NZ Oil & Gas (NZO)

[shasta]

Shasta $ Upside_down
It was the the Chairman's review in the Annual report (30th June - wasn't that a long time ago) that stated "One clear objective is to ensure that NZOG's value is fully recognised in the marketplace ahead of the 30th june 2008 final date for option holders to exercise the share options which the company has on issue."

DS's statement indicating that NZOG didn't need to ask shareholders for more money was in early October. I for one felt that the company had moved on from the June statement, to focus on delivering profitable growth to shareholders which the Chairman also included in his Annual Report review.

Who in their right mind would give $200M to someone who hasn't got an outstandingly clear view of how they are going to make a return on it?

Which directors would be acting in their shareholder's best interests by taking on another $200M when they haven't been able to demonstrate a satisfactory return (for the level of risk) on the ~$200M they already have?

As McDunk correctly points out, June 2008 is far too late to have indicated value, the options will be sold down months before then unless they are well in the money. The options are not near "in-the-money" according to recent company releases on company value. Reducing the conversion price to $1 might do it...but DS still needs to demonstrate future return on investment.

To answer your other question, I am a long term holder and have lots of both heads and options. I think most of the investors in the company are in a similar position wrt heads and options. Although a number of major shareholders notably appear to have fewer than their allotment of options, I guess that the numbers of shareholders with both heads and options out-number those that do not have options.

For a start the $200m would clear out all debt, that would be both smart & prudent?

[Nitaa]

This may have been answered already. NZO are possibly looking at aquisitions. To me an obvious synergy was a PPP and NZO merger. This would have achieved DS target. Clearly this is off the table as NZO sold its holding. The big question is why? I remember they said that they needed the money for possible aqusition or something to that affect. However a merger would have still be able to create this. Keeping PPP also gave it a useful blocking stake with its converted options. Bermuda, you may be able to shed something that i am missing.

On one had NZO are ready to put their hand in their pocket to stump up another $25m for Pike which is quite likely to happen. Since this will be strickly a commercial deal then its a bit puzzling why they sold PPP. If they have confidence in Tui and now in production stage it begs the question again, why sell your stake?

I am a holder of PPP as well and have done extremely well out of it but i really think TR should go. DS has probably done more for NZO since April than TR was able to do in the last 5 years. How could he possibly have been effective while sitting in his North Sydney home. I really dont get it. (ok this bit should be on the ppp thread)

Reserve upgrade? you bet. I acrulately picked the last upgrade (4mbo) perhaps luck more than good management. Clearly as long as oil stays above $65 then the life of Tui will be extended.

The PR lady was totally ineffective last year but i suspect her primary role was the Pike IPO which would have had her bogged down for some time.

OP's getting converted. 50/50 i say but there is no question that NZO will be or have developed a plan to achieve this. I think its clear part of those plans are in operation now...ie Broker presentations etc. Although Pike and NZO are seperate companies you can also bet your life that they are working closely together as time is becoming critical for NZO and its options. The next 8 months will no doubt see some strong SP movement but whether its enough will be another thing.

macdunk you should concentrate on your aussie speccy shares (big risk but whatever gets your jollies going) rather than on a stock that you have no financial interest. Thats gotta be dumb

[duncan macgregor]

macdunk you should concentrate on your aussie speccy shares (big risk but whatever gets your jollies going) rather than on a stock that you have no financial interest. Thats gotta be dumb

NITA, Not to jolly on the ASX today with all the shares opening way down. NZO on the ASX dropped 5.5% so it looks like you will be back to a dollar tomorrow.
PRC untraded. It looks like a grim week starting up. Macdunk

[bermuda]

NZO weighed up their investment in PPP and decided it was time to cash up after a very good sp run up.

If Hector or Taranui had come in then okay if may not have been the best decision but PPP had only 10% of Tui and NZO had only 10% of PPP so its only another 1%.

I think they got better than fair value in hindsight

[arjay]

McDunk - A downward trend has been predicted for this week on world markets due to another miserable performance in the US. This is another factor we need to consider re the ODs - NZO may perform stunningly over the next few months but the SP may languish on due to the continual hangover on Wall Street.

OTM - what I meant earlier about shareholders not seeing returned value related to tangible value - such as in divies or barrels of oil. In an ideal accountants world more oil out of the ground should equate to increased SP which the investor can then sell to make profit. However, as we have seen market fickleness and extenal events can prevent this. It's a bit like putting your money in the bank - who would be interested in investing $1.50 in the bank for a year if it grew the bank bigger but returned no interest? There are interesting times ahead. Many in this forum are dead keen to have all NZO income reinvested in the giant fruit machine of exploration. This can only have two possible outcomes - (1) all our earnings go down the porcelain, or (2) a discovery is made requiring the cycle to repeat itself - ie, no returns until development is underway and a sustained income generated.

[Nitaa]

NZO weighed up their investment in PPP and decided it was time to cash up after a very good sp run up.

If Hector or Taranui had come in then okay if may not have been the best decision but PPP had only 10% of Tui and NZO had only 10% of PPP so its only another 1%.

I think they got better than fair value in hindsight

r u saying Allan Tettersfield got it wrong and NZO got it right. Even though the wells came up dry they know exactly the position PPP are in and so does AT. I am not saying its a bad move but if you are going to sell its most likely because of 2 things. 1 that PPP SP is at a premium or 2/ they need the cash for something else. At 26 cps when they sold i have yet to see neither being necessary. One other thing is i am not in favour of a company with close ties to directors to sell their shares to them. It opens up the possibility of colusion, backhanders as such. just my opinion.

[shasta]

r u saying Allan Tettersfield got it wrong and NZO got it right. Even though the wells came up dry they know exactly the position PPP are in and so does AT. I am not saying its a bad move but if you are going to sell its most likely because of 2 things. 1 that PPP SP is at a premium or 2/ they need the cash for something else. At 26 cps when they sold i have yet to see neither being necessary. One other thing is i am not in favour of a company with close ties to directors to sell their shares to them. It opens up the possibility of colusion, backhanders as such. just my opinion.

Nita

In the ultimate act of irony, perhaps PPP are lining up NZO!

NZO's cashflows would just about pay for the purchase!

[Onthemoney]

Onthemoney a question for you.

On what point of law do you say that "NZO can only buy back shares"?
And how do you see that stopping NZO buying back the 2008 Options?

Secondly what is to stop NZO offering to convert options to shares, buy them back for (say)15c, and cancel that share?

I didn't see anything that would stop the company from buying the options back on market, but that may be what you are referring to.

I had a look at my prospectus and it was difficult to tell (without a complete knowledge of company constitution, the Companies Act and NZX rules). The prospectus refered me to Brian Roulston (are you following Brian?) if I had a problem with this investment. And I do.

A few snippets from the Prospectus indicate (to me anyway) that change to option terms is up to us:

"NZ PART A 7. Can the investment be altered?
The rights and obligations attaching to 2008 Options and/or Shares can only be altered by special resolutions passed at a general meeting of Option holders and Shareholders of NZOG, respectively.

Australia PART B 7.9

“Under the companies Act 1993, NZOG can cancel its shares

“Buyback of Shares

Subject to the Companies Act 1993, the Constitution and the Listing Rules, NZOG may repurchase its shares from Shareholders.

Variation of Rights Attaching to Shares (and other securities)
The rights attaching to a class of Shares can only be varied with the sanction of a special resolution passed at a separate general meeting of the holders of that class of shares and any other class of securities (for example 2008 Options) which are affected. ……A variation of the rights attached to the 2008 Options will be treated as also affecting the rights attached to the Shares.”

Some danger that this is taken out of context, and the prospectus may have to be read in conjunction with NZOG’s Constitution but anything seems possible. This includes waiting until next year and letting us shareholders (and option holders) elect not to take up our options.

Surely as shareholders, given that the company doesn't need to touch us for the couple of hundred million NZD, and has no stated use for it, we would vote to have the 2008 share options cancelled for this small amount instead?

Hi Bilo

I have not got the time at the moment to look into the point of law but can tell you that a share buy back is exactly that.

Options are not shares.

An option is the right to buy shares in a company at a fixed price (the excercise price), on or before a specified date in the future.

The reason they would not buy them back is because they would transfer wealth unfairly/unequally to market holders of options as opposed to the legal owners of the company - the shareholders.

A buyback of options will not happen - but a buyback of ordinary shares could - very unlikely though. This is only done when a company has surplus capital.

[Onthemoney]

Also be very aware that NOG have only extended the options once and there was a reason for this. Other options have expired worthless.

[Nitaa]

I hope i havent killed off what has been a pretty good discussion and thoughts while i have been relaxing on a tropical island the last few days. I would like some feedback or thoughts from digger, SC, Shasta etc on my previous post. Like in any good discussion one needs to ask all types of questions even if it challenges or questions your own judgement.

The initial response why they sold PPP was to some efect help reduce debt and possibly help in an aquisition. However i ask myself that if i was in the same shoes would i have done the same for the same reason? I keep coming up with no, except they think that PPP had reached a premium price. Apart from that i just dont buy into any of the other arguments.

discl. Have held NZO for 5 years although have 70% of my NZO and OD portfilio this year.