR is creaming it in from there as well so maybe PPP shareholders should be asking similar questions.

By the way, if oil really does hit $150 by 2010 and NZO really is pulling in 2 million barrels as planned then that's a $70 per barrel wind-fall profit over todays prices which by my reckoning at 50% should come back as around 35 cents per share divie to the investor. Not bad.

[boysy]

Tui is the only project on line currently anyone could see that dividends would only becom possible after all three or at least two of the current projects are up and running. Sure they could pay a dividend but what is the opportunity cost of doing so . People who want a steady dividend income from a company should clearly not go near NZO for a few more years at least. I for one would rather see the money invested into projects which will not only further NZO but also increase the potential dividend stream in the future. The question which people should asking is will the positives of offering a dividend out weigh the negatives ?

[Scuffer]

Can they offer fuel vouchers then

[shasta]

Tui is the only project on line currently anyone could see that dividends would only becom possible after all three or at least two of the current projects are up and running. Sure they could pay a dividend but what is the opportunity cost of doing so . People who want a steady dividend income from a company should clearly not go near NZO for a few more years at least. I for one would rather see the money invested into projects which will not only further NZO but also increase the potential dividend stream in the future. The question which people should asking is will the positives of offering a dividend out weigh the negatives ?

Ok, once again i shall enlighten those "deluded" into thinking dividends are forth coming...SIMPLE they aren't.

Yes, NZO's dividend policy is to pay out 50% of net profit AFTER tax, BUT with consideration of future capital committments!!!!

Reasons why NZO would not & should NOT pay a dividend:

1. Tax losses make it not "tax efficient" to do so, wait til we have full imputation credits folks

2. This would be akin to putting money into a savings a/c & 7%, & not paying your credit card @ 20% first!

3. The "letter of comfort" NZO provided to Pike's bankers for up to $25m looks like it will be required in the next 3 months.

4. Lets pay off Tui first huh?

5. Kupe costs have increased (approx 10%) & again we had to borrow up front, so we now have more interest to pay.

6. DS has hinted at acquistions, & we will need to lower debt levels before taking on more!

7. Option holders do not get dividends, so no point until after the expiration of the options.

8. A share buyback would be a far better option than dividends, for NZO shareholders, assisting the options get converted & NZO's capital structure (remembering if all options are converted, NZO will have around 400m shares on issue).

9. We will also want to continue to explore O&G opportunities particularly in the Taranaki Basin.

10. Lastly, whats the point paying say a 10 - 15c dividend & then having to come back to shareholders for more cash 6 months down the track?

Yes, we have $5m per week revenue/cashflows at present, but we have expenses & loan repayments/interest as well, (just look at the last quarterly cashflow statement), whilst getting two other projects into production & cashflow positive.

If NZO holders are after a "steady" stream of dividends then come back in 2 years time & buy NZO, PRC & PPP (if its still around!).

Until then perhaps some of the bigger Aussie oilers would be a better option, ie Santos, Woodside etc

[digger]

Tui is the only project on line currently anyone could see that dividends would only becom possible after all three or at least two of the current projects are up and running. Sure they could pay a dividend but what is the opportunity cost of doing so . People who want a steady dividend income from a company should clearly not go near NZO for a few more years at least. I for one would rather see the money invested into projects which will not only further NZO but also increase the potential dividend stream in the future. The question which people should asking is will the positives of offering a dividend out weigh the negatives ?

Your on to it boysy. Agree 100%. Complete the other two projects then we will start hounding about a dividend.

[digger]

shasta, agree 100% with your last post as well. Now if we can just get everyone else to see the light.We are getting there as a company but another two years are required to really complete all projects ,then NZO will be a different company.
Still planning to fly to Greymouth and then on to Wellington if weather will allow.
All are coming i trust.

[COLIN]

Tui is the only project on line currently anyone could see that dividends would only becom possible after all three or at least two of the current projects are up and running. Sure they could pay a dividend but what is the opportunity cost of doing so . People who want a steady dividend income from a company should clearly not go near NZO for a few more years at least. I for one would rather see the money invested into projects which will not only further NZO but also increase the potential dividend stream in the future. The question which people should asking is will the positives of offering a dividend out weigh the negatives ?

I agree with your points, my boy. I don't want dividends from any of my investments if the payment of such dividend results in a negative for the particular company. If I want some cash to pay for the groceries then I can just sell a few shares. Simple!

[BigBob]

Bravo Shasta, Bravo...!! Finally someone makes some sense... !!!

[arjay]

So, let's assume for a moment that NZO want the ODs exercised. With no dividend and Felix relenquished, what do they have to get the SP above $1.50 within the next 28 weeks? On this note, can someone please explain how a share buyback could do this? Ta. Kupe exploration is planned for Q2, but that can easily slip past June 30th.

Playing devils advocate here: If mum and dad investors, going on Shasta's advice, sell their NZO's now for $1.09 they can put the money back into paying their mortgage for a year, which gives them a total valuse after one year of $1.20 per share. They can then buy back into NZO if a divie seems imminent. This is good for them because they can buy more NZO's for their $1.20. Knowing there is no return on their NZO investment over the next year or so, why would the market pay more than $1.50 in the short term?

[boysy]

A possible rerating of TUI reserves ?
Higher than anticipated earning from TUI oil ?
Possible t/o target ?
Higer oil prices to come ?
PRC producing coal before options expire ?
Increase in coal prices set to continue and negotiated before excise date ?

Any one of which could happen or none at all. I mean $1-50 does seem abitious currently but with 2 projects up and running hopefully by then and the third on the horizon time will tell.