NZ Oil & Gas (NZO)

[Drone]

NZO back of envelope:

Cash net of debt: $280m approx
PRC Stake: $171m at market price

Current market cap $633m

So the market really is valuing the cashflow from Tui and the Kupe asset at around $180m!!

Why is someone not taking over this company? Am I missing something here?

Tui perhaps making $650k NZD profit a day...

I for one would pay $180m for that, in fact I would probably pay $400m for NZOGs Tui stake. But no the market values the Tui AND Kupe stake at $180m, just crazy.

The current price assumes a collapse in oil and coking coal prices in my opinion, like down to $80 USD and $150/ton respectively.

If prices/exchange rates stay close to where they are then the lucky owners of NZO/Pike are in cream.

Cheers

[Casa del Energia]

NZO back of envelope:

Cash net of debt: $280m approx
PRC Stake: $171m at market price

Current market cap $633m

So the market really is valuing the cashflow from Tui and the Kupe asset at around $180m!!

Why is someone not taking over this company? Am I missing something here?

Tui perhaps making $650k NZD profit a day...

I for one would pay $180m for that, in fact I would probably pay $400m for NZOGs Tui stake. But no the market values the Tui AND Kupe stake at $180m, just crazy.

The current price assumes a collapse in oil and coking coal prices in my opinion, like down to $80 USD and $150/ton respectively.

If prices/exchange rates stay close to where they are then the lucky owners of NZO/Pike are in cream.

Cheers

"Why is someone not taking over this company? Am I missing something here?"


I'm wondering as well.

(Interesting to watch the shareholding structure slowly changing over to the institutions now - and that may make take over easier)

[Hoop]

Drone quote "...Am I missing something here?...."

Yep....The worst global financial crisis since the 1930's or maybe worse...a rather hostile environment for everyone don't you think?

[Drone]

Drone quote "...Am I missing something here?...."

Yep....The worst global financial crisis since the 1930's or maybe worse...a rather hostile environment for an investor don't you think?

Without doubt, but there are plenty of unaffected individuals/firms that should/do have plenty of cash, a takeover of NZO would be more than self funding even done entirely with debt. This should be meat and drink for soverign wealth funds, private equity, even high net worth individuals.

Good deals will still get finance IMHO.

Private equity could break it up, get hands on the cash to repay purchase funding, sell the PRC stake to overseas steel maker (who are buying at the mo (http://asterisk.tmcnet.com/news/2008/07/22/3559253.htm), cash and prc sale would probably net $550m. On say a $800m takeover price ($2.05), that would leave $250m to be funded from Tui and Kupe cashflows, so maybe $30m/ year "cost". I think Tui and Kupe could look after that ok..... all this totally leaves out condieration of further tui/kupe upgrades, or the exploration rights/opportunities.

[Nitaa]

Yes the ripple effect from the subprime has gathered momentum. Stocks such as nzo although looks great great on face value poses a risk like most other companies. hence why nzo is trading at a significant discount.

take us back 2 years in time. someone said the $nz at usd0.73 and oil at $100 in august 2008, tui increased reserves by nearly double and produced 15mbo, pike almost penetrated to the happy zone and kupe going well then most of us would be extremely content. The only difference is oil at $120 at the mo.

Markets are very volatile but what a stella performance by nzo.

discl. hold

[Chalice]

Drone quote "...Am I missing something here?...."

Yep....The worst global financial crisis since the 1930's or maybe worse...a rather hostile environment for everyone don't you think?

Recently individuals and institutions took the opportunity to enter NZO at what could reasonably be seen as discount levels.

Both had a fair while to absorb the info out there + given the low entry point, most probably entered at, or toward, their maximum comfort level, including leveraging (see Leveraged Equities shareholding...)

Both did so to the tune of nearly $200 million - huge & outstanding but justified in a difficult environment.

As such I think the curent unreasonably low SP is a result of the fact there are not too many individuals/institutions out there who want to "get in" or increase holdings substantually as it can be reasonably assumed they are already in - and to the hilt.

In saying so I'm sure institutions don't kind cleaning up undervalued shares as disenfranchised individuals sell at below medium term value.

This, coupled with short term oil downside and uncertainty on NZO forward investment strategy (well the strategy has been spelt out), re-read as contracts, I'm not surprised.

Whilst slightly frustrating I think the current low SP is undoubtedly short term & I'm looking forward to the Kupe upgrade!

[Hoop]

Chalice
Energy producers all around the world are accumulating good revenue and are cash richer...but their share prices are also off their highs for the year, and are "perceived" now to be cheap. There seems to be a rather large risk premium built in these energy producing stock share prices at the moment for some reason.
NZO is no exemption....yes, local factors (exercised options) don't help.
I am not sure at what degree the local factors has influenced the NZO share price, or whether it is more to do with the shift of available money away from the Global energy sector market causing an overall lack of momentum everywhere incl NZO.


Drone
Personally, I think takeover activity just adds extra risk which could in the future turn out to be unwise... taking in the consideration of a worsening hostile economic environment. Bank loans to oil companies normally carry high risk status, and in this current environment those high risk loans could be expensive. E.g PPP example,,,and that was when credit was easy and in a less risk adverse environment.
There are many more worse options than money in the bank (safe?) earning 8 to 10% interest. Can't think of many better options at the moment..I have the feeling, neither can the NZO management.

[gazprom1]

Hoop,

I think your points are valid except perhaps in the case of PPP (and maybe others). If NOG could buy PPP for A$200 million (45% premium to current market and I have no idea whether or not this would be enough to be successful). Fund it through PPP's own cash (A$100 million) and NZ$125 million of NOG's cash. If PPP is netting in excess of A$400,000 per day then payback on T/O would be 500 days from Tui project alone. Obviously this more likely to be 600 - 700 days as the field production declines. Potential returns are very attractive IMHO and I would rather NOG invest in PPP than leave all their money in the bank. They would still have more than NZ$150 million in the bank and would have nearly doubled their daily revenue. Only requires one of the AA banks to go west and some of our money could be lost..highly unlikely though!

[boxburger]

This thought might well be absurd, but I'd be curious to hear the reasons as to why. Experienced oilers, why is the following idea unworthy of pursuit?

NZOG and our partners know the Taranaki Basin. Our knowledge extensive but far from complete. I think this knowledge separates us from our giant global competitors. Our ace up the sleeve.

There is a global shortage of exploratory rigs. "Get in the queue buddy, we'll ring you in 2 years."

I wonder if an investment in a crewed exploratory rig of our own is a feasible idea. Perhaps with a venture partner that has expertise in this area.

When it wasn't drilling NZOG holes I could the imagine demand for such a piece of professionally manned equipment being strong from other oil exploration companies in our relative neighbourhood.

[blockhead]

Even if it was a good idea (and I have my doubts) I am not sure how many built up ready to go rigs are lying around waiting to be sold, with or without a full crew.

Nope, leave drilling to the drillers finding and selling oil is the bizzo for NOG