NZ Oil & Gas (NZO)

[fish]

NZOG a takeover target: analyst

Neil Ritchie, New Zealand
Wednesday, 6 August 2008

WHILE most energy analysts are pondering how New Zealand Oil & Gas will spend some of its “sizeable war chest” of about $NZ280 million ($A222 million), McDouall Stuart has raised the possibility of NZOG being taken over by a larger corporation.



The Umuroa FPSO at the Tui Area oil project

In its latest report on NZOG, Wellington-based McDouall Stuart said NZOG’s significant discount to valuation, outstanding asset portfolio, cash-heavy balance sheet, open register and reserve upside potential were “key attractions to a potential suitor”.

However, potential suitors were not obvious, with the majors appearing to be resigned to a relatively passive upstream presence in New Zealand while Australia’s Origin Energy and Australian Worldwide Exploration are currently managing merger and acquisition activities elsewhere in their businesses.

McDouall Stuart added that while it appeared increasingly certain that NZOG would spend some of its “sizeable war chest” overseas, it was likely that NZOG would focus its resources primarily within NZ.

“While NZ opportunities may not currently be abundant, there is considerable scope to lean on existing domestic relationships. The Tui and Kupe JVs are each strong, and are led by field operators that appear increasingly committed to NZ.

“Travelling with the JVs to drill new prospects within existing licence areas would represent a continuation of NZOG’s already successful model.”

Rig availability appeared to be the biggest constraint, with early 2010 likely to be the earliest a rig could be secured for New Zealand.

However, McDouall Stuart added, international campaigns brought quite a different risk profile.

“Depending on the target geography, political and economic risks play a much greater role. NZOG’s strategy must show both purpose and balance.”

The broker also noted the offshore Taranaki, New Zealand Tui oil field was still “going like a Boeing”, and that the nearby $NZ1.1 billion ($A0.87 billion) Kupe gas-condensate field development was over 80% complete.

Tui continued to outperform all pre-commissioning projections, producing a total of 15.23 million barrels for the 12 months to July 30, at an average rate of 41,600 barrels per day.

However, deliverability was expected to continue to decline until early 2010 when the drilling of at least one new production well, Tui-4H, was scheduled to be completed.

Confirmation of the intention to increase the floating, production, storage and offtake vessel Umuroa’s liquids handling capability, from 120,000bpd to 150,000bpd, would also boost deliverability.

“We continue to be of the view that increasing the FPSO oil-stripping capacity will deliver significant value to the JV. Advancing Tui’s production profile and, therefore, cash flows could add as much as 15 percent to the value of the field.”

The broker also said that day-to-day running of the field had improved markedly over the past 12 months.

“Improved demulsifying has reduced water and sediment levels in Tui sales product, moving the quality differential in the JV’s favour … the FPSO has at times operated comfortably at 130,000 barrels per day.”

McDouall Stuart added that first production from Kupe was expected in early 2009, with full production likely in the second quarter.

The broker also said that a reserves upgrade appeared likely, with the partners, headed by operator Origin Energy, expected to make an announcement before the end of this year, given the success of the three-well development drilling campaign.

The three development wells flowed more than 115 million cubic feet a gas of gas and 16,000 barrels per day of condensate during initial production testing earlier this year.

Current Kupe 2P estimates are 253 petajoules of gas, 14.7 million barrels of condensate and 1.1 million tonnes of LPG.

NZOG shares were this morning trading on the Australian Securities Exchange for $A1.20-1.22 and on the New Zealand Exchange for $NZ1.55-1.59.

The Tui partners are operator AWE (42.5%), Mitsui E&P NZ (35%), NZOG (12.5%) and Pan Pacific Petroleum (10%).

The Kupe partners are operator Origin Energy (50%), Genesis Energy (31%), New Zealand Oil & Gas (15%), and Mitsui E&P NZ (4%).

Click here to read the rest of today's news stories.

[Casa del Energia]

NZOG a takeover target: analyst

Thanks for posting that - very informative. And it shows that the posters in this thread are pretty up to the mark - there had been chatter of takerover risk.

Need a cohort of bretheren of small holders to pledge into a 11% holdout?

[Sideshow Bob]

It's amazing how lower oil price + declining share price = considerable less number of posts.

Disc: Holder

[Drone]

Thanks for posting that - very informative. And it shows that the posters in this thread are pretty up to the mark - there had been chatter of takerover risk.

Need a cohort of bretheren of small holders to pledge into a 11% holdout?

Mate, with the way the market has been viewing this stock I think us small holders would be pretty pleased to see someone share the view of the real value in the company, an offer in the 2.00 - 2.20 range would go down pretty well I would think while still leaving a lot on the table for the buyer. Win win all round with the irrationality of current market pricing.

Cheers

[Paddie]

Mate, with the way the market has been viewing this stock I think us small holders would be pretty pleased to see someone share the view of the real value in the company, an offer in the 2.00 - 2.20 range would go down pretty well I would think while still leaving a lot on the table for the buyer. Win win all round with the irrationality of current market pricing.

Cheers

They would have my holding.

Paddie

[Mingeathinaikos]

They would have my holding.

Paddie

Mine too.....
And if the management don't come out with something that they will do with the monies they are holding, the market will have my holding at what ever price in 3 months.

[sideline]

Surely the bottom must be near, with so much negativity around.

Keep it up guys, errrr I mean down of course.....



Meanwhile from Bloomberg:

Commodity Prospects `Astoundingly' Good, Rogers Says (Update1)

By Jesse Riseborough

Aug. 6 (Bloomberg) -- Jim Rogers, who in April 2006 correctly predicted oil would reach $100 a barrel and gold $1,000 an ounce, said the fundamentals for commodities are ``astoundingly'' good.

The bull market for commodities ``has a long way to go,'' Rogers, 65, said today at an investor conference at the Gold Coast, Queensland, Australia. The bull market may end by 2020 based on historical cycles, he said.

The Reuters/Jefferies CRB Index had its biggest monthly decline in 28 years in July reversing course after its best first half in 35 years. Agricultural commodities and crude oil may fuel the rally for five more years as global supplies won't increase fast enough to meet demand, Pinpoint Investment Advisor Ltd. said last month.

``We are going to have plenty of setbacks in commodities but when they happen please keep your heads about you, do some more homework, and if you decide that thing is still OK I would suggest you might think about buying more commodities,'' Rogers said today.

Prices for copper, gold, iron ore and coal all rose to records this year on increased demand for raw materials from China and India.

``By the time we come to the end of the bull market commodities are going to be skyrocketing, they are going to be going through the roof, everybody is going to be investing in commodities,'' Rogers said.

The CRB index slid 10 percent in July, the most in any month since March 1980, when the U.S. economy was in a recession. Following that month the index then rose 30 percent through to the end of November 1980, setting a high that wouldn't be matched for the next 25 years.

[Casa del Energia]

Mate, with the way the market has been viewing this stock I think us small holders would be pretty pleased to see someone share the view of the real value in the company, an offer in the 2.00 - 2.20 range would go down pretty well I would think while still leaving a lot on the table for the buyer. Win win all round with the irrationality of current market pricing.

Cheers

Oh well - maybe it's just my knee jerk reaction - I've been squeezed out of Flet Engergy, Montana and Waste Management in the past and whilst I got bundles of cash - I still had to find a new home for it and remain diversified- - which on a small bourse like NZs - - not easy. And of course, someone else is getting the ongoing income from what are very good businesses.
- - And since they have all gone off overseas - it doesn't help our invisibles.

[Drone]

Oh well - maybe it's just my knee jerk reaction - I've been squeezed out of Flet Engergy, Montana and Waste Management in the past and whilst I got bundles of cash - I still had to find a new home for it and remain diversified- - which on a small bourse like NZs - - not easy. And of course, someone else is getting the ongoing income from what are very good businesses.
- - And since they have all gone off overseas - it doesn't help our invisibles.

Fair points all. Ideally the market would price these stocks "correctly" and we wouldn't have quite the big discrepancies that we have often seen between the value the market attaches to a widely held company vs what people are prepared to pay for control.

As an aside, while everyone talks about the falling price of oil not many people have been mentioning the NZD which is tanking, down 7% in the last 3 weeks alone, new lows this morning below 72c. Certainly will help to insulate NZO from "declining" crude prices, although 6 months ago I'm sure we would have been very happy with $127 tapis.

Cheers

[AMR]

The brokers might help. Check out the new NZO website. There are now 7 brokers covering NZO.