NZ Oil & Gas (NZO)

[arjay]

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.

Being a takeover target might do it, however value to shareholders changes little if they don't tangibly see any of the rest before OD expiry time.

[shasta]

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.

Quite right Boysy, & lets not be forgetting the Kupe project is twice the size of Tui (boe) without any further drilling/upgrades, so there is some leverage to the gas price as well.

[bermuda]

Quite right Boysy, & lets not be forgetting the Kupe project is twice the size of Tui (boe) without any further drilling/upgrades, so there is some leverage to the gas price as well.

I quizzed David S on the gas contract particularly as the previous one would have left NZO in a hopeless position as capital inreases couldnt be covered adequately. Saisbury has considerable gas contact experience and stated that the new negotiated contract is in line with good practice but the gas price escalates due to an inflation factor and not the actual gas price. Pity because I see gas prices firming in NZ. Good to know that LNG is off the NZ agenda.

Anyway the oil factor is now worth at least half the Kupe value and both the condensate (Tapis Value ) and the LPG's are tied to world oil prices (Platts ) which is good news indeed. Expect some big upsides with kupe.

[shasta]

I quizzed David S on the gas contract particularly as the previous one would have left NZO in a hopeless position as capital inreases couldnt be covered adequately. Saisbury has considerable gas contact experience and stated that the new negotiated contract is in line with good practice but the gas price escalates due to an inflation factor and not the actual gas price. Pity because I see gas prices firming in NZ. Good to know that LNG is off the NZ agenda.

Anyway the oil factor is now worth at least half the Kupe value and both the condensate (Tapis Value ) and the LPG's are tied to world oil prices (Platts ) which is good news indeed. Expect some big upsides with kupe.

Thanks Bermuda

Given NZO & JV partners are spending just over $NZ1 billion dollars which includes an onshore gas handling facility, the nearby Kupe drilling is of immense interest to me, as part of there 2008 drilling campaign.

They obviously intend drilling more around Kupe in the future, & are seemingly very confident there's plenty more Gas, LPG & light condensate to be found!

[upside_umop]

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?

every share has an element of risk which the shareprice is discounted at annually by a theoretical discount rate. going a bit further, history tells us that the markets rate of return is in the vicinity of 13%, which suggests year on year it will rise 13%, in the long run. if we apply this to nzo, or any other share on the market, without a crystal ball, we will expect it to rise by 13%. if more, we outperform the market, any less, underperform.
given nzo has many developments on the go, and the risked nature of the companies projects, i would assume a slightly higher discount rate than 13%. saying this, if all goes well, and no nasty suprises, it should rise by more than your average mortgage interest rates even if they are tax free way of saving.

this is my opinion on it what your asking, im sure some others have different views...like warren buffet who ive heard has a stock valuation formula using a discount rate equivalent to risk free rate (usually short term govt bonds for the corresponding country.

does this help answer your question?

[Unicorn]

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?

A share buyback would increase the share price, simply by adding buying demand. If the buyback is done below the underlying value of the shares, then the remaining shareholders end up with a larger slice of the remaining smaller, although comparatively less so, cake.
e.g a company has 200M shareholders, and assets/business worth $250M
Value = $1.25 per share.
Buys back 150M shares at $1.
Leaving 50M shares owning assets/business worth $100M
Value = $2.00 per share

Dividends on the other hand reduce share price, because assets (cash) are given away without any reduction in the number of shares.
e.g a company has 200M shareholders, and assets/business worth $250M
Value = $1.25 per share.
Gives dividend of 25c per share.
Leaving 200M shares owning assets/business worth $200M
Value = $1.00 per share

A buyback this side of NZOOD conversion is therefore possible, but a dividend is extremely unlikely.

"They can buy more NZO's for their $1.20" is an illogical statement. If NZO price stays the same, or falls, then this is true. If NZO shareprice rises to more than $1.20 then it is wrong. There is no reason to suggest that the value of a company that is returning a healthy profit remains unchanged.

"Knowing there is no return on their NZO investment over the next year" means they know the NZO shareprice will be static for the next year. This doesn't make any sense - it is almost guaranteed to be wrong.

The value of a company to its shareholders is the sum of the returns paid to shareholders and the increase in value of the company itself perceived by the market. You seem to suggest that it is only the returns paid that matter - which implies that it is irrelevant whether a company makes a small profit, a large profit, or a loss! Doesn't make sense, does it?

[Bilo]

Unicorn and others

In the light of DS's comment that NZOG has “no need for more capital from shareholders” it seems to me that any buyback of shares would have to start by buying back NZOODs.



I have posted my interpretation of NZOs Valuation at 30 September based on recent (I consider very conservative) company releases to market and the NZOOD adjustment:

$M
200 ....Tui
100 ....Kupe (30M ebit pa for 15years)
..60 ....Pike
..30 ....Cash
390 ....Total NZOG Value
..20 ....Buy Back NZOODs
370

Values 260M head shares @ 1.42 cps

N.B.
No majority shareholder premium on PRC that is conservatively valued at >$40M
No value on producing asset upgrades or near field developments
No value on exploration licences
No value on $130M tax losses
....also serve to make this estimate of value conservative
....but I accept that if I sold on Friday I would have been lucky to get $1.08 for heads and 12c for options.

For a company with no need to pick shareholders pockets yet again buying back the options seems to me to be the best thing to do all round.

[shasta]

Unicorn and others

In the light of DS's comment that NZOG has “no need for more capital from shareholders” it seems to me that any buyback of shares would have to start by buying back NZOODs.



I have posted my interpretation of NZOs Valuation at 30 September based on recent (I consider very conservative) company releases to market and the NZOOD adjustment:

$M
200 ....Tui
100 ....Kupe (30M ebit pa for 15years)
..60 ....Pike
..30 ....Cash
390 ....Total NZOG Value
..20 ....Buy Back NZOODs
370

Values 260M head shares @ 1.42 cps

N.B.
No majority shareholder premium on PRC that is conservatively valued at >$40M
No value on producing asset upgrades or near field developments
No value on exploration licences
No value on $130M tax losses
....also serve to make this estimate of value conservative
....but I accept that if I sold on Friday I would have been lucky to get $1.08 for heads and 12c for options.

For a company with no need to pick shareholders pockets yet again buying back the options seems to me to be the best thing to do all round.

Bilo

Wouldn't NZO buying back the options (& cancelling them) ultimately reduce the total $$$ possibly received from the option conversion?

I'm thinking they want the "new" money to fund an acquistion!

For me, a buyback has to be the heads & those holding options should benefit indirectly as the heads rise accordingly...

[upside_umop]

yeah totally with you on this one shasta...
if they wanted to get rid of the options, they should just let them expire.
if they're in the money, they can search for an elephant or buy up assets in large, if not, save themselves 20 million and NOT buy back the shares. why spend 20 million and get nothing out of it? seriously, i think thats nuts...

[Onthemoney]

Unicorn and others

In the light of DS's comment that NZOG has “no need for more capital from shareholders” it seems to me that any buyback of shares would have to start by buying back NZOODs.



I have posted my interpretation of NZOs Valuation at 30 September based on recent (I consider very conservative) company releases to market and the NZOOD adjustment:

$M
200 ....Tui
100 ....Kupe (30M ebit pa for 15years)
..60 ....Pike
..30 ....Cash
390 ....Total NZOG Value
..20 ....Buy Back NZOODs
370

Values 260M head shares @ 1.42 cps

N.B.
No majority shareholder premium on PRC that is conservatively valued at >$40M
No value on producing asset upgrades or near field developments
No value on exploration licences
No value on $130M tax losses
....also serve to make this estimate of value conservative
....but I accept that if I sold on Friday I would have been lucky to get $1.08 for heads and 12c for options.

For a company with no need to pick shareholders pockets yet again buying back the options seems to me to be the best thing to do all round.

An option is not a share - but a tradable option to purchase at a set price..... A company can only buy back shares.