NZ Oil & Gas (NZO)

[Mick100]

Mick100. From what I can remember, NZO did not hedge full production amount. They have hedged a percentage (vaguely remember 60%) of the daily production to $86. The other 40% can still be sold at a higher price.

I repeat - they have hedged 100,000 bbls over the next 3 yrs
Thats less than 10% of production

I'll also repeat that I have no worries about the current level of hedging
It was a smart thing to do at the time that it was put in place
What I don't want to see is more forward sales put in place and according to digger that's not likely to happen anyway.

I'm getting tired of this hedging discussion
.

[bermuda]

When is the next quaterly cashflow report due to hit our desks?
Thanks

Probably after the next quarter.

It will be the best Quarterley NZOG have produced.

[Mingeathinaikos]

Probably after the next quarter.

It will be the best Quarterley NZOG have produced.

Thanks all... i probably should have been slightly more specific, what date in jan.... but get the point.

[digger]

Thanks all... i probably should have been slightly more specific, what date in jan.... but get the point.

Very late in Jan if not early feb given the holidays. Be thankful it is not done by lawers or govt staff or it would come out in march.

[Toddy]

I repeat - they have hedged 100,000 bbls over the next 3 yrs
Thats less than 10% of production

I'll also repeat that I have no worries about the current level of hedging
It was a smart thing to do at the time that it was put in place
What I don't want to see is more forward sales put in place and according to digger that's not likely to happen anyway.

I'm getting tired of this hedging discussion
.

'no worries about the current level of hedging'

Ofcourse you wouldn't Mick, thats because 10% is not a hedge, this is just a banking arrangement. NZO management would rather leave themselves exposed, or more likely have not grasped the concept of good rational risk management. I guess that it is the drill and thrill attitude coming through.

Anyway, I'll leave you too it. After the agm I sold out again of my NZO position. I'll be back once the risks have reduced further, or atleast the management have worked out how to minimise some of the obvious market risks out there.

[Bixbite]

Quote:
Originally posted by Toddy
#1554 (P104)
RISK - real and perceived
“1. Unknown future revenue streams. e.g at the agm management made a prediction that TUI oil income would be $100 million for this coming financial year based on no real facts. The shareholders like Mick love this kind of gamble predicition based on floating targets.”

Toddy,

The answer can be found from NZO 26-10-07 ADDRESS
NZO: Chief Executives Address to 2007 Annual Meeting

Under the Tui heading: -
“The cash received by NZOG in the September quarter was US$7.5m. This is
significantly less than the revenues accrued to date. Payments are typically
received up to 30 days after delivery.
There are a number of variables - including oil price, production rate, and
the exchange rate
- which make forward revenue predictions difficult. However, a useful rule of
thumb is to say that each barrel of oil earns roughly NZ$100, and we expect
NZOG's share of production this financial year to be around 1.2 million
barrels. We therefore currently expect NZOG revenue from the Tui Area to
comfortably exceed $100m in 2007/08.”


The cash US$7.5m is related to the revenue of the August 07.

US$7.5m times 11 months (August 07 to June 08) = US$82.5m
(Today’s exchange rate 0.76)
US$82.5m / 0.76 = NZ$108.55m

Wish it could help!

Cheers
Bixbite

[Viking]

That makes perfect sense~ thanks Bixbite~

[Toddy]

This is exactly what I was talking about.

'There are a number of variables - including oil price, production rate, and
the exchange rate'................ non of which your board wishes to take any control over. So, therefore I am going to give you, the shareholders a 'stab in the dark'.

Question
Can NZO management put together a policy and procedures where they can minimise the negative impact of these variables on future earnings of NZO.

Would such a policy help clear the muddy waters of such financial estimates as presented at the agm.


Guys, dont beat me up about this. I'm just trying to help shareholders understand that if NZO Management want to ensure that the options are exercised, then a much clearer cashflow and funding policy direction should be presented to the market. If and when the oil price drops back, you can bet your bottom dollar that the NZO SP will follow.

[sideline]

This is exactly what I was talking about.

'There are a number of variables - including oil price, production rate, and
the exchange rate'................ non of which your board wishes to take any control over. So, therefore I am going to give you, the shareholders a 'stab in the dark'.

Question
Can NZO management put together a policy and procedures where they can minimise the negative impact of these variables on future earnings of NZO.

Would such a policy help clear the muddy waters of such financial estimates as presented at the agm.


Guys, dont beat me up about this. I'm just trying to help shareholders understand that if NZO Management want to ensure that the options are exercised, then a much clearer cashflow and funding policy direction should be presented to the market. If and when the oil price drops back, you can bet your bottom dollar that the NZO SP will follow.

Toddy,
why the presumption that above variables will have a negative impact only???
They can go both ways, and so far it's mainly been positive.
Of course, no guarantee that this will continue but if you lock in the price you not only remove the
downside but the upside potential as well.
Remember that when TUI was deemed viable an oil price around US$40 (or was it 35?) was assumed.
Even if poo pulls back a little from its current height I don't see any problem.

[Toddy]

Sideline

You are 100% correct, the price can go up. What I have been talking about is risk management and minimising the impact of a negative movement in the variables and giving certainty to the market place.

You do not have to use futures when forward selling. NZO could put into place a number of 'options', which act more like your home insurance policy or a stop loss on your share trading.

As for the oil price. The current spike does have a cap. Its only a matter of time before economic and political pressure dictates the cap on the short term oil price. Long term super inflation caused by inflated oil prices would harm world economic growth. I'm not going to debate the oil price as we would be here forever.